Why value chain
Value chains aspire to steer resources to their most productive use, not only across countries and sectors, but also within the stages of value addition. Consequently, hyper-specialization assumes significant importance along with the coordination needed to achieve the flow of material and information. While international trade traditionally involves movement of products between two countries, global value chains entails spatially dispersed production activities spanning multiple countries, occasionally back and forth.
This necessitates the creation of a boundaryless organization with cross-functional integration, team alignment and a strategic focus on customer value. A value chain assessment involves two major activities:
1.Value chain mapping: Identifying the firms, products, activities, stakeholders and geographic locations involved in taking a good or service from concept through production to the final consumer.
2. Value chain analysis: Looking at how and why these factors are linked together by analyzing the role certain factors, such as governance, institutions and interfirm relationships, play in influencing the location, development, and competitiveness of a product or service.
A value chain and a supply chain are closely related, functioning in tandem within a business ecosystem. While a supply chain focuses on the logistics and operational processes from raw materials to the end product, the value chain delves into how these steps contribute to the creation of customer value. In essence, the value chain encapsulates the supply chain, using it as a tool to increase a product's value, thereby increasing competitive advantage. While supply chain mapping and analysis is typically conducted within the boundaries of supply chain, extending it to other aspects of the business and stakeholders will interlink the two. Recognizing the interconnection between the two enables businesses to operate more effectively, with an integrated approach to maximizing value at each step.
Enablers of value chain
In the past two decades, the value chain has been enabled by affordable and reliable communication, economies of scale lowering transportation costs and technology aiding coordination among geographically diverse stakeholders. Weakening trade barriers, trust driven strategic partnerships, heightened customer expectations and a recognition of core competencies among participants also contribute significantly to this growth