What does the value chain describe?

The value chain describes the internal activities of an organization that work together to transform inputs into outputs. This concept, developed by Michael Porter, emphasizes how each step in the production process adds value to the final product or service. By breaking down the various stages—such as inbound logistics, operations, outbound logistics, marketing, sales, and service—companies can identify where they can improve efficiency, reduce costs, and enhance differentiation.

Understanding the value chain is crucial for strategic management because it allows firms to pinpoint areas of competitive advantage. By analyzing each activity, organizations can see how they contribute to overall value and how to optimize them for better performance. This makes the answer focused on internal activities the most accurate reflection of what the value chain entails, emphasizing the transformation process that is central to delivering value to customers.