Value chain analysis example

What it shows

Michael Porter’s value chain (Porter 1985): five primary activities in sequence, four support activities that serve all of them, and the margin at the end. A short line under each activity says what it covers.

Every activity has one example from Northfield Coffee Roasters, a fictional specialty roaster that sells wholesale beans to cafes, runs a coffee subscription and has four cafes of its own.

How to read it

1. 1

   The primary activities run left to right in the order the product moves: inbound logistics, operations, outbound logistics, marketing and sales, service. Green beans arrive at one end; help after the sale comes at the other.

2. 2

   The four support rows span all five columns because each support activity can serve any primary one. Procurement buys the green beans; inbound logistics receives and stores them.

3. 3

   The margin box sits at the end: the total value to buyers minus the cost of all the activities.

4. 4

   A real analysis asks, for each activity, what it costs and how it adds value buyers will pay for.

The activities

• Primary: inbound logistics, operations, outbound logistics, marketing and sales, service.
• Support: firm infrastructure, human resource management, technology development, procurement.
• Margin: total value to buyers minus the cost of all the activities.

Ways to use it in teaching

• Give students the blank grid and a business they know, such as a campus bookstore, and have them fill in one example per activity.

• Ask which two activities give Northfield its edge over supermarket coffee brands, and what that implies for where it should spend.

• Northfield’s differentiation focus, as the generic strategies page places it, should be visible in particular activities: a roast profile for each origin, tasting days for cafe owners, barista training. Have students find them, then name the activities a cost leader would cut first.

• Porter builds a value chain per business unit. Northfield runs three (wholesale, subscription, cafes); ask students to draw one for each and compare.

Sources

• Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. Free Press.
• University of Cambridge Institute for Manufacturing. (n.d.). Porter’s value chain. https://www.ifm.eng.cam.ac.uk/research/dstools/value-chain-/
• Value chain. (n.d.). In Wikipedia. Retrieved October 19, 2026, from https://en.wikipedia.org/wiki/Value_chain