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CHAPTER 2
VALUE CHAINS
DAVID A. COLLIER AND JAMES R. EVANS
Value Chains
The underlying purpose of every organization is to provide value to its customer and stakeholders. Value is the perception of the benefits
associated with a good, service, or bundle of goods and services (i.e., the customer benefit package) in relation to what buyers are willing to pay for them.
Value Chains
A value chain is a network of facilities and
processes that describes the flow of goods, services, information, and financial transactions from suppliers through the facilities and processes that create goods and services and deliver them to customer.
A value chain is a cradle-to-grave model of the operations function (see Exhibit 2.1).
OM, Ch. 2 Value Chains 2009 South-Western, a part of Cengage Learning
Exhibit 2.1
Exhibit 2.3
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Exhibit 2.5
Procter & Gambles Conceptual Model of a Supply Chain for Paper Products
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Value Chain Design and Management Outsourcing is the opposite of vertical integration in the sense that the organization is shedding (not acquiring) a part of its organization.
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acquiring and consolidating elements of a value chain to achieve more control. provide goods and services that were previously provided internally.
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capabilities at the front-end of the supply chain (for instance, suppliers), while forw ard integration refers to acquiring capabilities toward the back-end of the supply chain (for instance, distribution or even customers).
Companies must decide whether to integrate backward (acquiring suppliers) or forward (acquiring distributors), or both.
OM, Ch. 2 Value Chains 2009 South-Western, a part of Cengage Learning
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