Last version published: 12/10/2022 08:50
Publication number: ELQ-58003-3
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Porter's Value Chain Analysis Template
A PowerPoint Template of Porter's Value Chain Framework for strategists, business leaders and analysts to use to make an analysis of competitive advantage.
In his 1985 book "Competitive Advantage: reating and Sustaining Superior Performance" (available here: https://www.amazon.fr/Competitive-Advantage-Michael-Porter/dp/0743260872/ ), Michael Porter (Economist, Researcher, Author and Harvard Business School Professor), outlined his "Value Chain Analysis Framework". The framework is focused on value creation, and specifically on the transformation of INPUTS into valuable OUTPUTS while generating a MARGIN in the process (i.e. OUTPUT value > INPUT value). It remains a highly popular framework, close to 40 years after its creation, especially thanks to its central focus on the value created for the customer.
The value chain itself is embeded in a larger system, between SUPPLIERS (upstream), and DISTRIBUTION CHANNELS (downstream).
This can be resumed in the following formula:
Value Created and Captured – Cost of Creating that Value = Margin
Thus, the more value created and offered to customers, the more profitable the organisation, and the stronger the competitive advantage. In other words, the focus is on optimising competitive advantage to be in a position to have higher prices or lower costs.
Porter's Value chain lists INPUTS (i.e. a series of ACTIVITIES) that an organisation acts out that end up by creating VALUE to its end users or customers. The orginality of Porter's Framework is to help decision makers identify key activities that create the VALUE and drive competitive advantage on the long term.
The framework is composed of PRIMARY & SUPPORT Activities which together generate MARGIN.
PRIMARY ACTIVITIES: They directly relate to the creation of the product or service offered.
- 📥 InboundLogisticsThese are all the activities linked to moving inputs around during the creation of your product / service. Examples: Warehousing, Inventory Management, Transport, Material Handling.
- 🛠 Operations
These are the operational systems that allow you to transform inputs into valuable outputs for your customers. Examples: Access to real time sales system, inventory control system, branch operations, assembly, component fabrication,
- 📦 Outbound Logistics
These are the activities linked to the delivery of your product or service to your end customer. Examples: Order Processing, Full delivery trucks, warehousing, report preperation.
- 📈 Marketing & Sales
Activities, Processes and systems dedicated to convince your target customer to purchase from you, and also preferably instead at a competitor. The objectives of the activities here is to communicate effectively the potential value creation to the end user. Examples: Pricing, Communication, Promotion, Product based on community needs, website, advertising, Sales force, proposal writing.
- 👨🏼🔧 Service
Once your product/service is purchased, activities to maintain the promised level of value need to be put in place. This is it. Examples: Delivery, Repair,Customer Service Focus, Installation, Customer Support, Complaint, Resolution.
- 🏛 Firm Infrastructure
This is all the systems, functions, teams and departemnts that enable daily operations to run smoothly. Examples: Management, Finance, Legal, Planning, Investor Relations.
- 👨🏻👨🏼🦳👨🏻🦰 Human Resource Management
Given that talents are a significant leverage to value creation especially in service related industries, HR (Human Resources) activities need to be closely monitored. Examples: Recruiting, Monitoring, Training, Rewards, Promotions, Employee Relations,Competitive wages.
- 💻 📱Technology Development
Staying competitive on a technological basis is essential to maintain high levels of efficiency and potential for innovation, in particular for product based industries where the right technology choices can directly reduce costs or increase value by a log. Examples: Integrated Supply Chain SystemR&D, New Technology monitoring and sourcing, startup studios, incubators, Product Design, Process design, Market Research.
- 💰 Procurement
This is what the organisation needs to do to get the necessary INPUTS (ressources) ready for transformation into OUTPUTS. Examples: Communication with suppliers, Purchase Supplies and materials, services, machines, advertising, data.
Step 1: For PRIMARY ACTIVITIES: Identify sub-activities (or components). They can be direct, indirect or quality insurrance.
Step 2: Same as Step 1 but for SUPPORT ACTIVITIES
Step 3: Identify the links and dependencies between each sub-activity and main activities (intra PRIMARY or inter PRIMARY/SUPPORT)
Step 4: Identify the weakest links in the value creation process (with the objective to improve them), as well as the strong differentiating competitive advantages.
This template is my attempt at making Porter's Value Chain usable in a concrete business context. It's objective is to give decision makers and analysts a simple way to present the postive and negative components of each activity, as to identify key components to focus on to increase the value creation potential for the organisation.
The Best Practice is composed of:
- 1 editable Microsoft PowerPoint Template Slide
- with an online & offline 8 step-by-step methodology, with pedagogical illustrations for each step.
Additionnal resources on Porter's Value Chain:
- MindTools article: https://www.mindtools.com/pages/article/newSTR_66.htm
- Harvard Business School Strategy Concept overview: https://www.isc.hbs.edu/strategy/business-strategy/Pages/the-value-chain.aspx
- Four Week MBA explanations: https://fourweekmba.com/porters-value-chain-model/
Other Frameworks by Prof. Michael Porter: https://www.eloquens.com/channel/michael-e-porter
Should you have any questions about this top tier Porter Value Chain analysis framework template, you're welcome to reach out to me via Private Message.
⭐️ Bundle of 18 Strategy Consulting Frameworks (including this one): https://www.eloquens.com/tool/a7rgt4Bb/strategy/management-consulting-templates-and-frameworks/classic-strategy-frameworks-template-slides-bundle
This Best Practice includes
1 PowerPoint Template Model + 1 Offline/Online 7 Step-by-Step Methodology
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