Entering the field without having a good Strategic, Tactical and Operational Planning is out of the question. For this reason, SWOT Analysis plays an essential role, since it helps the company to know both its strengths and weaknesses in relation to its competitors, as well as to define opportunities and threats.
Having this information in hand, the company will be able to start a game tactic focused on directly reaching those who are interested, its target audience and circumventing its competitors. For this, it is necessary to carry out activities aimed at creating value for the customer, which will directly and positively affect the company’s profits. This set of activities is called the Value Chain, and that is exactly what we will cover in this article. How about checking out what we have prepared for you? You can Read this for more context on the matter.
What is Value Chain?
A Value Chain is a set of activities carried out by an organization with the aim of creating value for its customers. The model was developed by Michael Porter (hence it is also known as the Porter Value Chain) and basically describes a process that companies can follow to examine their activities and analyze the connection between them (called links).
According to the Value Chain, the way the chain’s activities are carried out determines costs and affects profits. This is the main reason why the tool can help the company understand what its sources of value are.
- When we talk about costs, we have to remember that they are any and all expenses related to the acquisition or production of goods. The list includes raw materials, labor and general manufacturing expenses (GGF), as well as depreciation of machinery and equipment, electricity, maintenance, conservation and cleaning materials for the factory, trips by people connected to the factory, etc.
- Note that the concept is different from expenses, which are the expenses related to the company’s management, that is, expenses that the organization needs to have to keep the structure working, however they do not directly contribute to the generation of new items that will be marketed.
Reinforcing the Ideas
We reinforce that without a correct calculation and classification of Costs and Expenses, your company cannot design and analyze important Performance Indicators such as Contribution Margin, EBITDA or Profitability. In addition, as the Value Chain seeks to present how the company’s costs are presented, it is important that you have at the tip of the pen what these costs are.