Value Chain & Strategy: Reading Material
D.M.Ravi Dissanayake
Senior Lecturer, Department of Marketing Mgt
University of Kelaniya

Introduction
Michael Porter introduced the value chain analysis concept in his 1985 book ‘ The Competitive Advantage’ . Porter suggested that activities within an organization add value to the service and products that the organization produces, and all these activities should be run at optimum level if the organization is to gain any real competitive advantage. If they are run efficiently the value obtained should exceed the costs of running them i.e. customers should return to the organization and transact freely and willingly. Michael Porter suggested that the organization is split into ‘primary activities’ and ‘support activities’.

Why it needs for strategists:

* To analyze internal performance of SBUs or corporate as holistic * To understand how industry goes on KPIs and to keep SBU consistent * To organize activities to support for the generic strategy * As a base line for resource allocation * Performance review guide

Understanding How Value is created within Organizations

How does your organization create value? How do you change business inputs into business outputs in such a way that they have a greater value than the original cost of creating those outputs?
This isn't just a dry question: it's a matter of fundamental importance to companies, because it addresses the economic logic of why the organization exists in the first place.
Manufacturing companies create value by acquiring raw materials and using them to produce something useful. Retailers bring together a range of products and present them in a way that's convenient to customers, sometimes supported by services such as fitting rooms or personal shopper advice. And insurance companies offer policies to customers that are