Official skill · Strategy

Value chain analysis

v1.0.1 · Updated 4 November 2026

Maps a business's primary and support activities with cost share, cost drivers, and value to buyers, checks how they fit the strategy, and picks the 2 to 3 changes that matter. Use it when margins are thin and you don't know which activities eat them.

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When to use it

Margins are thin and you don't know which activities eat them
Deciding what to outsource, automate, or invest in
Checking that daily activities support a chosen strategy

What you give it

What you sell, to whom, and your strategy
Costs by activity or department
What customers value and complain about
What rivals do differently, if known

What you get

An activity map with cost shares, cost drivers, value to buyers, and fit, plus the 2 to 3 changes with their effect, what they give up, and owners.

How it works

Set the unit and the strategy Name the business unit you're mapping (one product line or one business, not a whole group with different businesses) and the strategy it's meant to serve. Every later judgment is against that strategy.
List the activities Use Porter's categories as a checklist, then name the company's own activities under each. Primary: inbound logistics, operations, outbound logistics, marketing and sales, service. Support: procurement, technology development, human resource management, firm infrastructure (finance, planning, legal, management). Split a category into separate activities when they have different costs or different value to buyers; merge or skip ones that are tiny.
Put a cost share on each activity Assign operating costs and the people working on each activity, and give each a share of total cost. Use the user's numbers; where they're estimates, label them as such, and where they're missing, mark "[check: ...]". Show large purchased inputs (raw materials, goods for resale) on their own line, since they often outweigh any single activity. The shares should add to about 100%.
Find the cost drivers For the activities with the largest shares, write what makes their cost go up or down: volume and scale, utilization, learning, location, input prices, how one activity's choices change another's cost (a better file check upstream cuts reprints downstream), and policy choices the company makes. Note where rivals have a structurally lower cost and why.
Find the value drivers For each activity, write what in it buyers notice and would pay for or would leave over, using customer evidence. Mark the activities that make the offer different from rivals'. An activity can be a large cost and still where the premium comes from.
Check fit Test three things: does each activity match the strategy, do activities reinforce one another, and does the setup avoid doing work twice. List activities that pull against the strategy (a discount program in a premium business) and pairs that reinforce each other.
Pick the 2 to 3 changes Rank candidate changes by size of cost or value at stake and by fit. For each change, state the activity, the change, the expected effect on cost or price with the reasoning, and what it gives up. Prefer changes that strengthen links between activities over isolated cost cuts rivals can copy.
End with owners and the facts to check Give the first step for each change, an owner if named, and the open "[check: ...]" items that could reverse a conclusion.

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