Value chain development approach helps us to analyze how a firm can create competitive advantage by creating value for its customers. This approach uses a model to see the firm as a series of value-adding activities that link inputs to outputs purchased by customers. The related activities (primary and support) can then be used to measure their contribution to profits and costs.
Primary activities relate to the creation, sale, maintenance, and support of product or service. For example, primary activities include Inbound/Outbound logistics, operations, marketing and sales and service. On the other hand, support activities uphold the primary activities. They usually include technology development, procurement, firm infrastructure and human resource management.
This model was first created to analyze the impact of the firm activities on profit, but recently it is also used by social entrepreneurs to measure the impact of activities on the creation of social value. According to J.Gregory Dees, for business entrepreneurs wealth creation is the way to measure value creation while for social entrepreneurs social value is the way to measure value creation. When value chain approach intersects with social entrepreneurship, firms take in to account the social impacts of their value chains, including both mitigating harm from value chain activities and transforming value chain activities to benefit society.
Social value chain activates often include the following:
1) Operations. Making production and services more efficient and affordable for poor income families; hiring disadvantaged workers; providing product and services that solve the questions for local community
2) Supplies. Choosing environmental-friendly services; procuring parts ...
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...aved time for women, therefore increased their chance to become entrepreneurs themselves.
Through successful blending of market and social forces with technology, GS is able to provide services (SHSs, biomass tech, improved cook stove) to rural people at a reasonable price. Meanwhile, the company is able to make profit because of the high demand in local communities. By continuing innovation in technology and financial system, GS created a positive cycle of social and economic growth in rural areas. The economic upturn will, in the long run, help local people to have better education, better health and a pollution-free environment.
To conclude, we can measure social value creation in social entrepreneurship by using value chain approach. By using market-based value chain approach, social enterprise can achieve its social mission while obtaining bottom-line profit.
The series of activities that are enacted by a firm that add value to a product beyond the cost of the production are referred to as the value chain. Harley Davidson offers a combination of superior performance and unique attributes within its value chain that promotes their core competencies and provides them with a competitive advantage.
The value chain analysis can be examined as to whether they provide opportunities for differentiation or cost reduction. According to Porter, the value chain model is a useful analysis tool for defining a firm's core competencies and the activities in which it can pursue a competitive advantage by following one of the two strategies:
To supply the wants and needs of a consumer, society entrusts wealth-producing resources to the business enterprise.” (Santayana, George. Is The Tyranny Of Shareholder Value Finally Ending? So before we go into greater detail on the different perspectives related to social responsibility, one might question the meaning of social responsibility. It is generally agreed that social responsibility is defined as the business obligation to make decisions that benefit society.... ...
Value webs are concerned with what goes outside of the firm, and how well the firm coordinates direct, and direct suppliers, and delivery firms, and customers. By working with other firms, and using information systems, an advantage can be gained, by developing industry-wide standards for exchanging information, which eventually forces all market participants to subscribe to similar standards. Information exchange becomes more fluid, which positively influences efficiency, this in turn, makes product substitution unlikely. Such efforts also increase barriers to entry, which discourages new entrants. The internet has made possible to create highly synchronized value webs that integrate different business processes among the whole industry. These value webs are highly responsive and adaptable to environmental changes in supply and demand, as relationships can be bundled or unbundled, depending on the market conditions. Quick decisions can be made in order to optimize the value web relationship in order to deliver the required product or service in the right place and
For instance, Harley Davidson may be forced to change their marketing strategy due to the entrance of a new competitor into the market. Second, Harley Davidson has to learn new skills and technologies quickly. For example, technologies are changing rapidly, so it is crucial for Harley Davidson’s business plan to change or alter in order to keep up with innovation. Third, this organization has to effectively leverage its core competencies while competing with its competitors. This is, Flexibility is required for Harley Davidson to learn how to use primary value-chain activities and support functions in the way that allow the organization to produce their products at a lower cost with differentiated features compare to their competitors in the market
Value chains are essential elements of successful businesses, and how to gain a competitive advantage by analyzing them is the most important aspect. In Porter’s value-chain model, he points out that there are two types of business activities: primary activities, which include inbound logistics, operations, outbound logistics, marketing, sales and service; and support activities, which include procurement, technology development, human resources management, and firm infrastructure. In order to gain an edge, companies should focus on these activities to improve or create products that will satisfy their customers.
...mount of paid work. Social dimensions include: aim to benefit the community; initiative launched by a group of citizens or civil society organisations; limited profit distribution. Last set of criteria are participatory governance of social enterprises: a high degree of autonomy; decision-making power not based on capital ownership; participatory nature, which involves various parties affected by the activity (users or customers).
Value chain analyses a firm 's internal activities such as planning, production, and development, packaging and distribution so as to create value for clients. The function of the value chain is to identify the sources for cost reduction along with quality improvement. It means value chain is used to identify the strong and weak points, positive and negative points, the scope of improvement; in a nutshell, the advantages and disadvantages of the activities taking place in the system. The value chain is also called as a strategic analysis tool and it is a well-known concept in business management industry.
The value chain is a systematic approach to examining the development of competitive advantage. The Google's chain consists of a series of activities that create and build value, the mission is to organize the world's information and make it universally accessible and useful. Innovations in web search and advertising have made the web site a top internet destination and Google brand is one of the most recognized in the world.
Before explaining the advantages that a value chain can offer, it is important to first identify the value chain itself. According to Stabell and Fjeldstad (1998) Porter's work on VCA began by disseminating an organization's activities into two categories, primary activities and support activities (See Figure 1):
Operations management focuses on managing the processes of producing and distributing products and services. Operations activities often include product creation, development, production and distribution. It deals with all operations within the organization. Related activities include managing purchases, inventory control, quality control, storage, logistics and evaluations. The nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization, for example, retail, manufacturing, wholesale, etc.
By adopting the value chain into a manufacturing company, it will gain efficiency, effectiveness, reduce the product cost and improve continuously. For example, Toyota has implemented Toyota Product System (TPS) integrated information system with the business process which allowed the company to be more efficiency, effectiveness and reduce inventory cost. (Toyota
It can be concluded that entrepreneurship cannot exist in the absence of innovation. Innovative entrepreneurship is the key to a successful business leading to economic development. Entrepreneurs are very prominent figures of society and therefore their actions and decisions have a significant impact on the welfare of stakeholder groups. Sustainability plays a vital role in this relationship in that it provides a solid foundation upon which a business can expand with more temerity and assuredness.
Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems. Rather than leaving societal needs to the government or business sectors, social entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to move in different directions. ust as entrepreneurs change the face of business, social entrepreneurs act as the change agents for society, seizing opportunities others miss to improve systems, invent new approaches, and create solutions to change society for the better. While a business entrepreneur might create entirely new industries, a social entrepreneur develops innovative solutions to social problems and then implements them on a large scale.
Explain how the company’s value-chain activities can be better linked to create value for the company.