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Date Submitted: 11/17/2012 04:25 PM

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Value chain

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The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.[1]

Contents[hide] * 1 Firm Level * 2 Requirements of value chain * 2.1 Activities * 3 Industry Level * 4 Significance * 5 SCOR * 6 Value Reference Model * 7 References * 8 See also * 9 External links |

[edit] Firm Level

A value chain is a chain of activities for a firm operating in a specific industry. The business unit is the appropriate level for construction of a value chain, not the divisional level or corporate level. Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of the independent activity's value. It is important not to mix the concept of the value chain with the costs occurring throughout the activities. A diamond cutter, as a profession, can be used to illustrate the difference of cost and the value chain. The cutting activity may have a low cost, but the activity adds much of the value to the end product, since a rough diamond is significantly less valuable than a cut diamond. Typically, the described value chain and the documentation of processes, assessment and auditing of adherence to the process routines are at the core of the quality certification of the business, e.g. ISO 9001.

[edit] Requirements of value chain

Coordination and collaboration; Investment in information technology; Changes in organizational processes; Committed leadership; Flexible jobs and adaptable, capable employees; A supportive organizational culture and attitudes;

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