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How to apply the Porter Value Chain scheme in a company?

Updated: May 16, 2020

Precisely. It is possible, specifying the tasks of each main activity and the functions or components of the support activities. Michael Porter created a strategic model with 5 forces: 1- Rivalry between competitors. 2- Suppliers' bargaining power. 3- Threat of substitute products. 4- Threat of entry of new competitors. 5- Customers' bargaining power. Porter's 5 strengths are part of a competitive analysis model created by Michael Porter in 1979 at Harvard Business Review, which consists of considering 5 “strengths” that can determine the position of any company in its respective market. What are 3 Porter's Strategies? Porter (1986) presents three generic approaches for a company (with the author's focus being on industries) to outperform its competitors: . total cost leadership; . differentiation; . focus. How does this model apply? Each company and each business is a Universe within itself and in an environment (micro and macro). The main activities of any company are:

. Internal logistics, that is, logistical activities from the reception of goods or raw materials, storage and internal maintenance . The production, or transformation of raw materials into finished products . External logistics, delivery of goods and services to the customer . Marketing and sales, means and methods used to publicize the company's offer, appreciate it and trigger the purchase . The services, activities associated with the main offer (training, maintenance, etc.)

The Support activities are:

. Supplies, activities related to the purchase of materials, goods, miscellaneous supplies, but also with the means of production . Technological development, concerns information systems, research and development, knowledge management . Human resources management, all recruitment activities, remuneration, motivation, training, career management  . The company's infrastructure, general management and other functions commonly called "support", such as accounting, legal assistance

The Margin corresponds to the Value created and captured or acquired - the associated costs.

I'll give you an example. Let's say you make something physical, but you need to improve the production process or you want to use a new raw material to make your product better and cheaper. This innovation does not depend only on you, but on all the actors involved and also on the machinery... Everything is a process of renewal, even marketing. The raw material has to be tried and tested, the machines have to be adapted, people need training, everything has to be optimized. It's like starting from scratch, with the difference that you already have experience and know-how. It is also necessary to determine the costs of this change.

This will, for example, allow your product to be more resistant and have fewer complaints from customers. In each particular case you must see the placement of certain tasks, which are always debatable. Porter's original model is in fact evolving and the basic diagram headings are not necessarily taken up in the strict sense. In each of the items in the following table, you will need to readapt.

How to practice? You can download free editable templates, for example. Use this link: or this one : Or download this file folder and practice:

Download ZIP • 83KB

If you cannot open zip file, use this link:

See also this link from the Harvard Business Review:

See a very good example:

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