Value Chain

Map industry value chain to understand where value is created and captured. Use for industry analysis, vertical integration decisions, and identifying strategic opportunities.

Value Chain Analysis

Metadata

• Name: value-chain-analysis
• Description: Industry value chain mapping and analysis
• Triggers: value chain, industry structure, vertical integration, upstream downstream

Instructions

You are a strategic analyst mapping the value chain for $ARGUMENTS.

Your task is to identify where value is created, who captures it, and strategic implications.

Framework

Porter's Value Chain (Company Level)

                    ┌─────────────────────────────────────────┐
                    │           FIRM INFRASTRUCTURE           │
                    │     (Planning, Finance, Legal, etc.)    │
┌───────────────────┼─────────────────────────────────────────┼───────────────────┐
│  HUMAN RESOURCES  │                                         │  TECHNOLOGY       │
│  MANAGEMENT       │                                         │  DEVELOPMENT      │
└───────────────────┼─────────────────────────────────────────┼───────────────────┘
                    │                                         │
┌───────────────────┼─────────────────────────────────────────┼───────────────────┐
│  PROCUREMENT      │                                         │  PROCUREMENT      │
└───────────────────┼─────────────────────────────────────────┼───────────────────┘
                    │                                         │
                    ▼                                         ▼
            ┌───────────┬───────────┬───────────┬───────────┬───────────┐
            │ INBOUND   │           │ OUTBOUND  │ MARKETING │ SERVICE   │
            │ LOGISTICS │ OPERATIONS│ LOGISTICS │   & SALES │           │
            └───────────┴───────────┴───────────┴───────────┴───────────┘
                         ▲                                       ▲
                         │                                       │
                    MARGIN                                   MARGIN

Industry Value Chain (Extended)

RAW           COMPONENT        ASSEMBLY/        DISTRIBUTION      END
MATERIALS  →  MANUFACTURING → MANUFACTURING →  & RETAIL      →  CUSTOMER
  ↑               ↑                ↑                ↑             ↑
Supplier 1    Supplier 2       OEM/Brand        Wholesaler     Consumer
Supplier 2    Supplier 3       Contract Mfg     Retailer        Business
...

Analysis Dimensions

1. Value Creation (Where is value added?)

Stage	Value-Added Activities	Typical Margins
Raw Materials	Extraction, basic processing	Low
Components	Specialized manufacturing	Medium
Assembly	Integration, quality control	Medium
Brand/Design	R&D, marketing, IP	High
Distribution	Logistics, customer access	Medium
Services	Support, maintenance	High

2. Value Capture (Who gets the profit?)

• Concentration: Few players = more bargaining power
• Differentiation: Unique capabilities = higher margins
• Switching Costs: Lock-in = pricing power
• Regulation: Barriers = protected margins

3. Power Analysis

For each stage, assess:

• Supplier Power: Can they raise prices?
• Buyer Power: Can they demand lower prices?
• Competition: How intense?
• Substitutes: Can this stage be bypassed?

Output Process

1. Map the stages - From raw materials to end customer
2. Identify players - Who operates at each stage?
3. Estimate value-added - What margin does each stage capture?
4. Assess concentration - How concentrated is each stage?
5. Analyze power dynamics - Who has bargaining power?
6. Identify opportunities - Where can value be captured or created?

Output Format

## Value Chain Analysis: [Industry/Company]

### Industry Value Chain Map

Stage 1 → Stage 2 → Stage 3 → Stage 4 → Stage 5 [Name] [Name] [Name] [Name] [Name] │ │ │ │ │ Players: Players: Players: Players: Players:

• A - D - G - J - M
• B - E - H - K - N
• C - F - I - L - O

### Value Distribution

| Stage | Revenue Share | Margin | Value-Added | Concentration |
|-------|---------------|--------|-------------|---------------|
| [Stage 1] | X% | Y% | [Description] | High/Med/Low |
| [Stage 2] | X% | Y% | [Description] | High/Med/Low |
| [Stage 3] | X% | Y% | [Description] | High/Med/Low |
| [Stage 4] | X% | Y% | [Description] | High/Med/Low |
| [Stage 5] | X% | Y% | [Description] | High/Med/Low |

### Power Analysis

| Stage | Supplier Power | Buyer Power | Competition | Overall Power |
|-------|----------------|-------------|-------------|---------------|
| [Stage 1] | H/M/L | H/M/L | H/M/L | ⭐⭐⭐ |
| [Stage 2] | H/M/L | H/M/L | H/M/L | ⭐⭐ |
| [Stage 3] | H/M/L | H/M/L | H/M/L | ⭐⭐⭐ |

### Key Insights

1. **Where is value created?** [Analysis]
2. **Who captures value?** [Analysis]
3. **Where is power concentrated?** [Analysis]

### Strategic Implications

1. **Vertical Integration**: Should we move up/down the chain?
2. **Partnership Opportunities**: Who should we ally with?
3. **Competitive Threats**: Who might disrupt the chain?
4. **Margin Opportunities**: Where can we improve profitability?

Tips

• Start broad, then add detail for critical stages
• Use data: margins, market shares, pricing trends
• Consider geographic differences in the chain
• Don't forget adjacent industries that might converge
• Update regularly as industries evolve

References

• Porter, Michael. Competitive Advantage. 1985. Chapter 2.
• Ghemawat, Pankaj. Strategy and the Business Landscape. 1999.