Porter's diagnostic tool for examining competitive advantage is the value chain. Value chain analysis provides a way to break down the company in key areas. By focusing on the parts of the company, one can look for places to gain a competitive advantage. The value chain can be broken up into three broad sections, primary activities, support activities, and margin. Primary activities are the activities involved in the physical creation of the product and its sale and transfer to the buyer as well as after-sale assistance.
Margin is the price that a company can charge in excess of the cost.
Margin is aided by all of the primary and support activities. This paragraph will briefly explain the primary activities of the value chain. The category of Inbound Logistics covers all input activities including inventory control, warehousing and returns to suppliers. The Operations category includes the process of transforming inputs into sellable goods. This includes assembly and packaging.