We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Value Chain Analysis?

By Osmand Vitez
Updated May 17, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Value chain analysis helps a company review its supply chain and logistics to maintain a competitive advantage. A generic value chain can include a number of different steps, such as inbound logistics, operations and outbound logistics, as well as marketing and sales and service. Each step represents a portion of the company’s infrastructure that affects how the firm completes tasks and activities. A primary purpose of value chain analysis is to find areas to decrease operating costs and improve the overall economic value added of the company.

Inbound logistics includes acquiring and warehousing the materials needed to produce goods. Internal operations can also affect this process, as companies will need to move materials throughout the firm to produce goods. This leads into the operations portion of value chain analysis, which includes the activities for transforming raw materials into consumer products. Outbound logistics is the distribution of finished products to retail stores. This also leads into marketing and sales, which can help the company reach consumers for selling the product. Service is necessary to receive customer feedback and find ways to improve products.

Owners and managers will often undergo a value chain analysis to determine if their company will benefit from an economy of scale. This economic theory purports that a company can lower costs by increasing the number of goods produced. For example, each step in the value chain will add operating costs to the company’s operations. While some costs are necessary — such as raw materials and labor to produce goods — others can simply add expenses without generating revenues. Increasing production can lower these costs, as the company can allocate the money spent to produce more goods, which in turn will equal higher revenue when sold.

Another purpose of value chain analysis is the ability of a company to differentiate its operations from other companies. This can create a unique competitive advantage, as other companies in the business environment may be unable to replicate this process. Ways to differentiate the value chain include using internal or custom-designed computer software, integrating with vendors and suppliers or using specific locations to serve consumers.

Technology in the business world vastly transforms the value chain process. Historically, much of the interactions between companies in this chain used interpersonal communication forms to complete tasks. Technology takes the human element out of many of these interactions. Companies can use technology to transfer information electronically, shortening the lead time it will take to move goods or information through the value chain.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.