Value Chain Effects
Value chains define the position of each actor of the supply chain based on how much value added each partner of the supply chain is delivering.
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Value Chain Effects
Value chains define the position of each actor of the supply chain based on how much value added each partner of the supply chain is delivering. Porter (2001) defined value chain as a representation of a firm’s activities that are performed to design, produce, market, deliver, and support its product. According to Porter (2001), value chain describes all activities that a company is performing and how they interact, which, in turn, is necessary to outline the sources of competitive advantage. Value chain segments a firm into its strategically relevant activities, which facilitates understanding the structure of costs as well as identification of potential sources of differentiation. Porter (2001) also emphasizes that the value chains of firms are embedded in a larger structure called value system. According to Paiola et al. (2012), reorientation of a company’s value proposition, which also reshapes the company’s value chain, is caused by the commoditization of products, declining profitability, as well as the growing number of customers with increasingly complicated requirements. Therefore, manufacturers of industrial machinery are reinventing their value propositions guided by the principle of shifting focus from selling products to providing solutions. The authors quote examples of multinational companies such as Alstom, General Electric, or IBM.
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Cocreation and Coproduction of Value
According to Lusch et al. (2007), cocreation of value denies the main assumption of goods-dominant logic, which implies that value is something added only to products in the manufacturing process. Service-dominant logic assumes that value can only be determined by the customer in the process of “consuming a service.” The authors claim that the notion of value is also related to the concept of customer experience. Lusch et al. (2007) claim that one of the opportunities for companies to compete through service is the identification of innovative ways of cocreating value.
© Springer International Publishing Switzerland 2017 P. Helo et al., Designing and Managing Industrial Product-Service Systems, SpringerBriefs in Operations Management, DOI 10.1007/978-3-319-40430-1_10
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Value Chain Effects
The authors also highlight the most important distinction between service-dominant logic and goods-dominant logic: namely, the importance of interactivity and doing things with the customer (as in service-dominant logic), as opposed to doing things for the customer (as in goods-dominant logic). Identification of innovative ways of cocreation of value is a great opportunity for organizations to compete through services. According to Lusch et al. (2007), cocreation of value is largely dependent upon other entities of value creation such as resources. The authors claim that resources that are endogenous to value creation are often described in terms of belonging to a usually uncontrollable external environment. Lusch et al. (2007) also claim that “the customer is a primary integrator of resources in the creation of valu
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