7 Frameworks for Structuring Meetings Efficiently (7) "Value Chain" ~Visualizing Challenges~
"Value Chain" is a framework that views a series of business operations from product or service delivery to the customer as a "chain of value."
It was proposed by Professor Michael Porter of Harvard Business School in 1985. Rather than simply looking at "processes," it clarifies a company's competitive advantage by analyzing "what kind of added value is being created" and "where costs are being incurred" in each process.
1. Basic Structure of a Value Chain
A value chain is broadly classified into two categories: "Primary Activities" and "Support Activities."
① Primary Activities
Processes directly involved in the manufacturing, sales, and delivery of products to customers.
> Inbound Logistics: Procurement, storage, and receiving of raw materials.
> Operations: Assembly, processing, and packing.
> Outbound Logistics: Product distribution and warehouse management.
> Sales & Marketing: Advertising, sales activities, and pricing.
> Service: After-sales service, repairs, and customer support.
② Support Activities
Processes that support primary activities and enable the organization as a whole to function.
> Firm Infrastructure: Management, finance, and legal affairs.
> Human Resource Management: Recruitment, training, and labor management.
> Technology Development: Research and Development (R&D), product design, and IT systems.
> Procurement: Purchasing supplies and vendor negotiations (a function supporting the "purchasing" of primary activities).
2. Why Analyze the Value Chain?
The purpose of this framework is not just to organize operations, but to find the source of "profit (margin)."
Analytical Perspective
Content
Understanding Costs
In which process are costs highest? Is there room for reduction?
Identifying Strengths (VRIO)
Compared to competitors, which process creates overwhelming value?
Source of Differentiation
In which process is the value created that makes customers willing to pay a high price?
💡 Porter's Perspective
Competitive advantage does not arise from the company as a whole. It arises as a result of the accumulation of "individual activities" such as designing, making, selling, and delivering products.
3. Practical Application Steps
Decomposition of Activities: Write down your company's business in detail using the 9 elements mentioned above (Primary and Support).
Allocation of Costs and Value: Evaluate the costs incurred and the added value generated in each process.
Analysis of Strengths and Weaknesses: Compare with competitors to identify where your company's "winning strategy" lies.
Strategy Formulation: Decide whether to "reinforce weaknesses" or "concentrate resources on processes with overwhelming strengths."
4. Benefits of the Value Chain
Perspective of Overall Optimization: Instead of "partial optimization" by department, you can identify bottlenecks in the flow of the entire company.
Concretization of Strategy: You can break it down into specific actions, such as whether to "win through low prices (cost leadership)" or "win through quality (differentiation)."
Promotion of DX: It serves as a criterion for investment decisions regarding which processes to digitize to maximize value improvement.
Summary
The value chain is a map that dissects a business as a "collection of functions" and visualizes "where profits are being generated."
There is no more reliable tool when redefining your company's strengths or considering barriers to entry for new businesses.
Why don't you try creating a concrete value chain as well?