What is Value Chain Analysis, and what are best practices, tools and online templates for teams and organizations?
Definition of Value Chain Analysis
Value Chain Analysis is a method that can be used to identify all the tasks related to the creation and delivery of a product, service, or process. Value Chain Analysis process also helps determine the source of the organization’s competitive advantage. More specifically, the activities the organization decides to take on internally are typically linked to their attainment of competitive advantage. A Value Chain Analysis breaks down organizational tasks into two categories: Primary activities and Support activities.
Description of Value Chain Analysis
Value Chain Analysis focuses on the tasks led by those within the organization and those that would be best accomplished by external collaborators or consultants. Notably, these tasks are those that add appeal and market value to the products or services the organization produces. A Value Chain Analysis requires three steps:
- Categorize all organizational tasks to be either Primary or Support activities:
Primary Value Chain Activities are those that are focused on creating and supplying a product or service. Some examples of primary activities are:
- Inbound logistics: tasks that require locating and purchasing externally sourced materials
- Operations: tasks that require creating the product or converting raw materials to a product or service
- Outbound Logistics: activities associated with making the product accessible to the customer
- Marketing and Sales: tasks associated with advertising the price, function and value of the product or service to the customers
- Service: tasks that require sustaining superior product performance after it has been purchased
Supporting Value Chain Activities are those not directly involved with the production of a product or service. However, they increase efficiency and productivity in the organization.
- Procurement: tasks that require determining where organizational resources will be acquired
- Human Resource Management: activities concerned with recruiting, selecting, motivating and compensating organizational employees
- Technology Development: activities that require managing and protecting organizational information
- Infrastructure: tasks that require providing support to the organization in the form of financing, quality control, executive committees, etc.
- Assess each activity. Determine which activities across the value chain would be worthwhile to invest additional time, money or effort to improve and make the product more competitive in the industry. Additionally, identify the tasks that put the organization at a disadvantage in the industry.
- Scope priority activities. For only the activities deemed worthy of further investment, develop strategies that can be implemented to build and then sustain competitive advantage. In this step, think about whether the organization wants to develop cost or differentiation analysis.
Competitive Advantage occurs when the price of the product or service is on par with similar ones on the market. Achieving cost advantage requires that the organization consider what activities are costly. By contrast, a differentiation advantage exists when the organization has created a product or service that is unlike any other available on the market. To attain this kind of advantage the organization must engage in tasks that require management to think about what differentiates the product from others and whether or not the unique attributes align with customers’ needs and desires.
Tools & Templates
A Value Chain Analysis often requires the use of document management software or spreadsheets to keep track of which activities fall into which category, as well as what the benefits would accrue if more were invested in the task. To determine what kind of competitive advantage the organization wants, consider using a competitive analysis to support your efforts.
upBOARD's Online Value Chain Analysis Tools & Templates
Unlike most traditional Value Chain Analysis techniques, upBOARD’s online Value Chain Analysis collaboration tools allow any team or organization to instantly begin working with our web templates and input forms. Our digital platform goes far beyond other software tools by including progress dashboards, data integration from existing documents or other SaaS software, elegant intuitive designs, and full access on any desktop or mobile device.
Learn more about upBOARD’s portfolio of other business strategy best practice tools and templates, including:
ADL Matrix, Affinity Diagrams, Baker’s 4 Strategies of Influence, Balanced Scorecard, Benchmarking, Blue Ocean Strategy, Bowman Strategy Clock, Build-Measure-Learn Feedback Loop, CAGE Distance Framework, Competitive Analysis, Competitive Landscape Analysis, Contingency Planning, Core Competence Analysis, Critical Success Factors, Discovery Driven Planning, Five Forces Model, Force Field Analysis, Gap Analysis, GE McKinsey 9-Box Matrix, Go To Market Strategy, Hambrick & Frederickson’s Strategy Diamond, Hedgehog Model, Hook Model of Behavioral Design, Hoshin Planning System, Kay’s Distinctive Capabilities Framework, Kotler’s Five Product Levels Model, Kotler’s Pricing Strategies, Lafley & Martin’s Five Step Strategy Model, McKinsey’s Seven Degrees of Freedom for Growth, Mission Statements, Mullin’s Seven Domains Model, OGSM Framework, Ohmae’s 3-C’s Model, PEST Analysis, Porter’s Diamond, Portfolio Management, Purpose Statements, Pyramid of Purpose, Scenario Planning, Simonson & Rosen’s Influence Mix, SOAR, Strategic Goals, Strategic Roadmap, Strategy Map, Strategy Roadmap, Strategy Uncertainty Map, SWOT Analysis, TOWS Matrix, Triple Bottom Line, USP Analysis, Value Chain Analysis, Value Disciplines Model, Value Net Model, Values Statement, Vision Statements, VRIO Analysis, and Weisbord’s Six-Box Model.