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Virtual Value Chain and management



The Virtual Value Chain has the benefit of having a view that encompasses the entire network along with its strong employment of IT. The VVC model has a strong relationship to the supply chain and the goal of that relationship is to produce materials, information and knowledge for the market. IT maintains the relationship among the members of the chain. The VVC model does not indicate any shifts in the market, or how and when the customer’s needs will change.


 


New technological developments in IT are drastically changing the way businesses operate. Each business’ internal and external relationships are managed by IT and value adding and generation of ideas are relying more and more on IT. This trend has led to a different approach to value chain thinking. Using this approach Mary Cronin separates the VVC into three elements: inputs from supplier, internal operations, and customer relations.


 


* The inputs from supplier element is focused of the Internet and how it can add value to the business’s acquisition activities. In other words, business’ with use of the Internet have the capability to find different suppliers quickly (effective) and for different purposes (efficient).


 


* The internal operations element is in regards to the business’ value adding events which are based on the effective procurement and distribution of the information within the business. It is essential that businesses can emulate this model because of the increasing large role information plays in the business world. With use of the Internet, the business can procure and distribute information globally with relative ease and low cost.


 


* The customer relations element concentrates on applying the information directly from the customers’ needs and attitudes about the product or service to add value. The internet is a useful tool in acquiring the direct information about the customer’s needs and attitudes. The internet is also used to distribute information about the products and services to the market (i.e. electronic catalogues). Following the distribution, forums and discussion groups collect the necessary information about the products and services that the business provides.


Management

Today managers need to concentrate on how their business creates value in both the physical and virtual world. However, the methods for creating value are different in these worlds. By careful interpretation of the differences and interactions among the value adding events of the physical and virtual worlds, managers can more clearly visualize the strategic issues facing the business.


 


Managers must learn to utilize and value the virtual world of information. "By thinking boldly about the integration of place and space," Sviokla and Rayport comment, "executives may be able to create valuable digital assets that, in turn, could change the competitive dynamics of industries." (Rayport et al. 1996) To properly use the information, that is to create value from it, managers must explore the marketspace. Although the value chain or the marketspace is similar to that of the marketplace, there is an increased dynamic involved. The processes for transferring raw information to products and services are unique to the information world.


 


The conventional value chain model uses information for solely support, not as a source of value itself. However, with the arrival of the Internet the virtual value chain has been enabled, allowing businesses to use information for the creation of innovative products and services that are exclusive to the marketspace. An example of using the VVC to create such services includes the Federal Express Corporation which recently created a customer designed website to track packages by using their air bill number. FedEx has been able to capitalize using the VVC by adding value for the customer (for free) and in turn has increased customer loyalty in an intensely competitive market. In this increasingly information based economy managers must extract value from both the physical and virtual value chains to succeed.


 


This study establishes that the strategy of IT is an important issue for a business. Productivity, quality, cost structure and profitability are all characteristics that are directly affected by IT. It is essential for businesses to use IT in the most effective way and to have knowledge to implement IT systems. Lastly, both users and businesses need to realize the potential that IT has for their business.

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