Value Chain Analysis

• Value chain analysis allows the firm to understand the parts of its operations that create value and those that do not.
• the firm earns above-average returns only when the value it creates is greater than the costs incurred to create that value
• The value chain is a template that firms use to analyze their cost position and to identify the multiple means that can be used to facilitate implementation of a chosen strategy.
• are activities or tasks the firm completes in order to produce products and then sell, distribute, and service those products in ways that create value for customers

  value chain activities
• include the activities or tasks the firm completes in order to support the work being done to produce, sell, distribute, and service the products the firm is producing

  support function
• A firm can develop a capability and/or a core competence in any of the value chain activities and in any of the support functions. When it does so, it has established an ability to create value for customers.
• Judgment is necessary when using value chain analysis because no obviously correct model or rule is universally available to help in the process.
• What should a firm do about value chain activities and support functions in which its resources and capabilities are not a source of core competence?

  Outsourcing