Value Chain Approach Definition
The value chain approach is a business model that takes into account all of the steps involved in creating and delivering a product or service. The goal of the value chain approach is to maximize the value created for the customer while minimizing the cost of production.
The value chain approach was first developed by Michael Porter in his groundbreaking book, Competitive Advantage: Creating and Sustaining Superior Performance. Porter identified a company’s primary activities as being: research and development, production, marketing and sales, and customer service. He argued that it was important for companies to create a ‘chain’ of activities that added value for the customer.
The idea of the value chain is that each step in the process creates value for the customer, and that by streamlining these steps, companies can create a more efficient process and pass on those savings to the customer in the form of lower prices. In addition, by understanding all of the steps involved in creating their product or service, companies can look for ways to add even more value for the customer.
Thus, the goal of the value chain approach is to create a win-win situation for both businesses and customers: businesses save money while delivering more value, and customers get a better product or service at a lower price.
