Porter Verses Shank Value Chain

Both Porter and Shank assess the addition of value as management of costs in an effort to increase efficiency or add value to the organization as a whole. Porter model concentrates primarily on the internal control of operations via the value chain, whereas Shank concentrates on value addition. Porter’s model utilizes internal cost strategies for internal reduction of costs to increase value only on the value additions (microcosm) whereas Shank expands the value chain against both internal and external evaluations within the organizations and with competitors through strategization.

Porter’s model looks at primary and support functions within the organization’s value chain to create added value to the organization. In looking at purchasing, specifically, only looking at how to decrease costs inherent to the purchasing process may eclipse the firm’s ability to take advantage of synergistic interactions with the firm’s suppliers to reduce costs and capital use even further (Shank, p. 14).

Shank (p. 27) utilized Strategic Cost Management (SCM) verses the Management Cost Paradigm (MAP), which is more in line with Porter’s mentality, to show how value addition is determined (Shank, p. 27) by addressing the costs involved.

The SCM paradigm addresses strategy as a matter of addressing the value chain overall. Strategy (in Shank’s model), in observing the overall value chain elements and their interaction internally and externally, is molded by the firm itself as wells as the competition, suppliers and customers needs, wants and perceptions as well as costs. Accounting is not the end all to the process, but is an integral part of the process, therefore, intangibles are taken into account that pure cost accounting (of Porter) cannot address.

Porter’s objectives in analyzing the situation account for three processes; evaluating/scoring; directing attention, and; solving the issues. Porter’s value chain uses these three process as without regard to the strategy involved towards the industry or the customer/supplier relationships. This is in contrast to the value added paradigm from Shank that looks to see the links between suppliers and customers at a strategic level to interconnect unseen advantages that the Porter model may miss. These three objectives are shared with Shank’s model also, but the manner in which they are weighed and utilized are very different. Shank