Value Chains: Real or Virtual?

3. Value chains: Real or Virtual? With the steady grown in the country's economy as well as the people's living standards, the rhythm of people's living is speeding up and a lot of changes have taken place in their daily life. The discussion about whether or not the Value chains is real or virtual is a very controversial one. Many people take the view that the reality of the value chain has a strong applied legacy. Nevertheless, there are also a majority of people insist that the value chain is a assumption as the business development.

As far as I am considered that performing both the real value chain activities and the virtual value chain activities is important; however, in e-commerce, more and more activities become information based and performing them electronically becomes far more important than conducting these functions physically. The concept of the value chain was primarily targeted toward manufacturing firms, in which the value of activities is mostly concerned with the physical flow of material, for example, acquiring raw material, manufacturing products, distributing products, marketing products, and installing or repairing the products for customer use.

In the present digital age, a majority of firms are planning to conduct their business electronically, in which ‘‘information’’ becomes the main medium through which business transactions are exchanged. The extent to which e-commerce will affect the marketing of products and services will depend on the amount and the value of information that flows through the value chain. Over the years, some businesses have controlled almost all factors of production and distribution, for example Ford in early years, whereas others have outsourced almost everything, such as Dell.

In the early days of industry, large enterprises controlled and owned most factors of production and businesses like Ford Motor Company in the USA had their own foundries, railroad, and electricity generating plants, In the UK, Cadbury’s and Lever Brothers went so far as to build villages and amenities for their workers. The motivation for this vertical integration was varied but included cost and quality control, worker loyalty and protection of proprietary processes. As well as control of production, resources and employees, businesses like Ford also controlled the retail sales and service network.

In e-commerce, information is not viewed as a by-product of the strategic activities performed around the real value chain, rather it begins to play a strategic role in itself. Therefore, strategic activities in the virtual value chain are performed with and around information. The first, Visibility, is where businesses co-ordinate, measure and sometimes control business processes. Over the last 30 years, information systems have become powerful tools in management of the physical value chain.

Most of people claim that this phase is a necessary precursor to moving towards what they term a ‘virtual value chain’. Secondly, capability in which physical steps in the value chain may be substituted with virtual ones to create a parallel value chain in the marketplace, with steps that are faster, better, more flexible or lower cost. The third stage occurs when companies use the flow of information in their virtual value chain to create new customer relationships by delivering value to customers in new ways.

The Value chain has also become increasing transparent and this has a tendency to reveal and expose those who are not really adding any value. Intermediaries are being replaced with Infomediaries who are people and firms who eliminate unnecessary actors in the value chain by simultaneous acting as purchase agents for customers and sales departments for sellers, so the organisations could find eBusiness to be a threat if they do not embrace it. Dell Computer, Amazon. com, Alibaba.

com and so forth have captured the public’s attention, as these companies are able to enhance customer value. In a physical setting, capturing customer related information is not easy; however, in a virtual setting, customers are willing to provide personal information, if it is not misused and employed to enhance customer values. By mining customer information, a company can build long-term relations with its customers and can e-mail them if any product or service of their choice becomes available in the company.

A virtual value chain activity that runs across customers and suppliers can be supplemented through customer feedback, interests, and concerns. The process of gathering customer feedback often raises the quality of the products and services launched by a company, and this happens at a very low price in comparison to the cost of the traditional marketing surveys. For example, many software companies can distribute their software to customers through online.

In some other cases, these companies provide access to customers to freely download the Beta version of the software from their site and assemble their feedback, concerns, and interests for testing it against possible situations in the program. Although for physical products, the virtual value chain plays a minor role, it can still change the competition by increasing the flow of information between customers, suppliers, and manufacturers.

In addition, using a virtual chain, a business can provide related information and updates about products and services quickly to its past customers. Traditionally, businesses have paid less attention to the value of information than products and services. However, with the revolutionary growth of the Internet and the value of information, information has become as important as products and services. For instance, the value of products has been replaced by information contents.