Value Chain

A very large-scale business process that is initiated by a customer request, or by the decision of the company to enter a new line of business, and results in the delivery of a product or service to a customer. A value chain includes everything that contributes to the output. By adding up all of the costs of each activity in a value chain, and subtracting the total from the sale price, an organization can determine the profit margin on the value chain. Most organizations support from 3 to 15 value chains. Many managers associate value chains with the description provided in Michael Porter's Competitive Advantage (1985).