International Encyclopedia of Organization
Contributors: David Seidl
Edited by: Stewart R. Clegg & James R. Bailey
Book Title: International Encyclopedia of Organization Studies
Chapter Title: “Value Chains”
Pub. Date: 2008
Access Date: February 24, 2020
Publishing Company: SAGE Publications, Inc.
City: Thousand Oaks
Print ISBN: 9781412915151
Online ISBN: 9781412956246
Print pages: 1627-1601
Â© 2008 SAGE Publications, Inc. All Rights Reserved.
This PDF has been generated from SAGE Knowledge. Please note that the pagination of the online
version will vary from the pagination of the print book.
The concept of the value chain is a heuristic for analyzing the activities within and around a firm that together
create a product or service. On this basis, each activity is evaluated with regard to the value it adds to creating the product or service and the cost it incurs. It is used in strategic management to identify the potential of
the different organizational activities for constituting sources of competitive advantage.
The concept of the value chain is a central tool in strategic planning. McKinsey was the first to develop an
early version of it under the label â€œbusiness system conceptâ€ in 1980. Michael Porter elaborated the concept
in his seminal book on competitive advantage in 1985. According to Porter, the competitive advantage of a
company can be better analyzed if one does not assess an organization as a whole but decomposes its various processes into different value activities. Each activity can then be analyzed with regard to the value it
adds to the final product or service (measured in terms of what the customer is prepared to pay for it) and the
costs it incurs. If the created value is higher than the cost, the company will realize a profit margin.
Porter distinguishes between so-called primary activities and support activities (Figure 1). While primary activities contribute directly to the creation of the final product or service, the support activities merely increase
the effectiveness or efficiency of those primary activities. Porter’s basic model identifies five types of primary
â€¢ Inbound Logistics: activities concerned with receiving, storing, and distributing various inputs to the
product or service.
â€¢ Operations: activities concerned with transforming the inputs into the final product or service.
â€¢ Outbound Logistics: activities related to the collection, storage, and distribution of finished products
or aimed at bringing service and customer together.
â€¢ Marketing and Sales: activities associated with getting buyers to purchase a product or service.
â€¢ Service: activities concerned with the maintenance and enhancement of the value of a product or
service; for example, installation, repair, or training.
The support activities are grouped into four main areas:
â€¢ Procurement: activities related to the purchase of goods and services that are needed for the primary
â€¢ Technology Development: activities associated with the development of technologies directed at the
product, the processes, or particular resources.
â€¢ Human Resource Management: activities associated with the recruitment, training, development,
and compensation of employees.
â€¢ Infrastructure: activities associated with all types of management systems and with the structuring
and routines that sustain the organizational culture.
Figure 1 Porter’s Basic Value Chain Model
Â© 2008 by SAGE Publications, Inc.
Page 2 of 5 International Encyclopedia of Organization Studies
M. E. Porter. Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, 1985.
While the first three support activities are usually linked directly to particular primary activities, the infrastructure cuts across all primary activities.
Characteristically, different industries tend to put different emphases on the various groups of activities. In retail companies, for example, the main activities are typically those associated with the inbound and outbound
activities, while in manufacturing companies the emphasis is usually put on operations. Despite such industry
specificities, every company has its particular profile in terms of where its main activities lie and how they are
linked together. The particular profile may have emerged over time, or it might be the result of design. On
the basis of an analysis of one’s particular value chain in comparison with that of one’s competitors, companies can identify their potential sources of competitive advantage (in terms of cost advantage or in terms of
differentiation) and consequently decide how to develop their value chain further. This includes particularly
decisions on outsourcing or insourcing of activities.
The value chain of an individual company is typically just one element of a larger chain of value-creating
activities that includes the value chains of all upstream and downstream companies. Such larger interorganizational links and relationships that are necessary for creating a final product or service are usually referred
to as value systems (synonymously: supply chains, industry value chains). Beyond their own value chains,
companies often try to optimize the value system as a whole by taking into account the interdependencies
between elements of their own and those of other value chains on other levels in the value-creation process.
Under labels such as â€œdeconstruction of the value chain,â€ companies have also started to break up and reconfigure established structures of the value system. For example, some levels of the value-creation process are
removed (so-called disintermediation), so a manufacturer might deliver directly to the retailer, squeezing out
the wholesaler. Or companies create entirely new value systems by integrating elements of previously distinct
value systems: For example, gas stations may also become food retailers. Or they dissolve links between different value chains creating a fluid value network whose member companies are selectively coordinated on
a case-by-case basis. Such reconfigurations of the value-creation architecture have been supported by the
advent of new information and communication technologies.
