An investigation into the role of value chain in green alliances

1. Introduction
Businesses to become more environmentally responsible is what consumers, regulators and societies demand globally these days (Hartman and Stafford 1998, p.62). From businesses perspective, going green would not only be a demonstration in order to raise their image, but more and more it turns out to be a necessity. With the era of cheap oil close to an end (Mukherjee 2009), for companies to survive, cutting energy costs is required (Schumpeter 2011). The environment is under strain growing world population and soon scarce resources raise awareness in adding value to what before might have been neglected: sustainable existence and development. It is for the businesses to build value through innovative strategies that gain competitive and social benefits, while still protecting the Earth. Numerous corporate and environmental organisations have realised this and joined forces in order to fulfil it.

2. Value chain analysis

The value chain analysis is a powerful tool for managers to establish the key activities in a firm which form its value chain (Karki 2011, p.1), however Williams and Lewis (2008, p. 659) note down it might require substantial adaptation if it is to be applied to a public sector context. Crain and Abraham (2008, p.29) refer to Porters definition of value chain (Figure 1), which describes the different value-added steps from purchasing materials to distributing, selling, and servicing the final product within a company as to internal. The external, according to Abraham, characterizes those

value-added steps as each representing an industry. The two authors stress on the fact that while internal value chain is a key concept in strategic management and has been fully explored, the external one has not been studied as extensively. Figure 1. Michael Porters value chain framework

For years there has been a widespread thinking that established companies would be more competitive if they carried on adjusting and expanding a single (hybrid) value chain. Jonk et al (2008, p. 24) oppose to that and make recommendations for those companies to consider and create a number of specialized value chains, being the path to follow, in the globalized world of today

where there is a general shift toward specialization (see Figure 2). Thus opportunities for growth and finding external partners could appear, customer satisfaction become better, and channel conflicts and price cannibalization decrease. Figure 2. Hybrid versus specialized value chains

As any other concept, this of the specialized value chain poses some challenges and potential threats, as well. To start, customer focus needs to be redefined, as consumers demands, which are not served properly by the current hybrid value chain, have to be met. Secondly, a firm might have to cannibalize its own existing operations to guarantee the success of the new. And while Jonk et al see the future of value chains being specialized, Drayton and Budinich (2010) think quite the opposite. For them hybrid value chains are the way to go, if organisations want to create economic, as well as social value. According to them it is for the hybrid value chains that deliver the strength to boost benefits and lower costs.

Discussing in general, it is important to outline what the main advantages and disadvantages of value chain analysis are. While most theorists agree on the limitations of the concept being out-dated, needing to be adapted to each business situation, oriented to the manufacturing industry, rather than the service one (Williams and Lewis, 2008; Simister 2011), Lynch (2003) points out something different. He says the problem with the value chain is that it is designed to explore existing relationships and value-added areas of the business, making it not the best choice for outside of the existing structure operations. On the positives side, some of the listed benefits are that is applicable to any type of business, could be used to create competitive advantages on both cost and differentiation, and helps getting a better understanding of the issues related to customer value commitments within the organisations (Simister 2011). Kaplinsky (2000) adds that it throws more light on the origins of income distribution, both within and between organisations. With the

3. Green alliances
Addressing green issues creates essential good will in staff, customers, communities, suppliers, authorities, shareholders, and other important stakeholders, while poor environmental practices usually lead to activist protests, consumer withdrawal, embarrassing media coverage, and often legal prosecutions (Hartman and Stafford1998, p.63).

4. Value chain vs Value network 5. Conclusion

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Exhibit 1 Hybrid versus specialized value chains