Value Chains

Porter (1985) introduced the concept of "physical" value chain.

According to Porter (1985), by understanding and analyzing physical value chain, a business can uncover strategically relevant activities -- purchase of raw material, design, manufacture, market, and support of the products or services it sells -- for adding value to the customers.

A physical value chain consists of five core activities: inbound logistic, operations, outbound logistics, marketing & sales, and services, and four support activities: firm infrastructure, human resources management, technology development, and procurement.

The extent to which a company is able to reduce or eliminate redundant activities and hand-offs in carrying out different tasks in the physical value chain processes determines its capability in responding to customers' specific demands and expectations in quick time. By improving its internal business activities, a company can not only meet customers' demands in products and services quickly but also offers additional values...
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