Critical Commentary and Future Directions
The concept of the value chain is a useful heuristic for analyzing the strategic significance of organizational
activities. Its advantage lies in its simplicity and abstractness, which allow it to be applied to any kind of comSAGE
Â© 2008 by SAGE Publications, Inc.
Page 3 of 5 International Encyclopedia of Organization Studies
pany independent of the specific product or service. As with many such concepts, however, it provides little
operative guidance on its practical use. For example, it has been noted by several commentators that conducting a proper analysis of one’s value chain often requires information that is either unavailable or costly to
obtain. This is the case both for information regarding one’s own company (e.g., it might require changing the
system of accounting) andâ€”even more soâ€”for information on the activities of one’s competitors, suppliers,
or customers. (For example, the information might be very sensitive.)
More important, however, there are some conceptual limitations to the value-chain idea. Underlying this kind
of thinking is the classical assumption that one can understand a process or system (here: the valuecreation
process) by splitting it up into, and analyzing, its different components (here: the different value activities).
Yet, as systems theory in particular has pointed out, a systemic whole often possesses socalled emergent
characteristics that result from the interaction of its components and that thus cannot be studied by analyzing
the individual elements. As a consequence, the value-chain heuristic tends to obscure such emergent properties. By reconfiguring the value chain, for example, by outsourcing certain activities, companies thus risk
destroying particular competencies that are based on such emergent phenomena.
A further critical point concerns the mechanistic concept of the organization behind the value-chain concept,
according to which, elements of the value chain can simply be reconfigured according to a particular design.
This, however, overlooks the particular social dimension of organizations. Not only do structures and activities often possess latent (social) functions that are not captured by the value-chain heuristic, but some social
functions also resist intentional design (e.g., the organizational culture). Reconfigurations of the value chain
might thus destroy social capital that is often difficult to rebuild.
â€¢ value chains
â€¢ value creation
â€¢ competitive advantage
â€¢ systems structure
â€¢ Competitive Advantage
â€¢ Organizational Capabilities
â€¢ Strategic Management
Bresser, R. K. F., Heuskel, D., & Nixon, R. D. (2000). The deconstruction of integrated value chains: Practical
and conceptual challenges. In R. K. F.Bresser, M. A.Hitt, R. D.Nixon, & D.Heuskel (Eds.), Winning strategies
in a deconstructing world (pp. 1â€“21). Chichester, UK: Wiley.
Gluck, F.Strategic choice and resource allocation. McKinsey Quarterly(1980, Winter)22â€“33.
Porter, M. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free
Rappaport, A. (1986). Shareholder value: A guide for managers and investors. London: Free Press.
Â© 2008 by SAGE Publications, Inc.
Page 4 of 5 International Encyclopedia of Organization Studies
Shepherd, A. (1998). Understanding and using value chain analysis. In V.Ambrosini with G.Johnson & K.Scholes (Eds.), Exploring techniques of analysis and evaluation in strategic management (pp. 20â€“44). London:
Prentice Hall Europe.
Â© 2008 by SAGE Publications, Inc.
Page 5 of 5 International Encyclopedia of Organization Studies
Get Professional Assignment Help Cheaply
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Why Choose Our Academic Writing Service?
- Plagiarism free papers
- Timely delivery
- Any deadline
- Skilled, Experienced Native English Writers
- Subject-relevant academic writer
- Adherence to paper instructions
- Ability to tackle bulk assignments
- Reasonable prices
- 24/7 Customer Support
- Get superb grades consistently
Online Academic Help With Different Subjects
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
What discipline/subjects do you deal in?
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Are your writers competent enough to handle my paper?
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
What if I don’t like the paper?
There is a very low likelihood that you won’t like the paper.
- When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
- We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.
In the event that you don’t like your paper:
- The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
- We will have a different writer write the paper from scratch.
- Last resort, if the above does not work, we will refund your money.
Will the professor find out I didn’t write the paper myself?
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
What if the paper is plagiarized?
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
When will I get my paper?
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
Will anyone find out that I used your services?
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
How our Assignment Help Service Works
1. Place an order
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
2. Pay for the order
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
3. Track the progress
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
4. Download the paper
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!