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Page 1: Value chain

• Value chain

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 2: Value chain

Video game industry - Game industry value chain

1 Ben Sawyer of Digitalmill observes that the game industry value chain is

made up of six connected and distinctive layers:

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 3: Value chain

Value chain

1 A 'value chain' is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or Service (economics)|service

for the market. The concept comes from business management and was first

described and popularized by Michael Porter in his 1985 best-seller,

Competitive Advantage: Creating and Sustaining Superior Performance.

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 4: Value chain

Value chain

1 The concept of value chains as decision support tools, was added onto the

competitive strategies paradigm developed by Porter as early as 1979. In Porter's value

chains, Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales and Service are categorized as primary activities. Secondary activities include

Procurement, Human Resource management, Technological Development

and Infrastructure. https://store.theartofservice.com/the-value-chain-toolkit.html

Page 5: Value chain

Value chain

1 According to the OECD Secretary-General the emergence of global

value chains (GVCs) in the late 1990s provided a catalyst for accelerated

change in the landscape of international investment and trade,

with major, far-reaching consequences on governments as

well as enterprises.

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 6: Value chain

Value chain - Cross border / cross region Value Chains

1 the emergence of global value chains (GVCs) in the late 1990s provided a catalyst for accelerated change in

the landscape of international investment and trade, with major,

far-reaching consequences on governments as well as enterprises.

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Value chain - Global value chains (GVCs) in Development

1 Through global value chains, there has been growth in

interconnectedness as MNEs play an increasingly larger role in the

internationalisation of business. In response, governments have cut

Corporate income tax (CIT) rates or introduced new incentives for research and development to

compete in this changing geopolitical landscape.

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Value chain - Global value chains (GVCs) in Development

1 In an (industrial) development context, the concepts of Global Value Chain analysis were first introduced

in the 1990s (Gereffi et

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 9: Value chain

Value chain - Global value chains (GVCs) in Development

1 Value chain analysis has also been employed in the development sector as a means of

identifying poverty reduction strategies by upgrading along the value chain. Although commonly associated with export-oriented

trade, development practitioners have begun to highlight the importance of developing national

and intra-regional chains in addition to international ones.Microlinks (2009) [Value

Chain Development Wiki http://microlinks.kdid.org/vcwiki] Washington,

D.C.: USAID.

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 10: Value chain

Value chain - Firm-level

1 The appropriate level for constructing a value chain is the business unit, (not division (business)|division or corporate level).

Products pass through activities of a chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of

added values of all activities.Michael E. Porter (1985) Competitive advantage: creating and sustaining superior performance. The Free

Press

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Value chain - Firm-level

1 The activity of a diamond cutter can illustrate the difference between cost and the value chain. The cutting activity may have a low

cost, but the activity adds much of the value to the end product, since a rough diamond is

significantly less valuable than a cut diamond. Typically, the described value chain

and the documentation of processes, assessment and auditing of adherence to the process routines are at the core of the quality

certification of the business, e.g. ISO 9001.

https://store.theartofservice.com/the-value-chain-toolkit.html

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Value chain - Activities

1 The value chain categorizes the generic Value theory|value-adding activities of an organization. The activities considered under this product/service enhancement

process can be broadly categorized under two major activity-sets.

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Page 13: Value chain

Value chain - Activities

1 # Physical/traditional value chain: a physical-world activity performed in

order to enhance a product or a service. Such activities evolution|

evolved over time by the experience people gained from their business conduct. As the will to earn higher

profit drives any business, professionals (trained/untrained)

practice these to achieve their goal.https://store.theartofservice.com/the-value-chain-toolkit.html

Page 14: Value chain

Value chain - Activities

1 All activities of persistent physical world's physical value-chain

enhancement process, which we implement in the cyber-market, are in general terms referred to as a

virtual value chain.

https://store.theartofservice.com/the-value-chain-toolkit.html

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Value chain - Activities

1 In practice , no progressive organisation can afford to remain stuck to any one of these value

chains. In order to cover both market spaces (Market|physical world and Cyber World|cyber world), organisations need to deploy their very best practices in both of these spaces to churn

out the most informative data, which can further be used to improve the ongoing

products/services or to develop some new product/service. Hence organisations today try

to employ the 'combined value chain'.

https://store.theartofservice.com/the-value-chain-toolkit.html

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Value chain - Activities

1 'Combined Value Chain' = Physical Value shown

in sample below.

https://store.theartofservice.com/the-value-chain-toolkit.html

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Value chain - Activities

1 After the firm creates products, these products pass through the value chains of distributors (which also

have their own value chains), all the way to the customers

https://store.theartofservice.com/the-value-chain-toolkit.html

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Value chain - Industry-level

1 The French Physiocrats' Tableau économique is one of the earliest examples of a value

chain

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Value chain - Significance

1 The value chain framework quickly made its way to the forefront of

management thought as a powerful analysis tool for strategic planning.

