value chain

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Value Chain

The set of activities whereby a company take raw materials and turns them into finished products by adding value at each step. For example, take a conglomerate that controls every step of a supply chain. It may have a timber division that cuts down trees, which adds value to the wood because it can then be used. It then sends the timber to the milling division, which adds value by refining the timber into planks of wood. The carpentry department refining the planks adds value by making them into a table, which can then be sold to a customer.

The value chain analyzes how much value each activity adds to the final product against how much each step costs. The two may not be equivalent; making a table may add a great deal to the wood's value without costing very much. Analyzing the value chain is one strategy a company can use to identify and cut costs in a way that maximizes profit.

value chain

References in periodicals archive ?
The evolution of national value chain is involved in many aspects of the systems engineering.
In other words, LDCs may seek specialization in a narrowly defined segment of activities in the value chain and may also capture a certain amount of economic rent.
By constructing your value chain in a way that differs from your competitors, in ways that are meaningful to your customers, you can deliver a uniquely valuable end-product.
The breaking apart, or disaggregation, of the insurance value chain will become an important force for reinventing industry-leading organizations.
These emerging applications improve corporate reaction times as business conditions change, and facilitate the sharing of market data and business intelligence at several levels within the organization and across the value chain," wrote AMR Research in a report last year on enterprise management.
Nasdaq:ITWO), a provider of dynamic value chain and marketplace solutions, has introduced a comprehensive Supplier Enablement solution designed to improve value chain visibility and velocity for both buyers and suppliers engaged in e-commerce.
The concept of the value chain illustrates the benefits of partnering.
Understanding this value chain and the centrality of core competencies to value creation enables an organization to better leverage the processes - and the intangible assets within those processes.
First, look at the primary Internet business models for the insurance industry--portal, storefront and extended value chain.