Concepts And Facilities: Value Chain Management

The concept of value chain management has been applied in different companies or organizations during production of goods and services from raw materials for the final use by the consumers. Value chain management can be defined as the organizational steps followed when adding value to a good or service from the initial stages of production until when it’s in the market for purchase by consumers. Its main purpose for being incorporated in a business is to bring together all communication aspects to ease the work of all those involved in the selling a product to a customer as well as increasing the customer’s satisfaction (Lummus and Vokurka 1999). Value chain is mostly confused with supply chain by a good number of people and the two are totally different in meaning. Globalization on the on the other hand has been defined by many researchers as the movement across the world with the aim of making financial, economic and trade communications through an integrated system. Industries and companies are therefore interdependently allowed to transfer and exchange goods and services across different nationalities.

Value chain analysis is an important measurable tool or model in many companies globally. In order for a company to be introduced and exist in the global market, the company has to come up with methods of adding value to their products or services to meet the competitive advantage from other companies. This is achievable through giving a customer value. Competitive advantage is achievable by providing exactly what the consumers want for their satisfaction and for a company to be competitive globally; its value chain must be competitive as well. Research done for over the past twenty years indicate that there’s competition between two or more companies but their main aim is to always increase production and differentiating the products as well as making them easily and closely accessible to the consumers also by providing support and essential information to meet the needs of their customers(Institute of Management Accountants, 1996). Value chain is always multidirectional; for example the consumers can gain value by delivering the goods and services to them or the suppliers and retailers gain value buy timely paying them and making more and huge orders. Competitive advantage can however be assessed by three different method namely; vertical linkage analysis, internal differentiation and internal cost analysis. The later involves the profits obtained and the costs incurred by the company while internal differentiation encompasses the activities involved in creating the value of a product by the company or firm. Vertical linkage on the other is associated with all the practices from processing the raw materials until the end products reach the consumers. The above the above three aspects are critical in determining the range and scope a firm can obtain its competitive advantage.(Kaplinsky and Morris, 2001).

For an excellent value chain management, there must be very good objective oriented and strategic financial management practices. Value chains are regarded as the most effective models in meeting the competitive advantage that other companies may have. However, this is achieved through sharing common objectives leading to good relationships within the company(Frankel, 2000). Countries financial aspects should be integrated by the international financial systems, markets and institutions to effectively manage the value chain for the end product needed by the consumers. Governments should therefore liberalize the domestic financial sectors. Borrowers and lenders in the international markets play an important role in the value chain management globally. Under the financial considerations, most countries are at high risks though they are always short term. A good example in the short run is financial crisis usually evident when a country opens up its financial status. However, when the right financial ideas are adopted and exercised, capital inflows may improve the market system hence improved value chain management(Obstfeldand Taylor, 2003). Toachieve the appropriate integration, the local markets must be made strong by seriously supervising and regulating them. Policy makers may also face a lot of challenges especially in managing the global finance since some of the developed countries may take the advantage of the opportunities they create without taking into considerations the risk or harm they’re causing to other minor companies in the developing countries.

Most manufacturing and processing companies are located all over the world therefore the movement of goods and provision of mobile services has become increasingly important. Procurement and logistic persons are always responsible for the supply of goods and services to various consumers. Despite their different cultures, they have to develop strong working relationships and embracing teamwork. If all the cultural aspects are not put into consideration, there may be a lot of misunderstanding among the workers. Examples of cultural differences is evident among the two different working environments in the US and China (Lou, 2004).In the United States, most decisions are based on the objective of making money while in China, is to keep as many employed people as possible without considering the jobs they’re doing. This shows that most companies in China aren’t result oriented and the production capacity and quality work is low. According to Lou (2004) In America for example, the employees may not get back to work until exorcism is performed in a warehouse they has devils. Whenever one works in a value or supply chain, there are cultural challenges likely to be faced due to global interactions. Americans also like speeding their work whereas other prefers takingmuch time when working in companies for rational decisions (Kaplan and Kaplinsky1998). Different languages also lead to poor or no communication among the global working partners and this may greatly affect the value chain management within a company.

