Value Chain - Firm Level

Firm Level

A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver something valuable (product or service). A business unit is appropriate level for construction of a value chain, not divisional or corporate level. Products pass through activities of a chain in order, and at each activity the product gains some value. Chain of activities gives the product more added value than sum of the independent activities' values. A diamond cutter, as a profession, can be used to illustrate the difference of cost and the value chain. The cutting activity may have a low cost, but the activity adds much of the value to the end product, since a rough diamond is significantly less valuable than a cut diamond. Typically, the described value chain and the documentation of processes, assessment and auditing of adherence to the process routines are at the core of the quality certification of the business, e.g. ISO 9001.