e Value Chain

c
•
o that each business unit undertakes.
Value chain is a way of organizing the activities

m• Value Chain Analysis is one way of identifying

mwhich activities are best undertaken by a
e business and which are best outsourced
electronic
r
commerce


cstrategy
technologies
and

e
applications
 e The value chain
c
o
m
m
eelectronic
rcommerce

• The production of goods and services is the result
of the efforts of many organisations – a complex
c strategy
technologies
and
web of contracts and co-operation known as the
supply chain or the value system.
e
applications
 e Porter’s value chain model
support activities

c Firm Infrastructure
Human Resource Management

o Technology Development
Procurement
Margin

m Inbound Operations Outbound Marketing

Logistics Logistics & Sales
Service

m primary activities

eelectronic
• Primary Activities(those that are directly
concerned with creating and delivering a product):
rcommerce

–
–
Inbound Logistics
Operations (Production)
c strategy
technologies
and
–
–
Outbound Logistics
Marketing and Sales
e
applications
– Service
 e Porter’s value chain model
support activities

c Firm Infrastructure
Human Resource Management

o Technology Development
Procurement
Margin

m Inbound Operations Outbound Marketing

Logistics Logistics & Sales
Service

m primary activities

eelectronic
• Support Activities (which whilst they are not
directly involved in production, may increase
rcommerce

effectiveness or efficiency):
– Procurement
c strategy
technologies
and
–
–
Technology Development
Human Resources Management
e
applications – Firm Infrastructure
e Importance of value chain
c • Useful way to think about business
o strategy in general
m • Provides an excellent way to organise the
examination of business processes
m • Starting point to improve the efficiency
e electronic
and productivity of a company
r commerce

• Help indentifying the component
activities
c strategy
technologies
and
• Help identifying the various linkages
eapplications

• Performance deficits can be addressed

 e Use of value chain model
c • Analysis tool for defining a company’s core
o competencies and the activities in which it can
pursue a competitive advantage
m – Cost advantage
– Differentiation
m
e – Break down activities
Steps in value chain analysis
electronic
r advantage or differentiation
– Assess the potential for adding value via cost
commerce

– Determine strategies where competitive advantage
c can be sustained
strategy
technologies
and

e
applications
 e Key weaknesses of traditional
c value chain
o • Most applicable to manufacturing of
m physical products as compared to services
• One way chain involved with pushing
m products
eelectronic
• Does not emphasis on customer needs
• E-commerce has implication for whether
rcommerce
 activities are achieved internally or
c strategy
technologies
and
externally which is not covered in value
chain
e
applications
 e Revised value chain
c N M
o M
R
P
D
M
P
P
M
P
P
S
F
m
m – MR: Market Research (Identifying the product and
eelectronic
customers)
– NPD: New product development (Designing)
– MP: Market product (Test marketing)
rcommerce

– PM: Procure material (procurement activities)
– PP: Procure products
c strategy
technologies
and
– MSF: Manage selling and fulfillment (Promotion, pricing,
sales monitoring, distribution channel)
e
applications
 e e-Commerce in the value chain
c
• Electronic Value Chain:
o – Reduced time frame
m – Changed cost structures

m• Re-engineered Value Chain:

– Just-in-time manufacture
e – Quick response supply
electronic
r – Efficient document processing
commerce


c• Competitive advantage
strategy
technologies
and

e
applications
 e Linked value chains
c
o Outbound
Logistics
Inbound Operations Outbound
Logistics Logistics
Inbound
Logistics

m
m • Inbound Logistics —from Suppliers
eelectronic
rcommerce
 • Outbound Logistics —from Customers
c strategy
technologies
and

e
applications
 e Porter’s value system
(Inter-organisational value chain)

c
o Supplier
Value
Chains
Firm
Value
Chains
Channel
Value
Chains
Buyers
Value
Chains

m
m • Overall organisational competitive advantage:
– efficiency of the company
eelectronic
– quality of its products

rcommerce

• plus
– efficiency and quality of suppliers
c strategy
technologies
and
– efficiency of wholesalers (Channel)
– efficiency of retailers
e
applications
 e Automotive assembly value system
c Internal
Supplies

o
m Component
Suppliers
Vehicle
Assembler
Dealer
Network
Consumer

m • Inbound Logistics:
eelectronic
– Large number of suppliers
– Vast number of components
rcommerce
 • Process:

c strategy
technologies
and
– Just-in-time (JIT) manufacture
• Outbound Logistics:

e
applications – Limited number of Main Dealers
 e Food supermarkets value system
c Regional
Whse

o
m Food
Processors
Super-
market
Consumer

m • Inbound Logistics:
eelectronic
– Large number of suppliers
– Vast number of products
rcommerce
 • Process:

c strategy
technologies
and
– Retail
• Outbound Logistics:

e
applications – Vast number of Consumers
 e Insurance value system
c Agents

o
m Insurance
m Company
Consumer

eelectronic
rcommerce
 Insurance

c strategy
technologies
and
Broker

e
applications
 e Insurance value system
c
• Inbound Logistics:
o – No significant suppliers
m (financial / re-insurance partners)

m• Process:
– Administrative
e
electronic
• Outbound Logistics:
r – Sales through agents
commerce


c –– Sales
strategy
technologies through brokers
Direct sales
and

e
applications