[8] 2002 e-business-strategies-for-virtual-organizations

e-Business Strategies for Virtual Organizations
Figure 5.3
Internet-enabled
commerce and the
value chain
92
Inbound
logistics
Human resource management
IS/IT developments
Outbound
extracts Marketing
and sales
(1985) considered these concepts when he derived his classic
internal value chain showing primary activities which a business
must do to exist and the secondary activities required to
control and develop the business and which are common
across the primary activities. An organization today must
consider the effect of Internet-enabled commerce on their
distribution channels and the value chain. Figure 5.3 illustrates
the interconnections.
Value chain analysis is used to identify potential sources of
economic advantage. The analysis disaggregates a firm into its
major activities in order to understand the behaviour of costs
and the existing and potential sources of differentiation. It
determines how the firm’s own value chain interacts with the
value chains of suppliers, customers and competitors. Companies
gain competitive advantage by performing some or all of
these activities at lower cost or with greater differentiation than
competitors.
This approach requires an understanding of the linkages
between activities and the way the performance of one activity
impacts the cost and performance of others. To perform value
chain analysis:
� divide a firm into its key activities and assign costs to those
activities;