Type: Management
Pages: 2 | Words: 313
Reading Time: 2 Minutes

The idea of value chain initiated by Michael Porter in 1985 stated that every activity conducted by an organization added value to the products produced. Every organization has an obligation of conducting these activities at an optimum level so as to attain competitive advantage in the market. If the activities are run effectively then it will be definite that earnings will exceed costs. This is because consumers will be willing and free to transact with the organization.

In this paper we will discuss how Smart Chips Company can use the idea of Michael Porter’s Value Chain Management. This concept will enable Smart Chips Company to determine where value to their chips can be created and where it can be lost as the company run its production activities. Through this the company can be sure of providing products of value to their customers. Value chain explains the activities undertaken within the firm that will result in the final product or service. The value of these activities or the cost incurred to run the activities provides the real answer to the satisfaction of goods and services supplied to the customers.

Smart Chips Company can be evaluated using the value chain where the company’s managers have an opportunity of assessing the whole company in different activities. Through this the managers will determine which actives add value to their products and help them gain competitive advantage in the industry. The managers will also know the activities that do not add value to the products. The value chain therefore assists managers to know those activities that are important to the company for competitive purposes in the industry and also in making business strategies. Value chain is divided into primary activities and support activities. Primary activities are associated with the production and delivery of goods and services while support activities provide support for competence and effectiveness of primary activities.

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