The "value chain analysis method" proposed by Michael Porter, a famous strategist at Harvard Business School in the United States (as shown below), divides the activities that increase value inside and outside the enterprise into basic activities and supporting activities. The activities involve enterprise production, sales, incoming logistics, delivery logistics, and after-sales service. Supporting activities involve personnel, finance, planning, research and development, procurement, etc. Basic activities and supporting activities constitute the value chain of the enterprise. In the value activities that different enterprises participate in, not every link creates value. In fact, only certain specific value activities truly create value. These business activities that truly create value are the "strategic links" in the value chain. The competitive advantage that an enterprise wants to maintain is actually its advantage in certain strategic links in the value chain. Using the value chain analysis method to determine core competitiveness requires companies to pay close attention to the resource status of the organization, and requires companies to pay special attention to and cultivate important core competitiveness in key links of the value chain to form and consolidate the company's position in the industry. competitive advantage. The advantages of an enterprise can come from the adjustment of the market scope involved in value activities, or from the optimal benefits brought about by the coordination or sharing of value chains between enterprises.
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The value chain lists the total value , and includes value activities and profits. Value activities are clearly defined physical and technical activities that an enterprise engages in. These activities are the cornerstone of the enterprise's creation of products that are valuable to buyers. Profit is the difference between the total value and the total cost of engaging in various value activities.
Value activities are divided into two categories: basic activities and supporting activities. Basic activities are the various activities involved in the physical creation of the product and its sale, transfer to the buyer and after-sales service. Supporting activities assist the basic activities and support the basic activities by providing procurement inputs, technology, human resources, and various company-wide functions.