This guide walks you through the key steps of Porter’s Value Chain to help you identify, analyze, and improve the activities that drive value in your business.

Step 1: Identify Activities in Your Value Chain

Start by listing every activity your business performs to deliver value to customers. This should include both operational tasks and supporting processes.

Examples:

  • Inbound Logistics
  • Operations
  • Outbound Logistics
  • Marketing & Sales
  • Service
  • Procurement
  • Procurement
  • Technology Development
  • HR Management

Step 2: Classify Each Activity

Group each activity into one of two categories:

  • Primary Activities: Directly related to producing and delivering your product/service (e.g., Operations, Logistics).
  • Support Activities: Enable or improve the primary activities (e.g., HR, Tech Development).

Use this step to visualize your full chain. A simple bullet list will do.

Step 3: Explain How Each Activity Adds Value

For every activity identified, briefly describe how it contributes to the overall value delivered to the customer.

Example:

Operations
Transforms raw materials into finished goods. Efficiency here can reduce cost and improve product consistency.

Marketing & Sales
Builds awareness and converts interest into revenue. Clear messaging and targeted outreach create value by increasing conversions.

Step 4: Analyze the Cost of Each Activity

Estimate how much each activity costs, not just in money, but in time, tools, and headcount. This can highlight areas for cost optimization or investment.

You might ask:

  • What resources are needed to run this activity?
  • Is it outsourced or handled internally?
  • Are there hidden costs (e.g., employee churn, poor tooling)?

Step 5: Analyze the Cost of Each Activity

Review the activities to identify inefficiencies, redundancies, or areas where value addition is minimal. This helps prioritize which activities need improvement or streamlining.

Example:

Inbound Logistics
Handled by the Supply Chain team. Involves receiving, storing, and managing input materials. Look for bottlenecks in delivery schedules or inventory mismanagement.

Operations
Managed by Production. Transforms raw materials into final products. Analyze for automation opportunities or outdated machinery that slows output.