To cope up with the current consumers demand, the market systems have to drastically change to maintain its competitive advantage over others by inventing new ways and technologies of working with the consumers. Therefore firms have to come up with ways of integrating their value chains through restructuring their systems. Technological advancements therefore have been put on the forefront for global competition in value chain management. Most companies therefore have adopted different customer-concentric models to put the customers much closer than before (Abinavam et al., 1998). Internet technology on the other hand has been adopted to promote quick and efficient relationship between producers, suppliers, consumers, policy makers and other partners. A good example of currently adopted technology to meet the customers demand is the teleworking model where a big group of people work together with the help of network and other communication technologies. It’s for example been applied in the telemedicine, a business where health related information and other related services span schools, doctors, clinics and other partners to share and communicate the services or some important information rather than making physical appearances.Internet technologies have also made it easy to advertise a brand, a new product or service online (Curran, Keller and Ladd, 1998).

Human resources under the value chain management can be looked at from three different perspectives globally; the labor involved in the production of goods and services, all those employed in the company or firm and their flexibility and the social legitimacy. According to Wright and Nishii (2007),the employee’s attitude has a great impact on the consumer’s purchasing power, the legitimacy, flexibility and the cost – effectiveness. Employees who are highly motivated are more productive. Human resources can also be given a different view, for example, taking the example of a supermarket; the plot and all the structures constructed are human resources though given economic value. These resources can be used by the bank whenever a company or firm needs loans from banks as a source of security and therefore they’re very primary. Human capital is paramount in every company or firm involved in the production of goods and services and is awarded in monetary terms as well as the acquired experience hence high profits. (Fleetwood and Hesketh2006). Small and medium sized enterprises may come together with large international business partners through many forms and this brings goods and services close to buyers as well as timely delivery of raw materials. Product design, research and development must also be integrated to promote efficiency and cost effectiveness. Global industries may also form international partnerships and take advantage of the current technological activities in improving their businesses. However, most of the partnerships between businesses break when one or a number of companies decline to corporate or meet the obligations set under the partnership act. Strategic collaboration provides a competitive advantage especially when the human resource is very strong (Setyari, Widodo and Purnawan, 2015).

The economic considerations encompass the factors which deal with how the resources within a society are allocated whereas the political considerations envelopes the factors arising from individuals or a group of people having legal considerations whenever they are expressing their political will.  The policy makers have the responsibility of coordinating trade patterns and making global decisions whenever there is a financial crisis. They therefore ensure that a great percentage of trade takes place within the international markets increasing contacts between companies. Value though must be added at each level of production for their final use by the consumers.

Every country has got its rules and regulations governing the firms and companies in their territories. These factors are determined by countries openness to trade. The government plays a critical role in creating, subsidizing and introducing tax and also regulating the minimum standards that are to be met by a company especially in the aspects of environmental and social aspects (Gereffiand  Sturgeon 2013).A countries government should invest heavily in creating an environmentally friendly production of goods and services, proper transportation methods put in place as well as communication to facilitate the exchange of goods and services. Transparent and incorrupt public governance can also highly promote business within a country hence value chain management becomes easier, cheaper and effective. Government rules and regulations on the borders is also very significant. (Stark, Bamber and Gereffi 2011).Non- tariff barriers that prevent the exchange of goods and services as well as information exchange should also be removed.

Most companies expect their suppliers to put in place the corrective action measures to identify the gaps noted during audits(UNRISD 2001). In order to assist the developing countries with specific mechanisms that ensure they meet the international and national standards should be set during the implementation of the corporate social responsibility. Companies therefore are joining enterprise development programs that incorporate the corporate social responsibility component. Research shows that companies only give development programs to their big suppliers and leaving out the small companies simply because the corporate social responsibility programs are fewer in number. But wherever they exist, they are usually funded by developmental agencies and other intergovernmental agencies (Copenhagen Business School 2011). The main challenge is that most governments haven’t introduced the corporate social responsibility in their supplier development agencies on a strategic basis. However, small businesses done at the macro level have been introduced to promote the position the government holds in encouraging regulatory methods to promote the compliance with the least international standards set to be met.The codes of conduct are applicable at different levels of the value chain by the suppliers despite some companies going to greater levels in the value chain to address the problems of corporate social responsibility.

For many companies to access the national and international markets, value chain management must be viewed as a global economic integration and not just by marketing the new products. Therefore international marketing networks, current international designs bringing together many companies must be practiced. To develop a country and the policy it makes, one has to clearly understand how the value chains operate since they may seriously affect those who are new in the market (Humphrey and Schmitz 2000). Globalization and value chain management is however affected by different factors from the perspective of the organizational networks when it’s used for analysis, political power, and governance by a specific government brings a lot of changes in the chains.

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