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How to use Porter's Value Chain example Apple

Porter’s Value Chain is used to identify a company’s competitive advantages, it shows every stage involved in making a product.

By, Gavin Whale | Date: 10/06/2017 | Updated: 02/07/17

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Fun Fact:

The American academic Micheal Porter invented the concept of the value chain. The value chain first appeared in the 1985 book "Competitive Advantage.

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Sekhar (2009) states that the aim of Porter’s Value Chain is to identify a company’s competitive advantages, it shows every stage involved in making a product from the design, production, and delivery to the market. The value chain divides an organisation up into a chain of activities with each element contributing a part of the total profit to the customer, the problem with this is that when using the Value chain, more focus tends to the activities that contribute most profit when the activities that contribute least profit may need most work. It is worth noting that companies operating in the same market tend to have similar value chains (Bischoff, 2011).

Apple creates value from many different aspects of its business, to ensure value is created through inbound logistics it maintains good relationships with suppliers and therefore receive good prices so creating value. Apple creates value through operations by finding the best places to do certain operations for aspects of its business for example, production is done in Eastern countries where it is cheaper and design is done in America as to get highly educated and experienced employees. In terms of outbound logistics Apple deliver their products to the customer through their own styled stored and other specific stores as to add value, this is as it gives the company a better image which is reflected in the prices customers are willing to pay for products. When adding value to marketing and sales Apple advertise their products and as mentioned rely on their image heavily so the image is maintained with marketing activities and keeping clean, white and uniform stores with high levels of customer service. Leading onto service Apple create value here by having friendly, knowledgeable staff in stores and offering repairs for its products in store (Sekhar, 2009) (Bischoff, 2011). That covers the primary activities Apple does to create value, the main support activity for Apple in its industry is technology development without it Apple would not have enough value to compete with its competitors and therefore has to invest highly in technology but it gains more back through selling its unique products (Sekhar, 2009) (Apple, 2013).

This article shows how Apple being a large global organisation gives Apple many benefits and allows them to make more money by keeping costs low, this is because being global allows Apple to choose the cheapest or most effective country to carry out certain operations of the business this is due to laws and legislations being different in all countries so Apple can chose the best environment for the operation they want to carry out, for example production is done in Eastern countries and money is kept in accounts in countries with low tax rates allowing for money to be saved (Gordon, 2013). A second reason for Apple’s success is its strong brand, this creates a lot of value for Apple and allows them to charge a higher price for their product and act as a deterrent to anyone thinking about entering this same market, this meant that Apple could earn more profit and therefore use the money for growth. Another reason for Apple’s size is its reputation for innovation; it always creates new technology that inspires customers this leads onto Apples success by patenting its technologies which the law allows them to do, this prevents competition copying Apple and therefore customers are willing to pay high prices for Apples unique products (MarketLine, 2012). Apples competitors have helped it to actually grow, this is because Apple can use its competitors as benchmarks to learn from and compare itself with and provide the need to quickly research new technologies to gain the competitive edge, competitors also provided the need for Apple to be a large company to gain competitive economies of scale (Apple, 2013).

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