To better understand the activities through which a firm develops a competitive advantage and creates shareholder value, it is useful to separate the business system into a series of value-generating activities referred to as the value chain. In his 1985 book Competitive Advantage, Michael Porter introduced a generic value chain model that comprises a sequence of activities found to be common to a wide range of firms. Porter identified primary and support activities as shown in the following diagram:
Porter's Generic Value Chain
Inbound
Logistics |
>
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Operations
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>
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Outbound
Logistics |
>
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Marketing
& Sales |
>
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Service
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>
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M
A R G I N |
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Firm Infrastructure
 HR Management Technology Development Procurement |
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The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin.
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