Value Chains

The value chain concept was first described and popularised by Michael Porter (1985). A value chain is "the sequence of productive (i.e., value-added) activities leading to and supporting end use" (Sturgeon 2001); in other words, each actor in the sequence adds value, often in it's own market, and therefore, obtains profits/rents for their work - including particular types of customers. The linear sequence of events can be broken down into five main stages: inputs (extraction), make (production), outputs (goods/services and distribution), consume (use or buy/rent), and waste (throw-away).

Modern value chains are often complex, global supply and demand networks, that are usually initiated by national, trans-national, or multi-national Lead Manufacturing Firms (e.g. Caterpillar Inc.), or Lead Sales Firms (e.g. retailers in the apparel industry like Zara España S.A., or Decathlon Group), or a hybrid of the two (e.g. Apple Inc.); all of which are predominately based in industrialised countries. There are also firms like Cisco Systems, Inc., for example, which are Lead Firms within their upstream supply chain, but are not a Lead within the downstream of the value chain of the industries they serve. The main focus of the map above is on the Lead Manufacturing Firm, although it can equally be used to describe the other types of Lead Firms.

The word 'chain' in a 'supply or value chain' - creates a mental description (like the photo above) of a linear view of a system.

In ecology, the different predator-prey relationships in an ecosystem can be described as food-chains - a linear view. However, although the concept of food-chains still exists (usually to explain simple interactions, as that one shown above), it has also co-evolved with the more modern concept of 'food-webs,' which describes much better the complex, non-linear, relationships between all the different forms of life in a community. As should become more apparent in the web-pages to follow, value chains are evolving both conceptually and physically from chains to webs (also known as networks and systems).