── ── Startups

Value Chain Analysis

Porter (1985) separates firm activities into primary (inbound logistics, operations, outbound logistics, marketing/sales, service) and support (firm infrastructure, HR management, technology development, procurement). Competitive advantage — cost leadership or differentiation — emerges from performing one or more activities better than rivals. Margin is the residual after all activity costs are subtracted from customer willingness to pay.

How it works

Produce a Value Chain Audit — mapped activities with cost allocation, differentiation sources, competitive comparison, and strategic recommendations.

Step 1: Map All Activities. List every primary and support activity using Porter's nine-module structure. Be specific — not "sales" but "enterprise direct sales in North America." Stop rule: if two people assign the same cost item to different activities, break down further.

Step 2: Allocate Cost. Estimate cost % of total for each activity. Identify top 3 cost consumers, below-benchmark (potential advantages), above-benchmark (value leakage). Regress-test: cannot estimate to ±50% → fix data or definition.

When to use it

• user asks 'where does our competitive advantage come from', 'why are our margins lower than competitors', 'which activities create value', 'how is the competitor doing it cheaper', 'cost structure analysis', 'make vs. buy decision', 'which activities should we outsource', or is evaluating an acquisition for synergies or designing competitive strategy

Worked example

Apple's Value Chain and the iPhone Margin Structure (2007–2023)

Apple's iPhone is one of the most analyzed value chains in business history, with sufficient public data to test the framework's claims against observable outcomes.