Internal Value Chain

What is it?

The value chain describe the different activities that are conducted in order to deliver an end product or service to a customer. These activities can be conducted by other companies – the external value chain or the activities can be conducted within one company – this is the internal value chain.

The internal value chain maps closely to the functions with an organisation. There are line functions that directly deliver the value proposition and the support functions that exist to enable them.

 

 

 

 

 

 

 

 

 

 

 

When is it useful?

Use the internal value chain to align the organisation behind a new strategy. Each component will need to fit the new strategy:

  • Front line activities will take responsibility for the key strategic initiatives – e.g. new product development, market entry, building new capabilities
  • Supporting staff functions need to develop their own plan on how they will contribute to building the competitive advantage of the organisation
  • Some components may have no contribution to competitive advantage, they are just Context. If another organisation can do these activities cheaper, they can be outsourced