Components of Commercial Value Chain


The concept of the value chain was introduced by Michael Porter. The concept helps categories’ activities undertaken by enterprise to deliver a successful product to a customer. The concept since its introduction in 1980s has become a forefront in developing strategies around customer delight and commercial success.

The value chain is series of activities undertaken by organization to deliver a product to end users. Here the concept does not apply to one single manufacturing organization, but it also applies to the players in the value chain. One of the purposes of the value chain is to understand activities, which add value during creation of the end product.

Value Chain

Enterprise undertakes several primary activities as well as secondary activities to deliver the final product to customers. Here primary activities are defined as activities, which directly support production of product or service. Secondary activities or support activities are activities which primary activities.

Primary Activities

Primary activities in the value chain are directly related with the production and delivery of the final product. The objective of these activities is adding value to product that is more than the cost of product. This will ensure that company can generate healthy margin and stay in business. Primary activities mainly consist of inbound supply chain, operations, dispatch, sales and marketing and service.

Inbound supply chain is made up of activities like receiving raw materials, storing raw materials and inventory management.

Operations consist of activities which convert different raw material into final product.

Dispatch activities consist of sending final product to distributors, retailers etc.

Sales and Marketing activities includes promotion of products to potential as well as existing customers, networking with channel partners etc.

Service consists of activities like solving customer issues before the sale of the product as well after sale of the product i.e customer care or customer support.

Commercial Value Chain

Commercial value chain is defined as any value chain used to achieve its organizational goal. Every company in any given industry will have its own value. However objective all the different value chain is to add value chain at every stage till product is delivered. The value chain of business includes activities:

Potential Customer Attraction and Existing Customer Repeat: For online business it is very important that they are able to generate visitors for their website. This will ensure customers are aware of available products and pricing. Companies also want to ensure that website is able repeat customers also.

Customer Interaction: Website design and navigation should ensure that potential buyers are able to reach the required web page. Another option available is customers entering their requirement and website displaying potential products.

Order Processing and Payment: Once a potential buyer has selected the product, website should be equipped to display other product similar to purchase or pop a question whether customer would be interested in making another purchase. Purchase order should also highlight possible shipping date and number of days before product will arrive. After purchase transaction, the next important step is payment through secured fund transfer.

Order Delivery and Customer Care: Website should be able to provide online tracking of the product; it should also provide details about possible delays. Website should be equipped to solve any queries online through frequently asked question, email support etc.

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