Value Chain

Value chains are large-scale business processes that are initiated by a customer request, and result in the delivery of a product or service to a customer. A value chain includes everything that contributes to the delivery of a given product. By adding up all the costs of each activity in the value chain, and subtracting the total from the sales price, an organization can determine the profit margin on the value chain. Most organizations support from 3 to 15 value chains. Introduced by Michael Porter in his 1985 book entitled COMPETITIVE ADVANTAGE, this approach emphasizes capturing those processes and activities that “add value” to the service or product provided to a customer. Value Chains provide a strategic view of business processes across the organizations and products they support.