Value Chain

A low-price S&M shop that used to be in Times Square, before they shut it down to open the Disney Store.

Also, a term describing the value added to an item by each process it undergoes.

You are making cookies. You start with a bunch of separate ingredients. They're pretty cheap and easy to obtain. Then you combine them in the proper proportion to make dough. You've added value. You could sell that cookie dough (with a clear salmonella warning) for more than the cost of its component parts. The measuring and mixing has added value to ingredients. Next step: the oven. You bake the cookies for the prescribed period of time. Again, you've added value, turing the raw dough into cookies.

This series of processes make up the value chain for those cookies. Each step adds value to the product, turning them from ingredients to dough to cookies.

Companies closely analyze their value chains, looking at how each process adds value to the product. Activities that don't add much value can get cut out. For example, you find that you can't really sell the finished cookies for a higher price than you can sell the unbaked dough. It takes a long time to bake each batch of cookies, but doesn't really add that much value. You change your business model to sell the dough rather than the finished cookie. You've examined your value chain and discovered a way to maximize profitability.