Value chain analysis of the business or industry is also used by strategic analysts to understand vulnerabilities, discover and evaluate opportunities for expansion, look for increased margins, understand more profoundly suppliers, customers and competitors levicki, 2003. Coastal resources center, graduate school of oceanography, university of rhode island and snv netherlands development organization. This lesson discusses what a value chain is and how it can help a business meet the needs of customers. Value chain analysis is the process of looking at the activities that go into changing the inputs for a product or service into an output that is valued by the customer. Tanzania tourism value chain study final report june 2009 in association with braeside gardens, lavington po box 43483, nairobi 00100 tel. A conceptual study of value chain analysis as a tool for. Value chain analysis overcomes a number of important weaknesses of traditional. Value chain analysis research papers delve into an analysis tool developed by michael porter, and discuss the functions of this tool. Ups value chain analysis 864 words 4 pages value chain model and competitive force model busa 310.
But value chain analysis, which focuses on the dynamics of interlinkages within the productive sector, especially the way in which firms and countries are globally integrated, takes us a great deal further than traditional modes of economic and social analysis. Then, a number of chapters follow outlining different analytical approaches. Value chain analysis provides a rational and systematic framework for describing and evaluating the roles and relationships of people and organisations that exist in complex and dynamic systems and networks bolwig et al, 2010, haggblade et al, 2012, hartwich et al, 2005, rushton, 2009a. The value chain starts with fishers,continues with processors, traders, transporters, importers, retailers and ends with consumers. Value chain analysis is defined as the multidimensional assessment of the performance of value chains including the analysis of material flow, information flow, management and control of the value chain taylor, 2005. Value chain analysis for policy makers and practitioners 4 these global actors exert a major influence on upgrading and earning opportunities of local enterprises. All firms make decisions that affect their competitive position and profitability. This is the main reason the researchers used value chain analysis in this study. Porter has dedicated much of his career to studying competitive advantage. It can create change within a business, the products and services it offers, and its connections. Illustrative interview guides for value chain analysis. A value chain is a portion of an economic system where upstream agents producers are linked to downstream partners by technical, economic, territorial, institutional and social relationships. One of his bestknown concepts is the value chain, which is used to deliver a product or service to the market and has three key objectives. Value chain models can be created in both qualitative and quantitative forms.
Michael porter defines value chain as a representation of a firms valueadding activities, based on its pricing strategy and cost structure. Value chain michael porter was the first person who introduced the term value chain in his book competitive advantage. Ensign the linkages in value chains can be finely tuned to gain a competitive edge. Value chain analysis for policymakers and practitioners.
Focusing an organization on its pvc helps realign management. A value chain and market integration analysis of the cassava market in the democratic republic of congo by paulin njingulula mumbeya submitted in partial fulfilment of the requirements of the degree of msc agric agricultural economics in the department of agricultural economics, extension and. The value chain from competitive advantage, by michael. Value chain analysis and competitive advantage article pdf available in journal of general management 271. The value chain the term value chain was used by michael porter in his book competitive adva n tage. Value chain analysis plays an important role where firms are seeking an understanding of the factors that impact the longterm profitability, as well as when developing a successful strategic plan for the business. To allow the local sector to better meet the requirements of the buyers, four main interventions were implemented. You should be familiar with the original model see figure 1 and the activities described within it. From porters original work and also from other current management and ebusiness textbooks one can derive two distinct interpretations. In the second chapter, a short introduction into history and concepts of value chain analysis is given. Value chain analysis can help companies in various ways. The dagaa value chain is rather complex and can have different structures. It also provides an analysis of the effectiveness of the value chain actions. If a company can create efficiencies by analyzing one or more of the five primary value chain.
If its your first time performing this type of analysis, this. Value chain management involves the collaborative allocation of resources within and between the respective. Introduction value chain has been increasingly used in businesses as a tool to increase cooperation between production chain units in order to decrease delivery times of products services to consumers and coordinating communication between those units, this in return will reduce inventories and increase customer satisfaction. The industry value chain includes all of the valuecreating activities within the whole industry, beginning with the basic raw material and ending. A research paper that includes a value chain analysis is generally for a business or mba course.
Value chain analysis is mentioned extensively in the first half of the book competitive advantage in 1985 by michael porter. Because the value chain is about activities that contribute to value creation, the definition of value is very important. Value chain analysis is a technique that yields value improvement. Subsector analysis value chain analysis subsector and value chain analysis action for enterprise. An analysis of the value chain rather than value added is the appropriate way to examine competitive advantage. Creating and sustaining superior performance porter 1985. Porter suggested that activities within an organisation add value to the service and products that the organisation produces, and all these activities should be run at optimum level if the organisation is to gain any real competitive. Value chain analysis and competitive advantage prescott c. The concept comes through business management and was first described by michael porter in his 1985 bestseller, competitive advantage.
The following presents an interview guide used in undertaking value chain analysis. A value chain is the sequence of activities required to make a product or provide a. This interview guide, interview guide for value chain analysis is conducted with value chain participants at all levels of the chain, and is designed to. Companies use value chain analysis to deliver the most value for the least possible total cost. Value chain analysis and evaluation offers a starting point of the term value in economics, marketing, strategy and operations fields indicates that the notion of value chain may be a misnomer, although a widely used one. T he value chain analysis describes the activ ities the organ ization performs and links them to the organizations competitive pos ition. Strategic planning is the organizational process of. Apply to supply chain analyst, analyst, financial planning analyst and more.
The value chain was designed by michael porter in 1985 as a systematic way to examine how competitive advantage develops and to identify where value is added in an organisation. Value chain analysis pvc a technique that creates a dynamic view of major sets of activities that represent and deliver the companys core value proposition or those that impede performance. Chris lee carl field justin kelly jacob augustine monique becker value chain model pic value chain model of united postal service united postal service ups and every business has a value chain model in order to be able to make sure that. This includes understanding the flows of materials, resources, commodities and value. The value chain can be thought of as a set of activities, services, and products that lead to a product or service. Paper masters has writers that specialize in business projects that include a value chain analysis. Involvement of rural poor households is considerably high in the sector it is a common small scale livelihood option in the governorate presence of a clear value chain. Agriculture and rural development includes bibliographical references and index. Many organizations do not consciously make decisions to optimize the sources of. Value chain analysis key points the value chain helps an organization identify how it creates value for customers and locate where its sources of competitive advantage lie. Value chain analysis methodologies in the context of. A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product i.
The structure of the present paper is the following. Most studies on this topic have been mainly theoretical in nature. Is value chain analysis the solution for better policy making. It is mostly an informal chain that involves many players. A handbook for value chain research open university. A value chain and market integration analysis of the.
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