MARY THE QUEEN COLLEGE (P)

Institute of Business Education

Guagua, Pampanga

Strategic Management

JESSIE D. MANAPSAL, Ph.D.

Professor
 Value Chain C6

• The concept of value creation

• The idea of being engaged in a business of any kind is a matter of choice
whether to engage in producing tangible product directly or indirectly and
the other is to render a service with either choices designed to deliver
customer expectations. Direct involvement in a product based business
means creating, producing or assembling a product through the use of in
house manpower and other forms of resources and facilities. Partial or
indirect involvement in product generation could mean using or employing
the concept of outsourcing, subcontracting, purchased services, etc. Either
way, this means necessarily processing, converting, improving or adding
value to a particular product thereby giving more appeal, utility or value to
a new product that promises a level of satisfaction to prospective clients or
customers.
 Value Chain C6

• Concept of supply chain

• Aside from the aforementioned view on the value creation process, other
authors have defined or described supply chain and value chain in a much
detailed manner. In some cases, supply and value chain are used
interchangeably or synonymously.
• 1. Raw materials
• 2. Primary manufacturing
• 3. Fabrication
• 4. Product producer
• 5. Distributor
• 6. Retailer
 Value Chain C6

• The term supply chain in general talks about the series of activities
involved in the production or processing of a product or rendering of a
service. One view about supply chain is that it consists of a set of activities
involved before the creation or production of a product or the kind of
services to be rendered by the business firm to the public at large, or the
specific market it wants to serve.
• Dietel et al (2000) defined supply chain management as the strategic
management of distribution channels and processes that support the entire
business process. It is to be noted that this concept of supply chain
focuses only on the post production aspect of a product or simply the
management of distribution aspects sometimes referred to as outbound
logistics.
 Value Chain C6

• Concept of distribution chain

• The concept of distribution chain the process involved in delivering or
causing the creation of the product or services within the confines of the
business organizations are referred to upstream activities or classified as
part of the supply chain. Parties involved in moving the product are
referred to as downstream activities or as classified as distribution chain.
• The aforementioned notion and view of the distribution chain is not limited
only to distribution organizations but it covers all other parties with direct
and indirect roles in moving or causing the transfer of the product from its
origin to various places or countries and all the way to final consumption or
user stage.
 Value Chain C6

• The concept of value chain

• The concept of value chain refers to the processes involved in converting
a product from raw material to its finished, saleable and consumable
stage. Broadly, it involves a way of organizing the activities of business so
that each activity adds value or productivity to the total operation of the
business.
• Value chain can be viewed as the sum total of the supply and distribution
chain. Wheelen and Hunger (2004) specifically defined value chain as a
linked set of value-creating activities beginning with basic raw material
coming from suppliers, moving on to a series of value added activities
involved in producing and marketing product or service, and ending with
distributors getting the final goods into the hands of the ultimate
consumers.
 Value Chain C6

• Corporation’s value chain

• 1. Primary activities
1a. Inbound logistics
1b. Operations
1c. Outbound logistics
1d. Marketing and sales
1e. Services
• 2. Support activities
2a. Firm infrastructure
2b. Human resource management
2c. Technology development
2d. Procurement
 Value Chain C6

• The importance of value chain

• The business organizations involved in the entire supply or value chain
have their own respective roles considered extremely important and critical
for the top management and strategic managers in particular. This is so
because value chain has direct bearing in production and distribution costs
of the product and eventually the market price of the product or services
offered by the firm. Knowing that price of the product in the market place is
among the most dominant aspect that determines the competitiveness of
the firm, it is important to know the key players both in the supply and
distribution side of the business. It is important and critical to study and
analyze both the backward and forward channels of the entire value chain.
 Value Chain C6

• The backward channel

• This is composed of the companies or organization providing raw materials or
other forms of inputs for the company to undertake its value creation process.
Generally, this channel refers to the suppliers of the business concern.
Consideration for suppliers in the value chain is critical because costs, quality,
and performance of inputs provided by suppliers influence a firm’s own costs
and product quality or performance.

• The forward channel

• This refers to the distribution side of the business or parties involved beyond
the production and storage line. This group includes organizations acting as
distributors, dealers, agents, indentors, importers, transport/delivery firms and
other organizations closing in to the ultimate users or consumers of the
business organization involved in the value creation process.
 Value Chain C6

• Value chain in the e-commerce era

• The widespread use of the Internet nowadays or the ventures in the field of
e-Commerce business has given opportunity for value chain to be
radicalized more than just the use of a variety of information and
communication technologies. The value chain in the e-Commerce/e-
Business era allows a so called seamless chain scenario or one that
electronically connects various organizations either in the supply or
distribution chain side thereby ensuring timely information sharing and
efficient logistical operations both at the supply and distribution aspects of
the business.
 Reference

• Orcullo, N.A. (2007), Fundamentals of Strategic Management, Quezon

City, Rex Printing Company, Inc.
Thank you!