The concept, introduced by Michael Porter, splits the firm into linked activities: inbound logistics, operations, outbound logistics, marketing and sales, and service, supported by procurement, technology, human resources, and infrastructure. Analysing each reveals where the firm outperforms rivals and where it lags.
Leaders use the value chain to decide what to keep in-house, what to outsource, and where to invest. By comparing their chain with competitors', they find the activities that drive differentiation or cost leadership and reconfigure the rest.