Why Your Supply Chain Map Must Start with Porter's Value Chain

The global insights industry was worth over US$140 billion in 2023 (ESOMAR via Research World). That’s a lot of money spent on understanding markets, yet I keep seeing analysts jump straight into PESTLE or SWOT without ever mapping the value chain. That’s a mistake. If you don’t know how value is created and captured in your industry, you’re flying blind. My position: before you run any other framework, map the value chain using Porter’s original five-category model. It’s the only way to see where the real leverage points are.

The Value Chain Is the Missing Foundation

Michael Porter introduced the value chain in his 1985 book Competitive Advantage (IBM Think). He divided a firm’s activities into five primary categories—inbound logistics, operations, outbound logistics, marketing and sales, and service—plus four support categories: procurement, technology development, human resource management, and firm infrastructure (IBM Think). This isn’t just academic theory. When you map an industry’s value chain, you see exactly where costs are incurred and where differentiation can happen. Cost leadership means becoming the low-cost producer by making value chain activities more efficient; differentiation means creating products so unique that you can charge a premium (IBM Think). Without this map, you can’t tell which activities are driving profitability.

Consider the market research industry itself. In 2023, the market research sector accounted for about US$54 billion, but the research software sector was US$56 billion and grew 12.4% in absolute terms (ESOMAR via Research World). If I had only looked at the top-line market size, I might have missed that software is now the growth engine. Mapping the value chain for a research firm would reveal that technology development—a support activity—is becoming the primary source of advantage. That’s the kind of insight you only get when you start with the value chain.

Why Many Analysts Skip It—and Why They’re Wrong

The strongest counter-argument I hear is that Porter’s value chain is too company-specific. Analysts argue that they need industry-level tools like PESTLE to capture macro trends or SWOT to assess a firm’s position. I get that. PESTLE covers political, economic, social, technological, legal, and environmental factors (CFA Institute). And the CFA Institute recommends using both Porter’s Five Forces and PESTLE (CFA Institute). But here’s the problem: without a value chain map, you don’t know which of those macro factors actually matter to your industry. A political change might affect your industry’s supply chain, but you won’t see that unless you’ve mapped the chain first.

Take the pharmaceutical sector, which accounts for about 16.6% of market research spending (Similarweb / Research and Markets). A PESTLE analysis might flag new environmental regulations. But to understand the impact, you need to see that raw materials are a key input in the value chain. Environmental factors have grown because of the increasing scarcity of raw materials and carbon footprint goals (Washington State University Libraries). If you haven’t mapped the value chain, you might miss that the real vulnerability is in inbound logistics. So the counter-argument fails because it treats value chain analysis as optional, when it’s actually the connective tissue that makes other frameworks meaningful.

How to Use the Value Chain to Sharpen Your Industry Analysis

Here’s my recommended approach, and it’s concrete. Start by mapping the primary activities for the industry’s key players. For each activity, ask: where is value created? where are costs concentrated? Use the five categories as a checklist. Then overlay the support activities, especially technology development and procurement. That will immediately reveal which activities are ripe for disruption or are sources of competitive advantage.

• Inbound logistics: How do raw materials or data inputs flow in? Are there bottlenecks?
• Operations: Where are the high-cost conversion points?
• Outbound logistics: How does the product reach the customer? Is distribution a differentiator?
• Marketing and sales: What drives customer acquisition? Is brand power concentrated?
• Service: What post-sale support matters? Is it a profit center or a cost drain?

Let me give you a real scenario. Suppose you’re analyzing the global market research industry. The United States holds about 53% of the market (Similarweb / Research and Markets). If you map the value chain for a US-based full-service research firm, you might see that operations (data collection and analysis) are being automated by AI. About 47% of researchers already use AI regularly (Similarweb / Research and Markets). That means the primary activity of operations is shifting from human labor to technology. A firm that can build a proprietary AI-driven operations process could achieve cost leadership. Without mapping the value chain, you’d miss that this is the decisive battleground.

Make the Value Chain Your Non-Negotiable First Step

I’m not saying other frameworks are useless. Far from it. Porter’s Five Forces is essential for understanding competitive rivalry, and PESTLE helps you scan the horizon. But I am saying that you must start with the value chain. It gives you the granular view of where value is created, and that granular view is what makes every other analysis sharper. When you skip it, you’re making assumptions about how the industry works—and those assumptions can be wrong.

The next time you begin an industry analysis, resist the urge to jump into a PESTLE brainstorm or a SWOT grid. Instead, spend an hour mapping the value chain. You’ll probably find that your SWOT becomes more specific, your Five Forces analysis gains nuance, and your PESTLE factors become prioritized. That’s the payoff. The most important thing to remember: the value chain isn’t just a company-level tool; it’s the lens through which you should view the entire industry. Start there, and you’ll see more clearly.

Sources

• CFA Institute - https://www.cfainstitute.org/insights/professional-learning/refresher-readings/2026/industry-and-competitive-analysis
• Similarweb / Research and Markets - https://www.similarweb.com/blog/research/market-research/market-research-stats/
• IBM Think - https://www.ibm.com/think/topics/value-chain-analysis
• ESOMAR via Research World - https://researchworld.com/articles/drivers-of-our-142bn-insights-industry
• Washington State University Libraries - https://libguides.libraries.wsu.edu/c.php?g=294263&p=4358409