Value Chain Analysis"Accounting for Strategic Management Porter identified the "value chain" as a means of analyzing the strategically relevant activities of an organization in order to understand the cost behavior. Competitive advantage comes from performing these activities more cost-effectively than competitors. This essay describes what are defined as value chain activities and discusses how value chain cost analysis can be achieved to facilitate effectiveness. in terms of costs.M. in Competitive Advantage, 1985) divides the value chain (VC) model into two distinct types, namely primary and support activities (Bowman C., 1990, p63). no matter how many operational units are involved in the process of generating customer value; these primary activities can be conceptualized into five generic phases: inbound logistics, operations, outbound logistics, marketing and sales, and service. These primary stages are supported by business infrastructure, human resource management, technology development, and purchasing and procurement. The phases within VC should not be seen in isolation but looked at in a broader context and include interactions between phases not just within processes. The relationship between sales, operations and procurement, for example, can determine the amount of inventory to be held and therefore be reflected in the cost of inventory held. When analyzing the VC of a particular company/organization, the management accountant (MA) should first identify the activities of the enterprise to establish the chain structure. • or "... Porter suggests the detailed assignment of operating costs and assets to each valued activity" (Grant RM, 1995, p193) A computer manufacturing company and an accounting firm, for example, would show very different components all within the chain due to differentiated activities (see below); this framework will allow us to establish the relevant importance of each activity unit with respect to costs. As can be seen, the relevance of operations within the manufacturing company is greater than that of operations within accounting. With over 60% of costs going towards operations, it would appear that the manufacturing company should focus on this area to maximize savings, as this is the main cost driver. However, according to the accounting firm, the two main cost drivers are operations at 26% and marketing at 21%, suggesting that almost equal savings potentials will be offered. As MAs we need to identify the factors that drive costs, similar to ABC costing.