The Value Chain
The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and
Sustaining superior Performance" (1985). The value chain analysis describes the activities the organization
performs and links them to the organizations competitive position.
Value chain analysis describes the activities within and around an organization, and relates them to an
analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular
activity adds to the organizations products or services. This idea was built upon the insight that
an organization is more than a random compilation of machinery, equipment, people and money. Only
if these things are arranged into systems and systematic activates it will become possible to produce
something for which customers are willing to pay a price. Porter argues that the ability to perform particular
activities and to manage the linkages between these activities is a source of competitive advantage