What is value chain analysis?

What is value chain analysis?

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May 14, 2022
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What is value chain analysis? What does the firm gain by successfully using this tool?

Answer and ExplanationSolution by a verified expert

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The value chain is useful for the management of a firm to make business-level strategies successful.

Explanation
A value chain is a tool that is used by the management of the firms to evaluate their resources and abilities in accordance with the operations performed in the aspects of designing, manufacturing, and distribution of the products.

The value chain analysis plays a crucial role in analyzing and assessing the various resources at the disposal of the firms. This analysis goes a long way in the assessment of the value-generating activities of the firms.

Value chain analysis enables the managers to add more value to their activities for the customer base and study the competitors' competencies to identify the activities that have a scope of value addition. This is done so that this value can be absorbed by a firm.

The cost structure should be understood in detail to generate and absorb these potential value-creating activities.

Verified Answer
Value chain refers to the tool used by the firms for analyzing, identifying, and understanding the cost structure better and developing tools to complement the business strategies put in place.

Value chain analysis helps the firms to get a better understanding of their cost system and its operations, which can generate and absorb value.

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