The simpler concept of Value stream mapping|value streams, a cross-

functional process which was developed over the next decade,,

particularly the Con Edison example. had some success in the early 1990s.

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 20: Value chain

Value chain - Significance

1 A value system includes the value chains of a firm's supplier (and their suppliers all the way back), the firm itself, the firm distribution channels,

and the firm's buyers (and presumably extended to the buyers

of their products, and so on).

https://store.theartofservice.com/the-value-chain-toolkit.html

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Value chain - Significance

1 Capturing the value generated along the chain is the new approach taken by many

management strategists. For example, a manufacturer might require its parts suppliers

to be located nearby its assembly plant to minimize the cost of transportation. By

exploiting the upstream and downstream information flowing along the value chain, the

firms may try to bypass the intermediaries creating new business models, or in other

ways create improvements in its value system.

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 22: Value chain

Value chain - Significance

1 Value chain analysis has also been successfully used in large petrochemical plant maintenance organizations to show how work selection, work planning, work scheduling and finally work execution can (when considered

as elements of chains) help drive lean approaches to maintenance. The Maintenance Value Chain approach is particularly successful

when used as a tool for helping change management as it is seen as more user-

friendly than other business process tools.

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Value chain - Significance

1 A value chain approach could also offer a meaningful alternative to

evaluate private or public companies when there is a lack of publicly

known data from direct competition, where the subject company is compared with, for example, a

known downstream industry to have a good feel of its value by building

useful correlations with its downstream companies.

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 24: Value chain

Value chain - Value Reference Model

1 A Value Reference Model (VRM) developed by the trade consortium

Value Chain Group offers a proprietary information model for

value chain management, encompassing the process domains of product lifecycle management|product development, customer

relationship management|customer relations and supply chain

management|supply networks.https://store.theartofservice.com/the-value-chain-toolkit.html

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Value chain - Value Reference Model

1 The Value Chain Group claims VRM to be next generation Business process

management|Business Process Management that enables value

reference modeling of all business processes and provides product

excellence, operations excellence, and customer excellence.

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 26: Value chain

Value chain - Value Reference Model

1 Six business functions of the value chain:

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Page 27: Value chain

Value chain - Value Reference Model

1 This guide to the right provides the levels 1-3 basic building blocks for

value chain configurations. All Level3 processes in VRM have input/output

dependencies, metrics and practices. The VRM can be extended to levels

4-6 via the Extensible Reference Model schema.

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 28: Value chain

International Institute for Management Development - IMD Global Value Chain Center

1 The IMD Global Value Chain 2020 Center is a consortium initiative with

corporations to explore and develop future best practices in business models and value chains. The research program

centers on twelve strategic questions derived from megatrends that have changed value chains over the last

decade as well as new megatrends that will dominate in the next decade.

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Private sector development - Business linkages and value chain development

1 Value Chain Development thus seeks to maximise the value of any given type of product, whilst incurring the least possible cost to the producers, in the places along the production chain that give the most benefit to

poor people

https://store.theartofservice.com/the-value-chain-toolkit.html

Page 30: Value chain

Global Value Chain

1 In development studies, the concept of a value chain has been used to analyse international trade

in global value chains which comprises “the full range of activities that are required to bring a

product from its conception, through its design, its sourced raw materials and intermediate inputs, its marketing, its distribution and its support to the

final consumer”.http://www.globalvaluechains.org/concep

ts.html Specifically, when activities must be coordinated across geographies, the term 'global

value chain' (GVC) is used in the development literature.

https://store.theartofservice.com/the-value-chain-toolkit.html

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Global Value Chain - In development

1 In his early work based on research on East Asian garment firms, the

pioneer in value chain analysis, Gary Gereffi, describes a process of almost ‘natural’ learning and upgrading for

the firms that joined GVCs.Gereffi, G., (1994)

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Global Value Chain - In development

1 Governance and Upgrading: Linking

Industrial Cluster and Global Value Chain

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Global Value Chain - Current research on governance and its impact from a development perspective

1 It calls for donors and governments to work together to assess how aid

flows may affect power relationships.Jodie Keane, 2014, Aid for trade and Global Value Chains:

Issues for South Asia, http://www.sawtee.org/publications/P

olicy-Brief-26.pdf

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Global Value Chain - Current research on governance and its impact from a development perspective

1 Current research suggests that GVCs exhibit a variety of characteristics and

impact communities in a variety of ways. In a paper that emerged from the

deliberations of the GVC Initiative,Gary Gereffi, John Humphrey, and Timothy

Sturgeon, “The governance of global value chains,” Review of International Political

