Strategic Business Leader · E-business: value chain

Porter's Value Chain and the Impact of E-business for ACCA SBL

Updated 11 October 2026 · Fact-checked

Porter's value chain splits a firm into primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) and support activities (procurement, technology development, HR management, firm infrastructure). Value is created when what customers are willing to pay exceeds the cost of performing the activities; the difference is the margin. E-business cuts costs, adds value and tightens linkages in each activity.

Understand Porter's Value Chain and the Impact of E-business

The value chain is Michael Porter's model of how a business creates value. You break the organisation into separate activities. You then ask which activities cost money and which add value for the customer. Value is created when what customers are willing to pay exceeds the cost of performing the activities. The difference is the margin.

Primary activities deal directly with making and delivering the product: inbound logistics (receiving, storing, handling inputs), operations (turning inputs into the product), outbound logistics (storing and distributing the finished product), marketing and sales, and service (installation, repair, support). Support activities make the primary ones possible: procurement, technology development, human resource management and firm infrastructure (finance, legal, planning, quality, management systems). Support activities can apply to every primary activity.

Competitive advantage comes from doing activities more cheaply (cost leadership) or in a way customers value more (differentiation). It also comes from linkages: how one activity affects the cost or performance of another. For example, better quality control in operations can cut service costs later. Good coordination of linkages is often hard for rivals to copy.

E-business means using internet and digital technology to run all business processes, not only selling online. It reshapes each activity. Inbound logistics gains real-time stock data and automated reordering. Operations gains automation and data-driven production. Outbound logistics gains order tracking and direct delivery. Marketing gains targeted digital marketing and online sales channels. Service gains self-service portals, chatbots and remote support. Procurement gains e-procurement and online supplier markets. Technology development becomes central to strategy. HR gains e-recruitment and online training. Infrastructure gains integrated systems and shared data.

The biggest effect is on linkages. Shared data lets sales, production and suppliers work from the same information. This can extend beyond the firm into the value system or value network of suppliers, distributors and customers. In the exam, you must tie the model to the scenario, not recite it.

Key rules to remember

Margin in the value chain: Margin = Value to the customer − Total cost of value activities; Advantage comes from widening this gap, by cutting cost or raising the value customers see.
Primary activities: Inbound logistics → Operations → Outbound logistics → Marketing and sales → Service; These are the five activities directly involved in creating and delivering the product.
Support activities: Procurement + Technology development + HR management + Firm infrastructure; These support all primary activities. Procurement covers purchasing of all inputs, not only raw materials.
Linkages: Linkages = links between activities within the chain and with the value system; Look for trade-offs and for ways coordination lowers cost or lifts value.

How to solve Porter's Value Chain and the Impact of E-business questions

Use this method for any question on the value chain or on how e-business changes a business.

1Read the requirement and note whether it asks you to analyse, evaluate or advise. Note who the audience is.
2Identify the firm's strategy from the scenario, such as cost leadership or differentiation, so you can judge what matters.
3Go through primary and support activities. Pick those the scenario gives facts about. Do not list every activity equally.
4For each chosen activity, state the current position, then how e-business or technology changes cost, value or both. Use scenario facts.
5Look at linkages between activities and with suppliers and customers. Show where shared data or integration creates advantage.
6Weigh the risks and limits: cost, security, staff skills, customer acceptance and loss of personal contact.
7Finish with a clear recommendation or conclusion that answers the requirement, in the format asked (report, email, memo).

Quickest way: Activity, change, effect

When to use it: Use this when time is short and the question asks how technology affects the business.

Jot the nine activities down the page in a few seconds.
Circle the three or four activities that the scenario gives evidence about.
For each, write one line: what technology changes and whether it cuts cost, adds value, or both.
Add one linkage point, such as data shared between sales and production.
Add one risk or limit and a short conclusion.

