Definition: What is the value chain?

The value chain model (or value chain) describes the successive activities of a company that contribute to the production of a good (product or service). These include logistics, production and assembly, marketing, sales and customer service. The idea behind it: The value of a good (the sales price) must be higher than all the costs incurred in the production process; the difference remains with the company as a profit margin.

The US economist Michael E. Porter first published the concept of the corporate value chain in his book “Competitive Advantage” in 1985. It helps companies to understand how they can work more economically, increase the value of their services for customers and set themselves apart from the competition.

The value chain is not the same as the term supply chain: this actually describes all stages of the production process from the extraction of raw materials to delivery to the end customer (not just the stages within a participating company).

What does value creation mean?

Value creation is the targeted process by which companies increase the value of a product or service. It is about taking raw materials or basic services and creating something that is worth more than the sum of its parts. Our entire economic system is based on this concept, in which companies must operate profitably, i.e. make a profit.

A simple example: In a bakery, flour, water and yeast are processed into bread. Value is created through the combination of ingredients, the baker’s expertise, the use of the oven, packaging and presentation in the store. The value or selling price of the bread is higher than the sum of its ingredients plus the labor, energy and other costs required to make it; this additional value has been created or “created”.

Activities of the operational value chain (according to Michael E. Porter)

Michael E. Porter described the value chain on the basis of three elements: The activities, divided into primary and support activities, and the profit margin.

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Primary activities

Primary activities are tasks and processes that contribute directly to the production and sale of a good. They increase the value of the end product for the customer. These activities are the core competencies of every company and are crucial to its success. Porter names the following five primary activities:

  • Inbound logistics: receipt, storage and distribution of raw materials in the company
  • Operations: All finishing processes, including production, assembly and quality assurance
  • Outbound logistics: storage and delivery of end products to customers
  • Marketing and sales: design of pricing and product policy, advertising and sales promotion measures, distribution channels
  • Customer service: advice, installation, maintenance, repairs and spare parts supply

If companies do an excellent job in these areas, their products or services tend to become more attractive to customers, for example because they are of higher quality, more reliable, cheaper or can be delivered more quickly.

The activities can be weighted differently in each company and can also be outsourced. A wholesaler, for example, continues to sell products unchanged; the operations area is largely limited to picking and packing orders. A machine manufacturer can commission an external service provider to carry out maintenance and repairs at the customer’s premises. (Three examples of value chains in different sectors are explained below).

Supporting activities

The supporting activities do not directly increase the value of a good and are not absolutely necessary for its production. However, they create the framework conditions to ensure that the primary activities can be carried out as efficiently and smoothly as possible . Supporting activities include

  • Corporate infrastructure: organization and management of the entire company, including finance, planning, legal department and fleet management
  • Personalwirtschaft: Alle Aspekte der Mitarbeiterführung, von der Rekrutierung über die Entwicklung bis zur Vergütung
  • Technology development: research and development (R&D) and IT operations
  • Procurement: purchasing the raw materials, services and equipment required by the company

These activities are less relevant for customers. For example, customers do not pay higher prices for a product just because the manufacturer uses modern IT systems. However, with the help of the systems, the company can take measures to reduce manufacturing costs and improve the products. As a result, they indirectly contribute to an increase in value and a higher profit margin.

Profit margin

Ultimately, every company must work to maximize its profit margin: by delivering the highest possible value to customers and keeping costs or resource consumption as low as possible.

Examples of value chains in different sectors

The basic model of the value chain is universally applicable. Depending on the industry and business model, however, the activities can look very different. Here are three examples:

Mechanical engineer

  • Inbound logistics: The machine builder receives, stores and manages materials such as steel, plastics and electronic components that are necessary for the manufacture of machines.
  • Operations: In this phase, the materials are processed into machines or system components. This includes cutting, welding, assembly and quality control.
  • Outbound logistics: The finished machines are stored and then delivered to customers worldwide, which requires careful logistics planning to avoid damage and meet delivery times.
  • Marketing and sales: Marketing activities include participation in industry trade fairs, the production of technical brochures and direct contact with industrial customers. Sales are often carried out via a network of dealers or directly to customers.
  • Customer service: The machine manufacturer offers installation, maintenance, repair services and training in the operation of the machines.

Wholesaler for operating supplies

  • Inbound logistics: receipt and storage of goods in large quantities from various manufacturers.
  • Operations: The main operations include picking, packing and preparing orders for dispatch to customers.
  • Outbound logistics: The ordered products are transported to the customer.
  • Marketing and sales: Wholesalers rely on personal cultivation of their customer networks and negotiations with retailers as well as regular sales promotion campaigns.
  • Customer service: This includes the processing of orders, returns and complaints as well as advice on product selection and use.

Marketing agency

  • Inbound logistics: Service providers do not have inbound logistics in the traditional sense. The term can be applied here to the procurement of information, software and other resources that are necessary for the services.
  • Operations: Core activities include marketing strategy development, design, content creation and campaign execution for clients.
  • Outbound logistics: The delivery of the service to the customer, often in the form of digital media, reports and presentations.
  • Marketing and sales: Own marketing activities to position the agency and acquire new customers as well as direct sales through participation in tenders, offers and negotiations.
  • Customer service: Follow-up of projects, provision of support and ongoing advice to maintain the customer relationship and generate additional business.

What can the value chain model be used for?

