MANAGING INFORMATION SYSTEM

LESSON 6: VALUE CHAIN PROCESS

Objective
The objective of this lesson is to give you insight in to :
Is to illustrate the value chain process

Steps in Value Chain Analysis

Value chain analysis can be broken down into a three sequential steps.
Break down a market/organization into its key activities

which present competences can be alert to ways in which present competences can be improved. The aim of this process is to enable choices to be explicit and conscious and that it should be simple enough to be devolved down the enterprise, rather than be restricted to higher-management. This process should open. As new management theory and practice is revealed, the basic process should be able to accommodate this - the Process is the trunk and the set of branches onto which new leaves of management expertise can be accommodated.

under each of the major headings in the model.

Assess the potential for adding value via cost advantage or

differentiation, or identify current activities where a business appears to be at a competitive disadvantage.

Determine strategies built around focusing on activities

An Illustration
Quinn (1993) points out that a product itself does not create a sustainable edge, so the need is to create a new value chain from the functions associated with new products. The enterprise should determine where it could dominate in that chain. It is easy to go wrong. IBM collaborated with Intel (chips) and Microsoft (operating system software) in the development of their PC, and gave a way $ billions of future business. IBM lost control of the value chain, until IBM dominated only a tiny piece of value (controlling the BIOS, linking the operating system to the chip). And that was eventually imitated. IBM started with a major asset, its brand, but first Microsoft then Intel built strong brands, which eliminated the need for IBMs (Carroll,1993), describes this in an entertaining way).

where competitive advantage can be sustained.

Activity 2
List down five major primaries and five major support activities with respect to an intelligence department of an army. This intelligence wing works within the boundary of its country and report to Chief Defense Staff (CDS).

Process
The origin of the Process was the need for help in making investment decisions of the form I need a new product/system should I make it, re-use someone elses Collaborate..? These questions are valid in their own right, but in fact they are all concerned with the nature of the value chain for the product/system. Given the credibility that value chain analysis has in the business and management literature, this is now the focus of the Process. New management theory and evidence concerned with value chains is being revealed all the time. Typically, each new finding about management theory does not fit into an easily recognized frame work- the reader must identify how to fit it in. This is fine for management theorists and consultants, but as Collis and Montgomery (1955) point out, each new approach compounds a managers confusion and about strategy. The purpose of this Process is, in certain clearly defined cases, to answer the managers question yes put what should I do ? The prime aim of this Process is to identify a series of steps which steer a collection of decision makers (managers, marketers, procurement, sales, finance, etc) through a set of investigations, brainstorms, judgments, decisions, until they achieve a broad based frame work value chain, which they can all understand (even if they dont agree with all of it) Gronhaug and Nordhaug (1992) point out that all enterprises make strategic choices, either explicitly and consciously or implicitly and unconsciously and that it is paramount for firms to map and analyze competences and to be alert to ways in
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Building on Product or System Development

This Process can be used by an enterprise, which needs a new product for its product range, or a new system to enable its operations the enterprise is acquiring a new asset or resource to use or sell. This report uses Product to cover both situations. Gronhaug and Nordhaug (1992) point out that product to an increasing extent are made by new works of collaborators. A new product has upstream and downstream elements in the value chain, and probably partners/collaborators as well. A system may have just suppliers, and these may be short term. During the life cycle there will be needs to acquire assets, including:
People Processes Methodologies Tools Integration components Addition infrastructure

Prahalad and Hamel (1990) point out that outsourcing contributes little to skills needed to sustain product leadership. The ideal is that each decision-to make, buy, collaborate, re-use a

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product or component contributes not just to the product itself but also to the future competence of the enterprise. The process may not be restricted to the introduction of new products. Lorange, 1996, shows the similarities between foreign entry strategies and collaborations. In the former case the enterprise acquires a complete part of the value chain, and therefore this Process may help with introducing existing products to new markets. The decision dont just exist at the level of the overall product/system a product may be strategically important, but there may be component of it which are not (for example, the screws which hold it together , or the support service in particular countries). The Process allows different decisions to be made at various levels of decomposition of the product.

INFORMATION SYSTEM

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