What is Value Chain Analysis?

Value chain analysis is a popular strategic analysis tool. It provides a visual method to analyzing a company's business activities in reviewing how the company can create a competitive advantage for itself. Value chain analysis helps a company understands how it adds value to something and subsequently how it can sell its product or service for more than the cost of adding the value, thereby generating a profit margin. In other words, if they are run efficiently the value obtained should exceed the costs of running them i.e. customers should return to the organisation and transact freely and willingly.

How to perform Value Chain Analysis?

You can perform Value Chain Analysis easily with Visual Paradigm Online. Here are several quick steps:

1. Create a Value Chain Analysis diagram.
2. Identify the primary and support activities involved in your business and write them down as the headers of those compartments.
3. Identify the cost drivers for each activity. For a more labor-intensive activity, cost drivers could include how fast work is completed, work hours, wage rates, etc.
4. Identify links between activities - reducing costs in one area may reduce cost in another. Identify opportunities to reduce costs.
5. Once your diagram is complete, you can save it (File > Save as) to our cloud repository for future access. You can also export your work into image (JPG, PNG, PDF, SVG, etc) and share it with your co-workers.