Strategic Business Leader · The internal resources, capabilities and competences of an organisation

Value Chain and Value Network Analysis for ACCA SBL

Updated 11 October 2026 · Fact-checked

Porter's value chain splits an organisation into primary and support activities to show where it creates value and where it incurs cost. The value network extends this to suppliers, partners and customers. To solve a question, map the activities, link each to the scenario, then judge where advantage or waste lies.

Understand Value Chain and Value Network Analysis

A business turns inputs into outputs that customers pay for. The value chain breaks this process into separate activities. Each activity adds cost. Each may also add value, meaning customers will pay more for it. Margin is the gap between the total value created and the total cost of creating it.

Porter splits activities into two groups. Primary activities make and deliver the product: inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities help the primary ones: firm infrastructure, human resource management, technology development and procurement. Support activities cut across all primary activities.

The point is not to list activities. The point is to find where advantage comes from. Advantage can come from doing an activity at lower cost, or from doing it in a way that is different and valued by customers. Linkages matter too. A better design (technology development) may cut service costs later. A cheaper input may raise defects in operations. Competitive advantage often sits in these linkages, and they are hard for rivals to copy.

The value network widens the view. Few organisations make everything themselves. Their value chain connects to suppliers' chains, distributors' chains and customers' chains. Together these form a system, or network. Value can be created or lost at the interfaces. Digital platforms and shared information make the network easier to manage. This is why SBL asks about outsourcing, partnerships and supply chain integration.

In SBL you apply the model to the pre-seen case. You use it to judge strategic capability, to support or challenge a strategy, and to advise on what to keep in-house, outsource or improve.

Key rules to remember

Margin in the value chain: Margin = Total value created − Total cost of value activities; Value is what customers are willing to pay. Advantage comes from a larger margin than rivals.
Primary activities: Inbound logistics + Operations + Outbound logistics + Marketing and sales + Service; These are directly involved in creating and delivering the product to the customer.
Support activities: Firm infrastructure + Human resource management + Technology development + Procurement; These support all primary activities and can be a source of advantage on their own.
Value network: Organisation's value chain + suppliers' chains + channel chains + customers' chains; Look for value created or lost at the links between organisations.

How to solve Value Chain and Value Network Analysis questions

Use this method for any question on value chain or value network. Keep every point tied to the scenario.

1Read the requirement. Decide if it asks you to analyse, evaluate, advise or recommend.
2List the relevant primary and support activities for this organisation. Use only those the scenario gives evidence for.
3For each, note the cost and the value it creates. Use figures and facts from the case.
4Identify where advantage or weakness lies, and compare with competitors or the strategy chosen.
5Look for linkages between activities, such as design affecting service cost.
6Extend to the value network if the case mentions suppliers, partners, outsourcing or customers.
7Make a clear recommendation: which activities to improve, outsource or keep in-house, and why.
8Add risks or limits, then write in the format asked, such as a report or briefing note.

Quickest way: Five-line value chain scan

When to use it: Use when time is short, or when the question is worth few marks and needs a focused answer.

Write the nine activity headings down the page in two groups.
Tick only the three or four that the scenario gives evidence about.
Beside each tick, write one scenario fact and one effect on cost or value.
Pick the single biggest source of advantage or weakness and say why.
Finish with one recommendation and one network point, such as a supplier or partner issue.

Common mistakes in Value Chain and Value Network Analysis

Listing the nine activities with generic definitions
Students memorise the model and write it out because it feels safe.
Fix: Only discuss activities the case supports. Give each a scenario fact and a consequence.
Treating support activities as less important
The word support suggests a minor role.
Fix: Check HR, technology and procurement. They often drive advantage, such as skilled staff or low-cost buying.
Ignoring linkages between activities
Students analyse each box separately.
Fix: Say how one activity changes cost or value in another, for example cheaper materials causing more rework.
Confusing value chain with value network
Both look at flows of activity and sound alike.
Fix: The value chain is inside one organisation. The value network covers links between organisations, including suppliers, channels and customers.
Describing without recommending
Students run out of time or forget the advice requirement.
Fix: End with a clear action tied to margin or advantage, and note one risk.
Forcing a manufacturing model onto a service business
The labels suit physical goods.
Fix: Adapt the labels. For a service firm, operations may be service delivery and inbound logistics may be gathering information or staff.

