Virtual Value Chain - New Developments Lead To New Strategies

New Developments Lead To New Strategies

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.

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:

“The value chain requires a comparison of all the skills and resources the firm uses to perform each activity.”

The products and services the business supplies to the market need to conform to a channel that fits the customer’s needs. Therefore this channel controls the strategy of the business. The channel comprises different events, and each of these events should accord with the overall strategy of the business.

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.

The transfer of information between all events and among all members is a fundamental component in using this model. In the VVC the creation of knowledge/added value involves a series of five events: gathering, organization, selection, synthesis, and distribution of information.

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