Definition
Value Chain Analysis helps to understand the numerous activities involved in producing a product or service from start to finish. This includes all stages of the production process such as procurement of raw materials, product design & development, manufacturing, marketing & sales and customer care.
In the room
How the word shows up in a real conversation.
John, CEO of a small leather goods manufacturing company, is determined to maximize the efficiency and gain maximum profits. To achieve this, he decides to carry out a value chain analysis as part of his strategy.
John begins by identifying every step embedded in the production and delivery of his commodities, including locating raw materials, constructing, advertising, and sending. He next scrutinizes every activity to decide the impact it has on the finished item & its cost.
Upon analyzing his business activities, John found that the major expense was not materials nor production but transportation & delivery. Realizing this, he decided to streamline the delivery process to decrease his expenses and improve his profit margins.
John opted for a local delivery company that focuses on eco-friendly practices. This not only proved to be more cost-effective, but it also corresponded with his business' core values of sustainability, allowing him to stand out from the competition.
By performing a value chain analysis, John was able to use the value chain tool to identify where he could make improvements and upgrades, which ended up increasing both efficiency and profits. The value chain is a great resource for businesses looking to optimize their operations.
Common mistake
Using Value Chain as a label instead of a fact. If you cannot point to the evidence — a number, a customer, or a written assumption — you are using the word as jargon.
See also
Value chain analysis
Process of examining each step in the value chain to identify opportunities.
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Value engineering
Systematic approach to improving the value of products or services.
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Value engineering process
Structured methodology for enhancing value while reducing costs.
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Value Proposition
Clear statement of the unique value a product or service provides to customers.
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