Understanding Porter's Value Chain

This assignment delves into Porter's Value Chain Analysis, a strategic tool used to examine an organization's internal activities and identify valuable processes. It explains primary activities like inbound logistics and marketing & sales, alongside secondary activities such as procurement and technological development. The paper further explores cost advantages, differentiation strategies, the importance of linking activities, and the role of outsourcing in value chain management.

Running head: STRATEGIC PLANNING
Strategic Planning
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Introduction......................................................................................................................................2
Value Chain Analysis Definition.....................................................................................................2
Primary Activities............................................................................................................................2
Secondary Activities........................................................................................................................2
Cost Advantages..............................................................................................................................3
Differentiation..................................................................................................................................3
Technology......................................................................................................................................3
Linkage between Activities.............................................................................................................4
Outsourcing......................................................................................................................................4
Conclusion.......................................................................................................................................4
References........................................................................................................................................5

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Introduction
Strategic Planning refers to the process to define the business strategies of the
organizations. Strategic planning plays an integral part in organizational decision-making and it
provides the business with necessary direction to achieve its objectives. One of the major parts of
strategic planning is Value Chain that helps to add value to the customers.
Value Chain Analysis Definition
Value Chain Analysis is described as a major strategic tool used by the organizational
managers for the analysis of the internal activities of the companies. The main objective of value
chain analysis is to recognize the most valuable activities in the organizations (Fearne et al.
2012).
Primary Activities
There are five primary activities in Porter’s Value Chain. They are Inbound Logistics like
receiving, storing and distributing inputs; Operations that the transformation activities; Outbound
Logistics like collection, storage and distribution system; Marketing and Sales that are done to
persuade customers; and Services that are done to maintain the value of products (netmba.com
2017).
Secondary Activities
There are four secondary activities in Porter’s Value Chain. They are Procurement that is
done to get the necessary resources for operation; Human Resource Management that involves
recruitment, hiring, motivation and others; Technological Development that are related to

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management and procurement of information; and Infrastructure that are the support system of
the companies.
Cost Advantages
There are five steps under coat advantage. First step involves the identification of primary
and secondary activities. Second step gives importance to each of the activities. The third step
involves identification of cost driver for each activity. Step four identifies links between the
activities. Fifth activity involves the identification of risk reduction opportunities.
Differentiation
There are three steps in differentiation advantages. First step involves the identification of
value creating activities. Second stage involves the evaluation of differentiation strategies to
improve value of the customers. In the third stage, the best sustainable differentiation is
identified.
Technology
In Porter’s Value Chain Analysis, the activities of technological development are related
with the management and processing of organizational information. In addition, it also helps to
protect the knowledge base of the companies. The major objectives of this are the minimization
of technological costs, to stay up to date with current technologies and to maintain technical
excellence (marketingteacher.com 2017).

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Linkage between Activities
Four steps can be seen here. In step one, high-quality assembling process helps in the
reduction of costs and defects for quality control and support activities. In step two, plants are
located near to the suppliers for the reduction of distribution and purchasing costs. In step three,
few models are used for the reduction of assembling costs. In step four, warehousing costs are
increased by high order sizes (tutor2u.net 2017).
Outsourcing
Businesses have the option to outsource the rest of value chain activities in which they
are not specialized. Thus, a thorough value chain analysis helps in the outsourcing decisions of
value chain. In order to take value chain outsourcing decision, businesses are required to identify
the strengths and weaknesses of various value chain activities.
Conclusion
From the above discussion, it can be seen that value chain helps in adding values to the
products and customers of the companies. As per the above discussion, there are various aspects
of value chain analysis and the organizational managers are required to consider all these factors
into consideration while taking value chain related decisions.

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References
Fearne, A., Garcia Martinez, M. and Dent, B., 2012. Dimensions of sustainable value chains:
implications for value chain analysis. Supply Chain Management: An International
Journal, 17(6), pp.575-581.
Marketingteacher.com. (2014). Value Chain Analysis. [online] Available at:
http://www.marketingteacher.com/value-chain-analysis/ [Accessed 7 Nov. 2017].
Netmba.com. (2017). Value Chain Analysis. [online] Available at:
http://www.netmba.com/strategy/value-chain/ [Accessed 7 Nov. 2017].
tutor2u. (2017). Value Chain Analysis | tutor2u Business. [online] Available at:
https://www.tutor2u.net/business/reference/value-chain-analysis [Accessed 7 Nov. 2017].

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