Michael E. Porter’s value chain model serves companies as a strategic analysis tool for recognizing and developing competitive advantages. It supports three tasks:

Determine the optimum final price of a product

Companies can determine in detail for each step of the value chain what costs are incurred there and what value is added to the product. This knowledge helps to determine the optimum sales price of a product. On the one hand, this must cover costs and include an appropriate profit margin. On the other hand, it must be competitive and reflect the perceived value of the product by the customer.

Evaluate the performance of the company

The model also provides a framework for evaluating internal processes and activities in terms of their efficiency and effectiveness. By analyzing the individual activities within the value chain, companies can identify their strengths and weaknesses: for example, in which areas they are ahead of the competition or need to catch up. This evaluation provides important insightsfor strategic decisions and the future direction of the company.

Uncover optimization potential

The assessment subsequently enables optimization potential to be identified along the entire value chain. Companies can take targeted measures to optimizeprocesses, reduce costs, create synergies between activities and ultimately increase the overall value for the customer. They can invest their resources where they make the greatest contribution to product value or profit margins.

Horizontal and vertical integration of value chains

The value chain is a central part of the corporate strategy or business model. Dealers who only resell products, for example, have low added value but also relatively low costs. A manufacturer that produces vehicles from tens of thousands of individual parts has high added value and high costs.

If a company wants to increase its added value, it can follow two strategies:

Horizontal value chains

A horizontal value chain refers to the expansion of a company within the same stage of production or distribution. This is possible through internal growth or through mergers and acquisitions: for example, when two retailers merge or when one software company buys another that offers similar products.

The aim of horizontal integration is to expand the company’s competitive position and market share and to realize economies of scale.

Vertical value chains

A vertical value chain describes the process in which a company integrates activities along different stages of production or distribution. Either forwards towards the end customer, for example when a manufacturer opens its own retail outlets, or backwards towards the extraction of raw materials, for example when a manufacturer of industrial foodstuffs buys an agricultural supplier.

The main objectives of vertical integration are to reduce both costs and dependence on external suppliers and to retain a larger share of the value added as a profit margin.

Supply chain and value chain systems

Porter’s value chain only includes the part of the value chain covered by an individual company. It does not take into account the activities of upstream suppliers and downstream buyers who process or sell the goods. For a broader perspective, two further terms are required:

Supply chain: The supply chain considers the entire process of providing a product or service across all companies involved: from the extraction of raw materials to delivery to the customer.

Value chain systems: An end product consists of numerous raw materials, parts and services, each of which has its own supply chain. The supply chains in turn consist of the value chains of all the companies involved, such as suppliers, manufacturers, service providers and retailers. These chains are all interwoven and form value chain systems.

Companies must not only look at their own value chain; the value of a product for the end customer is influenced by all steps in the supply chain. If, for example, the initial raw materials are of poor quality or in short supply, all downstream companies and end customers will feel the effects. Close cooperation between companies within these networks enables them to exploit synergies, reduce costs, improve product quality, accelerate innovation and respond better to the needs of the market and end consumers.

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FAQ zu Wertschöpfungskette

Was versteht man unter der Wertschöpfungskette?

Die Wertschöpfungskette bezeichnet die aufeinanderfolgenden Aktivitäten eines Unternehmens, mit denen ein Produkt oder eine Dienstleistung vom Rohstoff bis zum Endkunden entsteht und dabei Wert geschaffen wird.

Welche Hauptphasen enthält eine Wertschöpfungskette?

Typische Phasen einer Wertschöpfungskette sind Beschaffung, Produktion bzw. Bearbeitung, Logistik, Marketing & Vertrieb sowie Service oder Kundendienst – jede Stufe trägt dazu bei, den Nutzen für den Kunden zu steigern.

Warum ist die Analyse der Wertschöpfungskette für Unternehmen wichtig?

Die Analyse erlaubt es, Prozesse entlang der Kette zu prüfen, Kostentreiber zu identifizieren, Effizienzpotenziale aufzudecken und Wettbewerbsvorteile systematisch zu entwickeln – weil Wert- und Kostenbeiträge jeder Aktivität sichtbar werden.

Wie hängt die Wertschöpfungskette mit einem ERP-System zusammen?

Ein ERP-System vernetzt Daten und Prozesse entlang der gesamten Wertschöpfungskette – von Beschaffung über Produktion und Logistik bis hin zu Vertrieb und Service. Dadurch werden Transparenz, Steuerung und Optimierung der Kette möglich und Unternehmen können schneller und zielgerichteter auf Markt- oder Prozessveränderungen reagieren.

Welche Rolle spielt Digitalisierung in der Wertschöpfungskette?

Die Digitalisierung ermöglicht die Vernetzung von Prozess- und Informationsflüssen entlang der Wertschöpfungskette, Echtzeit-Daten für Steuerung und Monitoring bereitzustellen und neue Geschäftsmodelle zu integrieren – wodurch die Kette flexibler, effizienter und kundenorientierter wird.

Welche Herausforderungen ergeben sich bei der Gestaltung von Wertschöpfungsketten?

Herausforderungen sind unter anderem die Steuerung komplexer, globaler Liefer- und Wertschöpfungsnetzwerke, die Sicherstellung hoher Daten- und Prozessqualität, die Integration von Partnern und Systemen sowie das Management von Wandel und Innovationsdruck in der Kette.