Worked examples

Example 1

AquaPure makes water filters. It buys cheap components from a single supplier. Defect returns are high, so its service team spends much time on repairs. Its brand is strong and its marketing is well regarded. Required: Using the value chain, assess where AquaPure creates and loses value, and advise (10 marks).

Show the solution

Identify the relevant activities: procurement (support), operations, service and marketing and sales (primary).
Procurement: cheap components reduce purchase cost, but a single supplier creates dependence and weaker quality control.
Operations: defects arise from the poor components, so cost is added through rework and returns.
Service: high repair work adds cost and may harm the customer experience, reducing the value customers will pay for.
Marketing and sales: strong brand and well-regarded marketing create value and support a price premium.
Linkage: saving in procurement is more than offset by extra cost in operations and service. This reduces margin and may damage the brand over time.
Recommend: raise component quality standards, add a second supplier, and share quality data with suppliers. Judge the extra purchase cost against savings from fewer returns.

Answer: AquaPure creates value in marketing and sales through its brand, but loses it through procurement choices that cause defects, rework and heavy service costs. The linkage between procurement, operations and service is the key issue. It should improve supplier quality, use more than one supplier and compare higher input cost with lower failure cost.

Example 2

Required: Explain the difference between a value chain and a value network, and advise why a regional retailer, Kestrel, should consider the value network when deciding whether to outsource its delivery service (8 marks).

Show the solution

Define the value chain: the activities inside one organisation which add value and cost, grouped as primary and support.
Define the value network: the system of linked value chains of suppliers, Kestrel, delivery partners and customers.
Difference: the chain looks inside the firm. The network looks at the relationships between firms, where value can be gained or lost.
Apply to outsourcing: delivery is outbound logistics. A specialist may deliver at lower cost and with wider coverage.
Network view: the delivery partner's systems, information sharing and service quality affect customers' experience of Kestrel.
Risks: loss of control, dependence on one partner, damage to brand if service fails.
Recommend: outsource only if total cost and customer value across the network improve, with clear service agreements and performance monitoring.

Answer: A value chain covers activities within one organisation; a value network covers the links among the organisation, suppliers, partners and customers. Kestrel should assess outsourcing across the network. It should outsource delivery if a partner lowers cost or improves service. It should protect the customer experience through contracts, data sharing and monitoring.

Exam tips

Use the case. Marks go for applying the model to facts, not for describing Porter.
Adapt the headings to the organisation, especially for services, charities or public bodies.
Always link analysis to the strategy or decision in the requirement, such as outsourcing or cost leadership.
Use the value network for supplier, partner or digital platform scenarios, and name the interface where value is lost or gained.
Show professional skills by ending with a balanced, practical recommendation in the format asked.

Practice questions from The internal resources, capabilities and competences of an organisation

Value Chain and Value Network Analysis in other exams

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

Value Chain and Value Network Analysis: 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 firm infrastructure, human resource management, technology development and procurement. Support activities serve all the primary ones.

What is the difference between a value chain and a value network?

A value chain looks at activities inside one organisation. A value network looks at how that organisation's chain links with those of suppliers, distributors and customers. It helps you judge outsourcing, partnerships and supply chain integration.

How do I do value chain analysis in the SBL exam?

Pick the activities the case gives evidence about. Link each to cost and value, find the main source of advantage or weakness, and look at linkages. Then recommend an action. Do not list all nine activities with textbook definitions.

Can I use the value chain for a service or not-for-profit organisation?

Yes. Adapt the activity labels to fit, such as service delivery for operations. The logic is the same: find where the organisation adds value and cost, and whether this supports its strategy or objectives.