Value chain analysis should identify those activities that are the sources of either cost or differentiation advantages.

Value chain analysis should identify those activities that are the sources of either cost or differentiation advantages.

• A. Should identify only cost advantages
• B. Only focuses on distribution
• C. Should identify those activities that are the sources of either cost or differentiation advantages
• D. Only focuses on marketing

Answer: (C)

Value chain analysis examines every activity a firm performs to create, produce, market, and support its product or service, with the aim of spotting where value is added and where costs arise. The key idea is to identify activities that can generate a cost advantage through efficiency or scale, and activities that can enable differentiation by delivering features, quality, or service that customers value more than competitors. It’s not limited to distribution or marketing alone; those are just parts of the broader chain. By looking across inbound logistics, operations, outbound logistics, marketing and sales, and service, plus supporting activities like technology development, procurement, and firm infrastructure, you can see where improvements will lower costs or raise perceived value. Focusing on only cost or only marketing would miss other avenues to gain advantage, whereas a full value-chain view captures both cost reductions and differentiation opportunities.