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4 Examples of a Value Chain

A value chain is a sequence of activities that each adds value to a product, service or experience. Any activity that generates more valuable outputs than the cost of its inputs can be part of a value chain. Value chains are used to model economics at the level of an industry or firm. Any business model that is not part of a value chain can be considered rent seeking as it adds no value. The following are illustrative examples of a value chain.


At the highest level, the production of a product typically has the following value chain.
Inputs required to make the product such as materials, components, parts, energy and natural resources.
Processes of supply and fulfillment of orders including procurement, warehousing, transportation, distribution, reverse logistics and field service.
The development and manufacturer of products. It is also common to separate product development as a separate value added step.
The process of selling the product including all marketing and sales activities.
The process of reaching the customer to deliver your obligations to them.


Services are based on various layers of intangible value.
Inputs including energy, equipment and physical elements of a service, known as service tangibles, such as the food served by a restaurant.
Service Delivery
The operational work of delivering a service such as the logistics and kitchen operations of a restaurant. In many cases, information technology is viewed as a value added part of the service. For example, an airline would have no value without its systems for managing bookings, flights and other aspects of operations.
Marketing & Sales
The process of developing, branding, distributing, promoting, pricing and selling services.
Any touchpoints with the customer in the end-to-end customer experience adds value.


The ecommerce value chain for sales of physical products. This differs from other ecommerce models such as Software as a Service.
In some cases, a manufacturer or service provider sell their own goods by an ecommerce channel. In this case, they add value at the supply level.
Inbound Logistics
The process of purchasing goods, processing inbound deliveries and warehousing goods.
The promotion, pricing and sales of goods using ecommerce channels or retail shops using a bricks and clicks model.
Outbound Logistics
The process of assembling the order and delivering it to the customer.
Handling customer inquiries and requests such as returns.

Software as a Service

Software as a Service, or SaaS, is a business model that offers software that is hosted on a cloud platform. This allows customers to access scalable software without investing in data centers, hardware and software installations. The value chain for SaaS is mostly about technology with a thin layer of marketing and customer service. Some SaaS products sell themselves with word of mouth while others employ large global sales teams.
Cloud Platform
Foundational infrastructure and software services including the management of data centers.
Applications & Systems
Applications and systems for end-customers.
The operations of applications, systems and cloud platforms for high availability. This is often highly automated and includes an escalation process for incidents and problems.
Promotion, pricing and sales. Software as a service may be sold by a global sales team using personal selling methods. Alternatively, there may be an attempt to automate this layer of the value chain too with a combination of digital advertising and ecommerce capabilities.
Customer Service
SaaS firms may offer multiple levels of customer service with self-service tools at the lowest price level progressing to a personal account representative that you can get on the phone. In some cases, SaaS is sold with support for customization via a consulting practice that adds another layer of value.
Overview: Value Chain
A sequence of activities that each adds value to a product, service or experience.
Related Concepts


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Added Value
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Animal Spirits
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Gains From Trade
Giffen Good
Happiness Economics
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Industrial Complex
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Inferior Good
Information Asymmetry
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Intangible Value
Invisible Hand
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Market Economy
Market Failure
Market Forces
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Marketing Economics
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Media Economics
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Plateau Effect
Predatory Pricing
Price Economics
Price Umbrella
Price War
Pricing Strategy
Profit Motive
Rational Choice Theory
Rent Seeking
Rule Of Three
Search Good
Service Economy
State Capitalism
Sticky Prices
Superior Good
Superior Goods
Supply Shock
Sustainable Economics
Switching Barriers
Threat Of Substitutes
Trade War
Traditional Economy
Uneconomic Growth
Unsought Goods
Value Creation
Veblen Goods
Zero-sum Game
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