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Porter's Value Chain

Introduction

        Michael Porter introduced a concept known as Porter's Value Chain. A value chain consists of the activities an organization performs to make a product that is valued by customers.

        Porter's value chain lists nine activities that are found in most businesses. The activities are broken down into (2) categories.



Porter's Value Chain. Click to view full-size.


        The activities are leveraged to create a profit margin for a company.



Support Activities
       
        Support activities are the activities that support primary activities. Some people believe support activities are simply overhead costs, however some support activities can generate value.

        There are (4) support activities:
       
            1) Firm Infrastructure
                Legal, administrative, accounting, and management are examples of firm infrastructure.
            2) Human Resource Management
                The ability for a company to hire, train, motivate, and reward employees. People can add value to a business, thus giving a business competitive advantage.
            3) Technology Development
                Research & design and information systems are able to generate value which in turn can create a competitive advantage.
            4) Procurement
                Sourcing raw materials and negotiating contracts can definitely add value to a company. Procurement can add a competitive advantage to a company.


        Jobs that fall under support activities are jobs in which the employee is supporting the creation of a product, but not actually interacting with either the product itself or its inputs.

Primary Activities

     Primary activities are the activities which: create a product, sell the product, or provide service to a product.

      There are (5) primary activities.

            1) Inbound Logistics
                Receiving, inventory, and distribution of inputs from suppliers.
            2) Operations
                Transforming inputs into a final product.
            3) Outbound Logistics
                Moving the final products and services to customers.
            4) Marketing & Sales
                Communicating product's to customers and then selling products.
            5) Service
                Providing customer service and maintaining the value of a product. For example, patching a security vulnerability in software that was sold to customers.


       To determine if a job falls under a primary activity one must consider if that job is part of creating, selling, or providing the product to customers.



Impact of Cloud Computing & Internet of Things(IOT)

    
    Cloud computing and IOT will impact all areas of Porter's Value Chain.
When a pallet or box of items is shipped, in particular expensive ones, they could have devices that monitor location, temperature, and forces the container                   experienced in transit.  Employee I.D. badges will serve as locators to determine if a employee is in their office, in a meeting, or out to lunch. Chairs will be used to analyze how potential customers feel about a product based on their      movement in the chair while listening to a presentation. Quite literally every area will be impacted by IOT and cloud computing.












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