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Keywords
Value chain, Model, Supply chain management
Abstract
This article is a corollary to three articles published earlier in Management Decision. More precise definitions of a modern value chain are proposed, in terms of it being a business system that creates end-user satisfaction and realises the objectives of other member stakeholders. Comparisons are drawn with the current notion of supply chain management and an explanation is given as to how the supply chain fits into the wider perspective put forward in this paper. Ideas are advanced in relation to value chain relationships and options. Models are then suggested relating to a number of well-known international companies, where the authors have researched, at primary or secondary level.
Background
In our earlier articles in this journal (Walters and Lancaster, 1999a, 1999b) we offered basic definitions for three aspects of value. In summary these were:
1 Value is determined by the utility combination of benefits delivered to the customer less the total costs of acquiring the delivered benefits. Value is then a preferred combination of benefits (value criteria) compared with acquisition costs.
2 Relative value is the perceived satisfaction obtained (or assumed to be available) from alternative value offers.
3 A value proposition is a statement of how value is to be delivered to customers. It is important both internally and externally. Internally, it identifies the value drivers it is attempting to offer a target customer group and the activities involved in producing the value, together with the cost drivers involved in the value-producing activities. Externally it is the means by which the firm positions itself in the minds of customers. Webster (1994) suggests: "The value proposition should be the firm's single most important organising principle".
Brown (1997) has offered a succinct definition of the value chain:
The value chain is a tool to disaggregate a business into strategically relevant activities.
This enables identification of the source of competitive advantage by performing these activities more cheaply or better than its competitors. Its value chain is part of a larger stream of activities carried out by other members of the channel-suppliers, distributors and customers.
Introduction
Three important perspectives emerge. First is the emphasis on relationship management between activities (possibly organisations) in the value chain. The second concerns...