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Value Chain
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A High-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers.
Value-chain analysis looks at every step a business goes through, from raw materials to the eventual end-user. The goal is to deliver maximum value for the least possible total cost. A value chain is a chain of activities. Products pass all activities of the chain in order and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain, with the costs occurring throughout the activities. A diamond cutter can be used as an example of the difference. The cutting activity may have a Low cost, but the activity adds to much of the value of the end product, since a rough diamond is a lot less valuable than a cut diamond.
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Adam Smith Conferences
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