The value chain analysis helps the organizations in developing a frame work which analyzes the behaviour of costs and the potential sources of differentiation. Porter stresses a lot on the importance of regrouping functions into activities and delivers and support products which allows organizations to think about different activities and value chain can be linked with the organizations competitive position.
In order to analyze the entire organization its overall competitive position must be analyzed. Strengths and weaknesses can be identified with respect to the profiles of direct competitors. Therefore, competitive advantage is derived from the integrated set of decisions that are based on these key activities. It can be used as a quick scan to describe all the strengths and weaknesses of an organization and this analysis can be developed on qualitative terms. The Value chain analysis helps multidivisional organizations in portfolio planning and Porter stated that businesses should act independently with a conglomerate and the headquarters must be responsible for budgetary decisions with respect to different strategic business units. It provides a tool for strategic business units to focus on the whole organization rather than parts.
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