Value chain in the construction industry
[edit] Introduction
The term value chain was coined in 1998 by Harvard Business School professor Michael Eugene Porter in his book ‘Competitive Advantage: Creating and Sustaining Superior Performance’ (Free Press, 1985).
It comprises all the activities that must be performed by a firm in order to allow it to bring to market a product or service. These activities may include designing, manufacturing, marketing, sales, delivering and supporting the product (after sales) and so on.
The type of firm in question could be one that produces an end product by processing raw materials or it may be a firm that buys from other manufacturers semi-processed goods and converts them into finished products. The efficiency with which the company carries out these tasks will determine its costs and profits.
[edit] The chain of activities
To get to market, a product or service will typically go through an ordered chain of activities and at each stage it will increase in value. For example, in the processing of raw materials, the value chain comprises all the steps involved in bringing the product from conception to distribution, which includes obtaining the raw material, processing and manufacturing, marketing and promotion. For instance, sawn timber in itself may not have a high value, but it will increase in value as it goes through the various stages of cutting, treating, planing, shaping and assembly to then be marketed, sold and delivered.
Companies gain competitive advantage by continually examining and improving their value chain and delivering maximum value while incurring minimum cost. They may examine their value chains (value chain analysis) to see where in their operations there are inefficiencies, then instigate measures to correct those inefficiencies and add further value (at the lowest possible cost) in order to maximise their operations and profitability.
NB PAS 2080:2023 Carbon management in buildings and infrastructure, second edition, published by The British Standards Institution in March 2023, defines value chain as: ‘organizations and stakeholders involved in creating, operating and managing assets and/or networks.’
Asset Management – an anatomy, Version 4, published by The Institute of Asset Management in July 2024, defines value chain as “a set of activities that an organization carries out to create value for its customers”. Ref Porter, Michael E., “Competitive Advantage: Creating and Sustaining Superior Performance“. 1985
[edit] Related articles on Designing Buildings
Featured articles and news
The context, schemes, standards, roles and relevance of the Building Safety Act.
Retrofit 25 – What's Stopping Us?
Exhibition Opens at The Building Centre.
Types of work to existing buildings
A simple circular economy wiki breakdown with further links.
A threat to the creativity that makes London special.
How can digital twins boost profitability within construction?
The smart construction dashboard, as-built data and site changes forming an accurate digital twin.
Unlocking surplus public defence land and more to speed up the delivery of housing.
The Planning and Infrastructure Bill
An outline of the bill with a mix of reactions on potential impacts from IHBC, CIEEM, CIC, ACE and EIC.
Farnborough College Unveils its Half-house for Sustainable Construction Training.
Spring Statement 2025 with reactions from industry
Confirming previously announced funding, and welfare changes amid adjusted growth forecast.
Scottish Government responds to Grenfell report
As fund for unsafe cladding assessments is launched.
CLC and BSR process map for HRB approvals
One of the initial outputs of their weekly BSR meetings.
Architects Academy at an insulation manufacturing facility
Programme of technical engagement for aspiring designers.
Building Safety Levy technical consultation response
Details of the planned levy now due in 2026.
Great British Energy install solar on school and NHS sites
200 schools and 200 NHS sites to get solar systems, as first project of the newly formed government initiative.
600 million for 60,000 more skilled construction workers
Announced by Treasury ahead of the Spring Statement.
The restoration of the novelist’s birthplace in Eastwood.
Life Critical Fire Safety External Wall System LCFS EWS
Breaking down what is meant by this now often used term.
PAC report on the Remediation of Dangerous Cladding
Recommendations on workforce, transparency, support, insurance, funding, fraud and mismanagement.
New towns, expanded settlements and housing delivery
Modular inquiry asks if new towns and expanded settlements are an effective means of delivering housing.