In this topic 5 sections
Find where activities create value
A value chain breaks a business into the activities that deliver its offering. The aim is to understand why customers choose it and what it costs to deliver that promise. Activities must work together: a lower purchasing price is unhelpful if unreliable inputs cause expensive failures later.
An organisational value chain looks inside the business. An industry value chain, or wider value system, follows the connections between suppliers, the business, distributors and customers. Competitive advantage can come from improving a connection as well as an individual activity.
- Identify the customer promise
- Map activities and handovers
- Measure cost, quality and delay
- Compare improvement options
- Check the whole-chain outcome
Concept sources: Harvard Business School, The Value Chain — Porter's activity-based view and the wider value system. The decision path is an original study aid.
Primary activities directly help produce, sell, deliver or support the offering. Support activities provide the people, systems, procurement and organisational infrastructure those activities need. A support activity can be strategically important even when customers never see it.
| Activity in a bicycle-repair business | Information to investigate | Possible improvement |
|---|---|---|
| Diagnose the fault | Repeat visits and diagnostic time | Record recurring faults and improve technician training |
| Obtain replacement parts | Shortages, delivery time and defective parts | Agree dependable supply and quality checks |
| Repair and test | Labour time, rework and safety results | Improve the repair sequence without weakening testing |
| Return the bicycle | Collection delays and customer feedback | Coordinate completion notices and collection slots |
Concept sources: OpenStax, Principles of Management, section 8.5 — primary and support activities. The bicycle-repair table is an original application.
Improve total value, not just one department's cost
Value analysis asks whether an activity contributes to the required outcome relative to the resources it consumes. Distinguish work customers value, necessary enabling or compliance work, and avoidable waste. Duplicate entry, waiting and correcting preventable mistakes are candidates for improvement. A customer may not explicitly pay for a safety record, but that does not make it sensible to remove it.
Concept sources: Lean Enterprise Institute, Value — customer value and non-value-creating activity. The compliance distinction prevents a narrow customer-price test from being applied mechanically.
Just-in-time (JIT) coordinates supply and production with actual need, reducing unnecessary inventory. It depends on dependable quality, timing and communication; it is not simply an instruction to hold no stock. A missed delivery can interrupt the whole chain. Compare inventory savings with disruption exposure and the cost of making supply reliable.
Concept sources: Lean Enterprise Institute, Just-in-Time Production — flow, pull and supply when needed.
At industry level, consider whether to improve supplier relationships, collaborate with a partner, outsource an activity or bring it inside the business. Backward integration moves towards suppliers; forward integration moves towards distribution or the customer. Transferring costs to another participant does not necessarily reduce total system cost.
Concept sources: Harvard Business School, The Value Chain — upstream and downstream connections and choices about linked activities.
Assess resources and capabilities
Resources are what an organisation can draw upon, such as finance, equipment, skilled people, data, reputation and relationships. Capabilities describe what it can accomplish by combining them. Owning scheduling software is different from reliably coordinating complex repair jobs.
A reproducible capability can be matched relatively easily. A distinctive capability is harder for competitors to reproduce and may support a more durable advantage. Test whether it is useful to customers, uncommon, difficult to copy and supported by the organisation. A claimed strength needs evidence: compare outcomes with competitors rather than merely listing assets.
Concept sources: OpenStax, section 8.5 — resources, capabilities and evaluating competitive advantage.
Core competence directs attention to capabilities that can underpin growth across activities or markets.
Concept sources: Prahalad and Hamel, The Core Competence of the Corporation, 1990 — original article; full text may require access.
Turn SWOT into a decision
SWOT combines internal strengths and weaknesses with external opportunities and threats. An opportunity is a condition to exploit, not the action management proposes. “More commuters are cycling” is an external observation; “open another workshop” is a possible response.
| Category | Evidence to seek | Example finding |
|---|---|---|
| Strength | A demonstrated internal advantage | Technicians resolve most faults on the first visit |
| Weakness | An internal limitation | Only one employee can diagnose electric-bike systems |
| Opportunity | A favourable external development | Local employers want workplace servicing |
| Threat | An external pressure | A mobile competitor offers workplace collection |
Use the analysis to choose: develop the specialist skill, pilot workplace servicing and monitor repeat bookings. SWOT does not rank priorities or prove a project will pay. Validate the evidence, quantify the material effects and recognise that the same external change can create both an opportunity and a threat.
Concept sources: OpenStax, section 8.2: Using SWOT for Strategic Analysis — internal/external classification and limitations. Findings and recommended follow-up above are an original example.
Sources and further reading
- Harvard Business School: The Value Chain — activities, connections and competitive advantage.
- Lean Enterprise Institute: Value and Just-in-Time Production — value and coordinated flow.
- OpenStax: The Internal Environment and SWOT — conceptual explanations, not copied illustrations.
- Prahalad and Hamel, 1990 — original core-competence article.