Conceptualized by Harvard Business School professor Michael Porter in 1985, Porter argues that "every business is a collection of activities that go into the process of designing, producing, selling, sending, and assisting its products. All these activities can be indicated by a value chain." Value creation in an enterprise is constituted through a series of activities that can be categorized into basic activities, which include internal logistics, production operations, external logistics, marketing and sales, and services; and auxiliary activities, which include purchasing, technology development, human resource management, and enterprise infrastructure. These different but interrelated production and operation activities constitute a dynamic process of value creation, i.e. the value chain.

Value chain is ubiquitous in economic activities, upstream and downstream associated with the existence of industry value chain between enterprises, the enterprise internal business units of the linkage constitutes the enterprise's value chain, the enterprise also exists between the business units of the value chain linkage. Each value activity in the value chain will have an impact on how much value the enterprise can ultimately realize.

Porter's "value chain" theory reveals that the competition between enterprises is not only the competition of a certain link, but the competition of the whole value chain, and the comprehensive competitiveness of the whole value chain determines the competitiveness of enterprises. In the words of Porter: "The value in the mind of the consumer consists of a series of internal material and technological specific activities and profits, when you compete with other enterprises, in fact, a number of internal activities in the competition, rather than the competition of a particular activity."

I, the concept and composition of the value chain

1 enterprises to survive and develop, must be for the enterprise's shareholders and other interest groups, including employees, customers, suppliers, as well as the region and related industries to create value. If the "enterprise" this "black box" open, we can create value for the enterprise's process of decomposition into a series of different but interrelated economic activities, or called "value-added activities "The sum of these activities constitutes the "value chain" of an enterprise. Any enterprise is an aggregate of activities carried out in the design, production, sales, delivery and after-sales service of its products. Each business management activity is a link in this value chain. The value chain of an enterprise and the way in which it carries out individual activities reflects the history of the enterprise, its strategy, the way in which it implements that strategy, and the main economics of the activity itself.

Value Chain and Competitive Advantage

1The basic idea of the "value chain" theory is that not every one of the many "value activities" of an enterprise creates value. The value created by an enterprise actually comes from certain specific value activities along the enterprise value chain; these value-creating activities are the "strategic links" of the enterprise value chain. The advantage of an enterprise in competition, especially the advantage that can be maintained for a long time, in the final analysis, is the advantage of the enterprise in some specific strategic value links of the value chain. The monopoly advantage of the industry comes from the monopoly advantage of some specific links in the industry, and seizing these key links will also seize the entire value chain.

2 These strategic links that determine the success or failure of business operations and benefits can be product development, process design, marketing, information technology, or understanding of management, etc., depending on the different industries. In the high fashion industry, this strategic link is generally design capability; in the cigarette industry, this strategic link is primarily advertising and public **** relations strategy (i.e., how to deal with smoking cessation efforts by various government and consumer organizations); and in the restaurant industry, this strategic link is primarily the choice of restaurant location. Although, as mentioned earlier, different industries have different value chains and the role of the same link varies from industry to industry, large-scale enterprises, such as multinational corporations (MNCs), can diffuse and transplant their core competencies in related industries through the key links in the value chain, thereby enhancing the competitive advantage of enterprises, especially MNCs. In their international marketing activities, TNCs have the economy of scope effect of global cross-industry marketing. This economy of scope effect is the multinational corporation through the optimal breadth (scope) of the use of generic elements and resources and obtain. Such generic factors can be generic production equipment, management experience, marketing skills and research and development capabilities. Since the existence of generic elements can be found in almost every link of the value chain, when the key link in the value chain, i.e., the core competence, of two industries requires the same generic elements, the MNC spreads its core competence in one industry to another related industry, which transforms the economy of scope effect into an economic advantage of scope. As a result, the advanced knowledge, experience and skills acquired by TNCs in marketing and communication activities in one industry can be transferred to other related industries without significant additional investment.