The business management concept of the value chain was introduced and described by Michael Porter in his popular book “Competitive Advantage: Creating and Sustaining Superior Performance” in 1985.
A value chain is a series of activities or processes which aims at creating and adding value to an article (product) at every step during the production process.
Businesses aim at enhancing their margins and thus work to change input into an output which is of a greater value than what it was at the time of entering the process (the difference between the two being the company’s profit margin).
Thus the logic behind it is simple; the more value a company creates, the more profitable it is. When more value is created, the same is passed on to the customers and thus further helps in consolidating a competitive edge.
The business activities are divided into primary activities and secondary activities. The primary activities are directly related to the creation of a good or service while the support activities help in enhancing the efficiency and work to obtain a competitive advantage among peers. (Related Reading: Industry Handbook: Porter’s 5 Forces Analysis)