Economy, vol. 12, no. 1, 2005 five different GVC governance patterns were identified:

https://store.theartofservice.com/the-value-chain-toolkit.html

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Global Value Chain - Current research on governance and its impact from a development perspective

1 (2010), The Role of Standards in Global Value Chains and their Impact on Economic and Social Upgrading, Policy Research Paper 5396, World

Bank

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Global Value Chain - Current research on governance and its impact from a development perspective

1 (2011) “The Impact of Operating in Multiple Value Chains for Upgrading: The Case of the Brazilian Furniture

and Footwear Industries” World Development Vol

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Global Value Chain - Summary of Unctad report: Global Value Chains and Development

1 The relative ease with which the Value Chain Governors can relocate their production (often to lower cost

countries) also create additional risks.

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Knowledge value chain

1 As an example, the components of a research and development project form a knowledge

value chain.

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Knowledge value chain

1 Productivity improvements in a knowledge value chain may come from knowledge integration in its original sense of data systems consolidation.

Improvements also flow from the knowledge integration that occurs when knowledge

management techniques are applied to the continuous improvement of a business process

or processes.[http://www.edgeltd.com/performance

-consultants-services/edge_service.php?service=3 Canada Edge Performance

Consultants] - official page

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Knowledge value chain

1 783ndash;794(12)Tim Powell, Knowledge Value Chain, May 2001, Proceeding of 22nd National Online

Meeting, Information Today ([http://www.knowledgeagency.com/pdf_center/Knowledge_Value_Chain.pd

f pdf)] It was registered as a trademark in 2004 by TW Powell Co.,

a Manhattan company.[http://www.knowledgeagen

cy.com TW Powell Cohttps://store.theartofservice.com/the-value-chain-toolkit.html

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Agricultural value chain

1 The 'agricultural value chain' concept has been used since the beginning of the millennium, primarily by those working in agricultural development in Developing country|developing countries. Although

there is no universally accepted definition of the term, it normally refers to the whole range of goods and services necessary for an agricultural product to move from the farm to the final customer or consumer.

https://store.theartofservice.com/the-value-chain-toolkit.html

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Agricultural value chain - Background

1 The term value chain was first popularized in a book published in 1985 by Michael Porter, who

used it to illustrate how companies could achieve what he called “competitive advantage”

by adding value within their organization. Subsequently the term was adopted for

agricultural development purposes and has now become very much in vogue among those working in this field, with an increasing number of bilateral and multilateral aid organisations

using it to guide their development interventions.

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Agricultural value chain - Background

1 However, this “vertical” chain cannot function in isolation and an important aspect of the value chain approach is

that it also considers “horizontal” impacts on the chain, such as input

and finance provision, extension support and the general enabling

environment

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Agricultural value chain - Definitions

1 Indeed, some agencies are using the term without having a workable definition or definitions and simply redefined ongoing activities as

“value chain” work when the term came into vogue.[http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/---ifp_seed/documents/publication/wcms_170848.pdf Andreas Stamm and Christian von Drachenfels “Value Chain

Development: Approaches and activities by seven UN agencies and opportunities for interagency cooperation” ILO] Published definitions include the World Bank’s “the term ‘’value chain’’ describes the full

range of value adding activities required to bring a product or service through the different phases of production, including procurement of

raw materials and other inputs”, United Nations Industrial Development Organization|UNIDO’s “actors connected along a chain

producing, transforming and bringing goods and services to end-consumers through a sequenced set of activities”, and International Center for Tropical Agriculture|CIAT’s “a strategic network among a

number of business organizations”.

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Agricultural value chain - Definitions

1 Without a universal definition the term “value chain” is now being used to refer to a range of types of chain,

including:

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Agricultural value chain - Definitions

1 * An international, or regional commodity market. Examples could

include “the global cotton value chain”, “the southern African maize value chain” or “the Brazilian coffee

value chain”;

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Agricultural value chain - Definitions

1 * A national or local commodity market or agricultural marketing|marketing system such as “the

Ghanaian tomato value chain” or “”the Accra tomato value chain”;

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Agricultural value chain - Definitions

1 * An extended supply chain or marketing channel, which embraces all activities needed to produce the

product, including information/extension, planning,

input supply and finance. It is probably the most common usage of

the value chain term;

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Agricultural value chain - Definitions

1 * A dedicated chain designed to meet the needs of one or a limited number of buyers. This usage, which is arguably most faithful to Porter’s concept, stresses that a value chain is designed to capture value for all

actors by carrying out activities to meet the demand of consumers or of a particular

retailer, processor or food service company supplying those consumers. Emphasis is firmly placed on demand as the source of

the value.https://store.theartofservice.com/the-value-chain-toolkit.html

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Agricultural value chain - Value chain methodologies

