What Is Value Chain Analysis?

The value chain analysis method is a series of input, transformation, and output activity collections. Each activity may generate value-added behavior relative to the final product, thereby enhancing the competitive position of the enterprise. The optimization of information technology and key business processes is the key to achieving corporate strategy. Through the flexible application of information technology in the value chain process, enterprises can enhance the competitiveness of enterprises by giving play to the enabling, leverage and multiplier effects of information technology.

Value chain analysis

The value chain analysis method is a series of input, transformation, and output activity collections. Each activity may generate value-added behavior relative to the final product, thereby enhancing the competitive position of the enterprise. Enterprises pass information technology and key

1. Value chain analysis is based on value, and its focus is

The production and operation activities of an enterprise can be divided into two categories: basic activities and support activities. The main activities refer to the substantive activities of production and operation. Generally, they can be divided into five activities: supply of raw materials, production and processing, storage and transportation of finished products, marketing, and after-sales service. These activities are directly related to the processing and circulation of commodity entities and are the basic value-added activities of enterprises.

Support activities refer to activities that support the main activities and internally support each other, including procurement management, technology development, human resource management, and corporate infrastructure. The dashed lines in the figure indicate that the three support activities of procurement management, technology development, and human resource management not only support the activities of the entire value chain, but are also closely related to each specific main activity. The basic functional activities of the enterprise support the operation of the entire value chain without directly contacting each subject.

The value chain theory has been developing and innovating. After the value chain was proposed, some scholars proposed the theory of strategic cost method and operation management innovation based on the value chain.

Although the alliance enterprises participating in the analysis of the company's value chain can obtain potential benefits through their coordination, they may also generate risks due to the uncertain factors of the partner enterprises. Therefore, for a core enterprise to perform a complete value chain analysis, it is necessary to design a governance structure based on the full consideration of the interdependence among all the nodes in the value chain, so that it can adapt to the core enterprise's business characteristics and handle and control value Transaction risks caused by speculative behaviors of node enterprises in the chain can be used to manage and coordinate the relationships between enterprises in the value chain. It is more important to convince node companies that compared with the pursuit of enterprise optimization through individual behaviors and authoritative forces, the core companies will be more effective in cooperative management of the entire supply chain, which will increase the number of nodes in the value chain. Cooperation intentions, which make the company's value chain analysis possible. The special risks that may occur to the node companies participating in the company's complete value chain analysis project and their impact on corporate performance have the following three aspects:

Exchange of sensitive information

The willingness of node companies in the value chain to share information is the first uncertainty factor for a company to perform a complete value chain analysis. When customers and suppliers exchange each other's cost and performance information, companies may have concerns about their negotiation status and confidential information leaking to competitors. Because competitors can understand the relative efficiency of suppliers through the cost information provided by the suppliers, and use the information that is beneficial to them to conduct speculative actions to obtain potential advantages in future price negotiations. In particular, the earliest suppliers who participated in the analysis of the complete value chain and improved the supply chain operations project are particularly worried that core companies will use the information provided by them to directly compare their operating efficiency and require themselves to improve the efficiency until the average level of the network, otherwise they will be eliminated. . Therefore, if the core enterprise cannot ensure that these secret information are not used to crack down on the node enterprises participating in the complete value chain analysis cooperation project, the node enterprises will not participate in the cooperation of the core enterprises that requires information sharing and improve the complete value chain. Therefore, in order to reduce concerns about the abuse of supplier information, core companies need to make clear to suppliers that sensitive information is only used to develop the company's supply chain and achieve the goal of win-win, rather than comparing supplier efficiency by category, forcing suppliers to improve Its efficiency reaches the average level of the network; in addition, core enterprises need to use the results of the complete value chain analysis to work with relevant suppliers to improve some inefficient operations in the supply chain. On the contrary, if a company does not keep its promises and speculatively utilizes the sensitive information provided by suppliers, it will have a strong negative impact on the entire supplier network, which will seriously reduce the company's reputation, lack trust in the company, and damage the company and its supply. The relationship between suppliers greatly reduces the willingness of suppliers to cooperate with them, and ultimately worsens the relationship between all parties in the supply chain, of course, it is impossible to talk about reducing the potential costs in the supply chain. The basis for the realization of supplier-sensitive information sharing is the supplier's trust in core enterprises (such as goodwill). When core enterprises repeatedly use sensitive information for complete value chain analysis (without speculative use of information), it will further strengthen the trust between the company and the node enterprises and between the node enterprises. It can be seen that the reputation of core companies in the supplier network and the trust of suppliers in core companies will affect how the core companies use the reliability of information commitments, and also make them the most important relationship between nodes in the management value chain. Authoritative mechanism.

Fair distribution of costs and benefits

The second uncertainty factor in a company's complete value chain analysis is the fair distribution of costs, investments, and expected benefits. To resolve the issue of integrity, the company must analyze the following two points when deciding whether to participate in the cooperation: first, conduct a complete value chain analysis of the risks and returns of the cooperation project; second, whether the expected distribution of the benefits of the alliance enterprise is fair. Tomkins (2001) believes that only when the company's partners can obtain a risk-equivalent rate of return and hope to obtain a fair share of benefits, are they willing to invest and participate in the analysis project of the complete value chain, and then it is possible to improve the node enterprises To improve the efficiency of related operations in the supply chain. Therefore, based on the value chain analysis, after adjusting and improving the company's supply chain, achieving cost control, improving operating performance, and increasing profitability (value-chain value-added), based on the costs, investment and project risks incurred, It is important to distribute the profits that the value chain increases. In particular, in order to improve the overall performance of the supply chain, if a core company needs to invest in a new technology, the node companies in the value chain must evaluate the investment project before participating in the project. Further consultations to resolve cost, benefit and investment sharing issues. For example, the core enterprise can share the supplier's investment by negotiating with the supplier and increase the supplier's commodity price to achieve a fair distribution of benefits.

Use of special asset investments

As mentioned earlier, if a cooperation project for complete value chain analysis requires alliance companies to jointly invest in a specific asset to improve the supply chain, in addition to achieving a suitable rate of return, the alliance company must also be sure that the core enterprise will not divert the specific asset to other uses And the asset is of low value to the core company outside this project (Williamson, 1985), otherwise the affiliate will not contribute capital. This is the third factor of uncertainty. Gulati and Singh (1998) believe that if a certain trust has been established between the alliance companies through previous business relationships, it can be assumed that the alliance companies will not interact with each other because of common value chain analysis and exchange of sensitive information. Speculation. However, if a node company does not have enough trust with other companies in the value chain, but is willing to join a cooperative alliance for complete value chain analysis, then the core enterprise needs to adopt a series of formal control mechanisms to maintain the trust between each other. , Such as requiring new franchise companies to sign contractual agreements on shared benefits and costs, the length of purchases and cooperation relationships, confidentiality agreements for information exchange, joint investment in equipment, and mutual mortgages, etc., until the value of improvements Chain and make business performance change.