Value chain

Value chain: allows the company to be divided into its strategically relevant activities in order to understand its cost behavior, as well as current and potential sources of differentiation.

Summary

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  • 1 General
  • 2 Objective
  • 3 Elements of the value chain
  • 4 Advantages of the value chain
  • 5 Sources

General

The concept of value chain already existed before the publication of “The competitive advantage of nations” by Michael Porter. In 1958 Hirschman; He formulated the idea of ​​”forward and backward linkages” as a sequence of investment decisions that take place during the industrialization processes that characterize economic development . However, it was Porter who brought the discussion of groupings and chains to the fore in the 1990s. The concept has been extensively discussed and has evolved from 1958 to date.

objective

The fundamental objective is to add added value to its products, be it for quality , differentiation , innovation , among others, it will increase the net benefits of the entire chain.

Elements of the value chain

Primary activities: are those activities that have to do with the transformation of the raw material into a finished product, distribution and after-sales assistance .
Support activities: are those activities that serve as a complement and support to the primary activities, providing all the necessary resources for its full operation.
Margin or Greater Value: It is the difference that exists between the total value and the total cost incurred by the company to develop a certain value-generating activity (price-total cost).

Advantages of the value chain

  1. It highlights distribution and marketing as important components of the final cost and key factors of competitiveness.
  2. It facilitates the identification and analysis of the information flow, which is a fundamental factor to increase competitiveness.
  3. It identifies problems, critical points and bottlenecks throughout the chain, facilitating the development of solutions jointly between the different actors.
  4. It allows to analyze, independently and interrelated, the different activities of the production, processing and distribution process, identifying possibilities for improvement in each of the links.

 

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