1 The proliferation of guides has taken place in an environment where key

conceptual and methodological elements of value chain analysis and

development are still evolving

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Agricultural value chain - Linking farmers to markets

1 Unilever operates tea estates and tea processing facilities in Kenya and

then blends and packs the tea in Europe before selling it as Lipton,

Brooke Bond or PG Tips brands), the great bulk of agricultural value

chains involve sales to companies from independent farmers

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Agricultural value chain - Linking farmers to markets

1 Work to promote market linkages in developing countries is often based on the concept of “inclusive value

chains”, which usually places emphasis on identifying possible

ways in which small-scale farmers can be incorporated into existing or

new value chains or can extract greater value from the chain, either by increasing efficiency or by also

carrying out activities further along the chain.

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Agricultural value chain - Agricultural value chain finance

1 Also falling under value chain finance are asset collateralization, such as on the basis of warehouse receipts, and

risk mitigation, such as forward contracting, futures and insurance.

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Agricultural value chain - The use of ICTs in value chains

1 Applications such as M-Pesa can support access to mobile payment services for a large percentage of

those without banks, thereby facilitating transactions in the value

chain

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Agricultural value chain - Enabling environments

1 Many measures to improve value chains require collaboration between a wide range of different ministries, and this can be difficult to achieve.

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Corporate strategy - Value chain

1 By aligning the various activities in its value chain with the

organization's strategy in a coherent way, a firm can achieve a competitive advantage

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Corporate strategy - Value chain

1 Each of these activities can contribute to a firm's relative cost

position and create a basis for differentiation...the value chain

disaggregates a firm into its strategically relevant activities in

order to understand the behavior of costs and the existing and potential

sources of differentiation.

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Virtual value chain

1 It supports the physical value chain of procurement, manufacturing,

Distribution (business)|distribution and sales of traditional companies.

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Virtual value chain

1 The value chain is separated into two chains because the marketplace (physical) and the marketspace (virtual) need to be managed in

different ways to be effective and efficient (Samuelson 1981)

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Virtual value chain - New developments lead to new strategies

1 In the last decade the advancement of IT and the development of various concepts in manufacturing, such as

'just In time (JIT) have led to the situation where businesses no longer focus purely on the physical aspect

of the value chain as the virtual value chain became equal in

importance.

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Virtual value chain - New developments lead to new strategies

1 Michael Porter, creator of the value chain concept, stated that no value is added by the Internet itself, however the Internet should be incorporated into the business’ value chain. As a result the Internet affects primary activities and the activities that

support them in numerous ways. Porter describes the value chain in

the following:https://store.theartofservice.com/the-value-chain-toolkit.html

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Virtual value chain - New developments lead to new strategies

1 “The value chain requires a comparison of all the skills and

resources the firm uses to perform each activity.”

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Virtual value chain - New developments lead to new strategies

1 In the virtual value chain (VVC), information became a dynamic element in the formation of a business’ competitive advantage. The

information is utilized to generate innovative concepts and ‘new knowledge’. This

translates to new value for the consumer. The VVC model reveals what function they have in the chain. If they are not currently offering information-based services (i.e.

Internet services), how they can make the transition.

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Page 64: Value chain

Virtual value chain - Stages of the value adding information process

1 # Visibility—By using information, businesses learn the ability to view

physical operations more effectively. This means that the foundation for

the virtual value chain is used to co-ordinate the activities of the physical

value chain. Furthermore, with the assistance of IT, it is then fully

possible to plan, implement, and assess events with greater precision

and speed.https://store.theartofservice.com/the-value-chain-toolkit.html

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Virtual value chain - Stages of the value adding information process

1 # Mirroring capability—Businesses recreate their once-physical activities

for virtual ones by producing a parallel value chain in the

marketspace. In other words, the business moves the value-adding activities from the marketplace to

the virtual marketspace.

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Virtual value chain - Relevance to the business world

1 The virtual value chain offers a view that encompasses the entire network along with its employment of IT. The VVC model has a relationship to the

supply chain and the goal of that relationship is to produce materials, information and knowledge for the

market. IT maintains the relationship among the members of the chain.

The VVC model does not indicate any shifts in the market, or how and when the customer’s needs will

change.

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Virtual value chain - Relevance to the business world

1 New technological developments in IT are drastically changing the way businesses operate. Virtual business’s internal and

external relationships are managed by IT and value adding and generation of ideas

are relying more and more on IT. This trend has led to a different approach to value

chain thinking. Using this approach Mary Cronin separates the VVC into three

elements: inputs from supplier, internal operations, and customer relations.

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