What is a value chain?

A key point to evolve as entrepreneurs is to know what are the strongest points of our business to take it to the next level. The value chain is a tool that allows us to achieve it.

A value chain consists in the analysis of a business by breaking down its parts in order to identify those elements that generate value for the company. These elements are those that stand out above other competitors, which is highly valued by customers.

The value chains are divided into two parts:

Primary

It is related to the creation of the product and is divided, in turn, into five sections:

• Internal logistics: it deals with everything related to the reception of raw materials for the creation of our products.
• Operations: is the party responsible for the processing of these materials until the formation of the product.
• External logistics: is responsible for the storage and distribution of the product.
• Marketing and sales: it is about advertising and selling what we have created.
• Service: is dedicated to maintaining and enhancing the value of the product.

Secondaries

They are responsible for supporting primary activities and are related to the infrastructure of the organization, such as finance, accounting, planning, human resources, among others.

To effectively apply a value chain, we must know all the processes of our company in order to make a map of them.

When the processes are thoroughly known, we can be able to establish objectives (general and specific) as well as analyze the costs of production and the finished product, taking into account the 4 C's (cost, customer, competition and change). In this way we can identify the advantages and disadvantages we have with respect to other brands and, thus, enhance the strongest points.

Source: Pa Digital.