RESEARCH NOTE: UNDERSTANDING THE BASIC CONCEPTS OF THE VALUE SYSTEM
The value chain of an organization is the primary vehicle to deliver value promised by a business idea. So what are the components of the value system?
1. Value
Value is a two-way exchange of the needs of the customer as met by an organisation, and they payment of money in exchange by the customer.
1.1. Order-Winning and Market-Entry Parameters
1.2. Value density
2. Value chain
The Value offering of an organization is created through a set of processes that start with inputs and converts them to the value offering as outputs.
2.1. Outsourcing
2.2. Intermediation
3. Supply Chain
An organisation often outsources some activities and takes outputs from the outsourced companies as inputs for their own processes.
4. Demand Chain
The Supply Chain converts raw materials to the finished product which moves through the distribution channel to meet the demand of the ultimate customer.
5. The Value System
The Supply Chain and the Demand Chain together make up what Michael Porter defined as the Value System.
6. Operating the Value System
The challenge in any Value System is for all the organizations in the system to march in unison to the value parameter desired by the ultimate customer.
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