（iv）Value chain
The value chain is a model of business integration showing the way that business activities are organised and linked. This model uses activities rather than traditional functional departments（such as finance）to describe the business, emphasising that it is activities which create value and incur costs.
The activities are split into two groups: primary ones which the customer interacts with directly and can ‘see’ the value being created and secondary ones which support the primary activities. The business can then identify how value is created and so focus on improving this through its performance measurement system（for example, the board report）.

Another important feature of the value chain is the idea of value creation through a chain linking activities to each other.
Therefore, there must be a flow of information between the different activities and across departmental boundaries. In performance management terms, this will affect the information systems which will have to ensure good communication across functional boundaries and also, the job descriptions and reporting hierarchies, as these will have to reflect activities rather than being purely contained within functional areas.
This chain will not stop at the organisation’s boundaries as can be seen at Arkaig, where the relationship with suppliers（inbound logistics and procurement）is identified as an area of concern.

A specific area of concern at Arkaig is inbound and outbound logistics where there is an old warehousing and distribution information system. For a business such as Arkaig which aims to use technology innovatively, this could lead to inefficiencies. A state-of-the-art system would be integrated with the production and sales systems and would allow better stock control with fewer errors in picking inventory and reduced obsolescence while improved distribution could lead to faster delivery to customers with reduced costs of transportation.
The concern regarding after-sales service may be due to an inconsistency in having an area which generates a significant amount of revenue but which relates in reality to the failure of reliability of the business’ products. It would be important to identify that customers’ attitude to product reliability is not affected and that they see this service as necessary（maybe by benchmarking failure rates/machine downtime against competitors）.

Although the chain shows human resources as a secondary activity, it is recognised as important to achieving the entrepreneurial culture at Arkaig. This culture can be realised through the reward system where employees are rewarded by share ownership or a share option scheme. Its effect can be measured through improved profitability and increased innovation.