Restructuring the internal value chain

Traditional models of the value chain (such as Figure 2.5(a)) have been re-evaluated with the advent of global electronic communications. It can be suggested that there are some key weaknesses in the traditional value chain model:

• It is most applicable to manufacturing of physical products as opposed to services.

• It is a one-way chain involving pushing products to the customer; it does not highlight the importance of understanding customer needs through market research and responsiveness through innovation and new product development.

• The internal value chain does not emphasise the importance of value networks (although Porter (1980) did produce a diagram that indicated network relationships).

A revised form of the value chain has been suggested by Deise et al. (2000); an adaptation of this model is presented in Figure 2.5(b). This digital value chain starts with the market research process, emphasising the importance of real-time environment scanning for decision making. For each of the different types of organisation site introduced in Chapter 1, there are opportunities to create value by processing information in new ways:

1 Customer information collected on a transactional e-commerce site can develop greater understanding of the purchasing behaviour of its target customers, which can also be analysed in terms of demographic profiles through tracking online shopping preferences and sequences.

2 Service-oriented relationship building sites can collect information as part of creating a dialogue using profiling forms, feedback forms and forums on the site enabling their owners to better understand customer characteristics and purchasing behaviour.

3 Brand building sites also have opportunities to collect information about the profiles and preferences of their site visitors or those in their target market using third-party sites.

4 Portal or media sites can potentially use visitors to contribute content. Think of the BBC web site which now has feedback on its news, sport and entertainment sites, so adding value to its visitors. Even well-known media owner Rupert Murdoch has suggested that online newspapers consider recruiting bloggers to add value to their audiences (Murdoch, 2005).

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