Common mistakes in Porter's Value Chain and the Impact of E-business

Listing the nine activities with definitions only.
Students memorise the model and write it out because it feels safe.
Fix: Spend most of your answer applying activities to the scenario facts. Definitions earn little on their own.
Treating e-business as just online selling.
Students link e-business with websites and the sales channel.
Fix: Cover the whole chain: procurement, logistics, operations, HR and service, not only marketing and sales.
Ignoring linkages.
The model looks like a list of boxes, so links between them are forgotten.
Fix: Always include at least one point about how activities connect or how data is shared across the value system.
Placing support activities in the wrong group, such as treating procurement as inbound logistics.
Both deal with inputs, so they seem the same.
Fix: Inbound logistics is receiving and storing inputs. Procurement is the process of buying them, and it is a support activity.
Presenting only benefits of technology.
Students assume digital change is always good.
Fix: Weigh costs, security, resistance and customer acceptance, then give a balanced view tied to the scenario.
Not using the format or role in the requirement.
Students focus on technical content and forget professional skills marks.
Fix: Write as the role asked, such as an adviser to the board, with a clear structure and a justified recommendation.

Worked examples

Example 1

A furniture maker sells through retailers. The board plans to sell directly online and to link its systems to its timber suppliers. Explain how e-business could change two primary and two support activities in its value chain.

Show the solution

Primary: inbound logistics. Linking stock systems to suppliers allows automatic reordering when timber falls to a set level. This cuts stock held and the risk of stockouts.
Primary: outbound logistics. Direct online sales mean delivering to individual homes. Order tracking lifts customer value, but delivery cost per item may rise compared with bulk delivery to retailers.
Support: procurement. E-procurement lets the firm compare suppliers and place orders online, lowering admin cost and the price paid.
Support: technology development. The firm needs a website, order system and data analytics. This becomes a source of advantage rather than a back-office cost.
Linkage: online orders flow straight into production scheduling, so operations makes what is ordered. This links marketing, operations and logistics through shared data.

Answer: E-business cuts inbound cost through supplier-linked reordering and raises outbound value through tracking, though home delivery may cost more. E-procurement lowers purchasing cost. Technology development becomes central. Linked data across sales, production and logistics is the key gain.

Example 2

A regional airline's board asks whether a new mobile app and online customer portal will improve its competitive position. Advise using the value chain, including one limit.

Show the solution

Identify the strategy. Assume the airline competes on low cost, so the aim is to cut cost per passenger while keeping service acceptable.
Marketing and sales: direct online booking reduces commission paid to agents and gives customer data for targeted offers.
Service: self-service check-in, changes and queries cut call-centre and airport staffing cost, and customers value the convenience.
Operations: app data on bookings helps plan loads and crew, which improves use of aircraft.
Support: HR can use online rostering and training. Technology development must keep the app reliable.
Linkage: booking data feeds operations planning and marketing, so cost and service improve together.
Limit: development and security costs are high, a system failure would damage reputation, and some customers may not use the app.

Answer: The app and portal should improve position by cutting distribution and service cost and by sharing data across activities. The board should proceed, but must budget for security, reliability and support for customers who do not use digital channels.

Exam tips

Apply the model to the scenario. Name the firm's own facts in each point to earn application marks.
Pick the most relevant activities rather than covering all nine thinly. Say why you chose them.
Always mention linkages and the wider value system. Many students miss this.
Link your answer to strategy, such as cost or differentiation, and finish with a recommendation to show professional skills.
Check the role and format in the requirement and write to that reader.

Practice questions from E-business: value chain

Porter's Value Chain and the Impact of E-business in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Porter's Value Chain and the Impact of E-business: frequently asked questions

What are the primary and support activities in Porter's value chain?

Primary activities are inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities are procurement, technology development, human resource management and firm infrastructure. Support activities serve all the primary ones.

How does e-business change the value chain?

It lowers cost and raises value in each activity, for example through e-procurement, automated stock control, online sales and self-service. Its biggest effect is on linkages, because shared data connects activities and external partners.

Do I need to cover every activity in an SBL answer?

No. Choose the activities the scenario gives evidence about and apply them well. A focused answer with application and a conclusion scores better than a thin list of all nine.

What is the difference between the value chain and the value system?

The value chain looks at activities inside one organisation. The value system, or value network, includes the chains of suppliers, distributors and customers. E-business strengthens the links across this wider system.