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

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Moving from e-business to i-business strategies in virtual markets 5.8 The value system 5.7.5 Linkages within the chain Although definition needs this process of disaggregation, the value chain is not a series of independent activities – it is a system of interdependent ones. Linkages exist because of the relationship between how one activity is performed and its impact on the cost or performance of another. Porter argues that competitive advantage frequently emerges from such linkages – for instance, how buying high quality, well-prepared raw material can simplify manufacturing and reduce scrap, or how the timing of promotional campaigns can help production and capacity scheduling in a fast food chain. Linkages are not always obvious: the same function can be performed in different ways. Thus, keeping parts within specification can be achieved by buying in high quality parts, by specifying tight manufacturing tolerances or by imposing 100% inspection of finished goods – different firms will choose different routes and achieve different potential advantages. Another under-recognized factor is that the cost or performance of direct activities is improved by greater efforts in indirect activities. For example, better scheduling (indirect) can reduce time spent by either the sales force (customer complaints) or the cost of delivery vehicles (by making fewer runs). Porter extends the value chain concept to what he defines as a ‘value system’. This takes account of the fact that an individual firm’s value chain is inevitably ‘embedded’ in a larger stream of activities. This suggests that there are at least three additional value chains of which account must be taken: � supplier value chains – these create and deliver the essential inputs to the firm’s own chain; � channel value chains – these are the delivery mechanism(s) for the firm’s products on their way to the end buyer, customer or consumer; and � buyer’s value chains – these are the ultimate source of differentiation because it is the product’s role in this chain that determines buyer needs. For this reason managers need to understand not only their own firm’s value chain, but also how it fits into the industry’s overall value system. The underlying point being that the value chains of separate firms in an industry will differ according to each 95
e-Business Strategies for Virtual Organizations organization’s history, its strategies and its skills at implementation. For instance, one or more firms may have restricted their competitive scope. This decision to serve a focused industry segment may enable a firm to tailor its particular value chain to that segment and thus gain advantage either through lower costs or greater differentiation. Since Porter introduced the notion, it has become ever clearer, particularly when the explosive growth in, and reduced costs of, ICT is studied, competitive advantage does not just arise within the firm. It may be derived from looking at the entire system and recognizing that different firms can adjust and improve their own value system. For instance, it is often the case that supplier linkages mean that the relationship with suppliers is not a zero sum game in which one gains only at the expense of the other, but a relationship in which both can gain. Similarly, coordination and joint optimization with different distribution channels can be important – especially in those industries where the channel may represent as much as 50% of the ultimate selling price to customers (e.g. consumer goods, wine, newspapers, etc.). 5.9 Implementing the value chain analysis 96 The following summarizes the process of using value chain analysis to gain a competitive edge through either lower costs or differentiation. 5.9.1 Six steps in strategic cost analysis 1 Identify the individual firm’s value chain and then assign costs and assets to it. 2 Diagnose the key elements that drive the costs of each value activity (cost drivers). 3 Identify competitors’ value chains and determine both their relative costs and the sources of differences in cost. 4 Develop a strategy to lower relative costs by controlling cost drivers or by reconfiguring the value chain itself. 5 Ensure that any cost reduction does not erode differentiation or, if it does, make sure that this is a conscious choice. 6 Test the cost reductions to ensure that they are sustainable.
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e-Business Strategies for Virtual O
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e-Business Strategies for Virtual O
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Contents Computer Weekly Profession
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Contents 6 Globalization and e-busi
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Contents 11.6 The increasing power
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Computer Weekly Professional Series
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Authors’ Preface There are dozens
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Authors’ Preface model will there
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Authors’ Preface alliances, bette
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1 e-business and the virtual organi
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e-business and the virtual organiza
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Figure 1.2 e-business and the virtu
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1.5 e-business e-business and the v
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Figure 1.3 e-business and the virtu
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Figure 1.4 Virtual objects, Scholz
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Characteristics of the virtual orga
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Figure 2.1 Formation of business al
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� empowerment of staff; Character
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e-business models for virtual organ
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3.4 Models of efficient response e-
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Page 66 and 67: Figure 3.6 Market alliance model Fi
Page 68 and 69: e-business models for virtual organ
Page 70 and 71: Figure 3.10 Virtual alliance framew
Page 72 and 73: Figure 3.11 Virtual organizational
Page 74 and 75: References e-business models for vi
Page 76 and 77: IS planning strategies for emerging
Page 80 and 81: Figure 4.1 The evolution of IS/IT p
Page 82 and 83: Figure 4.3 A framework for SISP (Wa
Page 86 and 87: Figure 4.4 Planning adopts a busine
Page 88 and 89: Figure 4.5 Interconnected ecologies
Page 90 and 91: Figure 4.6 The interrelationships b
Page 94 and 95: 4.8 Conclusion IS planning strategi
Page 96 and 97: References IS planning strategies f
Page 98 and 99: Moving from e-business to i-busines
Page 130 and 131: Globalization and e-business strate
Page 134 and 135: Adoption and deployment of online i
Page 136 and 137: Table 6.1 Online business models On
Page 140 and 141: Figure 6.2 VIM strategy Globalizati
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Developing knowledge-based strategi
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8 Evaluating strategies for e-busin
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Figure 8.2 Fitness landscapes Evalu
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Evaluating strategies for e-busines
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Table 8.1 Information economics - v
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Customer view Whatisour image? Eval
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Table 8.6 Matrix for preparing to m
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9 Outsourcing, partnering and the v
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Outsourcing, partnering and the vir
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Figure 9.2 Outsourcing, partnering
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9.9 Summary Outsourcing, partnering
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References Outsourcing, partnering
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e-business strategies in the virtua
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10.10 Summary e-business strategies
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11 Creating virtual cultures for gl
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Creating virtual cultures for globa
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Four stages of market evolution Mar
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Figure 11.4 The four paths of evolu
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References Creating virtual culture
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Advanced knowledge, see Knowledge A
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[8] 2002 e-business-strategies-for-virtual-organizations

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