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Production
In value chain analysis, a stage of production can be referred to as any operating stage capable of producing a marketable product serving as an input to the next stage in the chain or for final consumption or use. Typical value chain processes include input supply, production, assembly, transport, storage, processing, wholesaling, retailing, and utilization, with exportation included as a major stage for products destined for international markets. A stage of production in a value chain performs a function that makes significant contribution to the effective operation of the value chain and in the process adds value (Anandajayasekeram and Berhanu, 2009).
Supplying the required amount effectively is a necessary condition for responsible and sustainable relationships among chain actors. Thus, one of the aims of value chain analysis is to increase the quantity of production. Understanding the mechanisms of the production more so in agriculture can greatly help to design appropriate policy that bring more gain to farmers and the whole society at large. For a long time, sector analyses have been used to measure the different economic aspects of production. However, sector analyses have not been without weaknesses.
Value chain governance
Governance refers to the role of coordination and associated roles of identifying dynamic profitable opportunities and apportioning roles to key players (Kaplinsky and Morries, 2000). Value chains means repetitiveness of linkage interactions. Governance ensures that interactions between actors along a value chain reflect the organization. The governance of value chains originates from the requirement to set product, process, and logistic standards, which then influences upstream o...
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...s from an understanding of the consumer demand and works its way back through distribution channels to the different stages of production, processing and marketing (GTZ, 2006).
Review of Empirical Studies
Value chain approach
There are a number of studies that have employed the value chain approach to agricultural commodities. Fitter and Kaplinsky (2001) used a value chain analysis to examine intercountry distributional outcomes of the global coffee sector by mapping input-output relations and identifying power asymmetries along the coffee value chain. Their study showed that returns to product differentiation taking place in the face of globalization do not accrue to the coffee producers. They also found that power in the coffee value chain was asymmetrical. At the importing end of the chain, importers, roasters and retailers compete with each other for a
Supply Chain Management: Chipotle uses an industrial supply chain that can consistently fulfill their product needs. They do not use a local farm supply as its consistency to deliver the amount of products they need are lacking. By using industrial manufactures they can be assured that they are to get consistent standards in their food products when ordered.
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As discussed in class, when demand decreases for a product, companies or in this case producers should exit the market. But when it comes to coffee, producers don’t want to exit the market because the costs of moving out of coffee production are quiet large and farmers don’t have the means for alternatives. The reason being that, farmers don’t have any outside funding to promote efficient diversification and development. Another reason is that there are protection policies from the United States and the European Union that have made it harder for framers to benefit from producing other crops. And yet, the opportunity cost for farmers to switch to another product is higher than the cost of coffee in a low profit market. So, this book discusses different strategies that are being used to help producers get a better advantage to provide a living for their families. Different strategies being used include shade-grown coffee, differentiation of products, organic coffe...
A value chain analysis allows the firm to understand the parts of its operations that create value and those that do not. Primary activities are involved with a product’s physical creation, a product’s sale and distribution to buyers, the product’s service after the sale. Support activities provide the necessary support for the primary activities to take place. A value chain shows how the product moves from raw material stage to the final customer. Each activity examined is rated as equivalent, superior, or inferior, relative to competitor’s capabilities (Ireland, R).
Gereffi’s more recent research with Joonkoo (2005) sees the evolution of the Global Commodity Chains approach into the theory of Global Value Chains. This new approach encompasses much of Smith et al’s criticisms of Global Commodity Chains. The new theory links the concept of value in chains with the global organization of industries. It incorporates governance as a key influence on the chain and sees the hybridization of producer and buyer driven chains.
The first impression one might have about Crocs' products are that they are basically plastic looking shoes that are comfortable and readily available. Customers familiar with this product boast, like on the company website, about "the company’s proprietary closed-cell resin, Croslite™, a technology that gives each pair of shoes the soft, comfortable, lightweight, non-marking and odor-resistant qualities"(Company.crocs.com, 2011). There are also various comments about how the material does not slip when exposed to water and of the popularity of the shoes since their "first sale in 2003"(Hoyt & Silverman, 2008, p.13). Over the last few years, the popularity of the shoes have dropped off and the purpose of this study is to present an analysis of the company's value chain and determine what changes I would incorporate and why.
The external environment has been analysed in previous sections, Appendix E lists internal capability and resources of Burberry by using porter’s value chain model, the VRIO framework will also be used to test whether the brand adds value by such activities or not.
The next step is the growth stage. In this stage product growth is monitored and big investments are made. Maturity stage the growth of the outputs is significant. For the company to ensure product survival in the market and gain a competitive advantage over competitors it has to incorporate product differentiation. The final stage involves product decline stage. In this juncture product sale goes down and the product identification
The value chain is a systematic approach to examining the development of competitive advantage. The Google's chain consists of a series of activities that create and build value, the mission is to organize the world's information and make it universally accessible and useful. Innovations in web search and advertising have made the web site a top internet destination and Google brand is one of the most recognized in the world.
In the era of globalization and international trade, global value chains (GVCs) have emerged as an important avenue for economic development especially for developing countries. GVCs allow small companies, and enterprises in low income countries to take part in the increasingly integrated global economy. A value chain refers to the range of processes involved in making a product including its conception, creation, distribution etc. and, the same process, when conducted amongst firms on an international level is considered a global value chain (Gereffi and Fernandez-Stark 4). The framework of GVCs is very detailed - it allows us to understand the complex processes and intricate procedures for production in global industries and the role various
Michael Porter coined the definition for value chain analysis also called as value chain in the year 1984. He believes that the effectiveness
More specifically, in order to undertake a value-chain analysis, a company should start by identifying each small part of the
Recklies, D (2001) ‘The value chain’, Recklies Management Project GmbH, http://www.fao.org/fileadmin/user_upload/fisheries/docs/ValueChain.pdf accessed 12 Jan 2014
Many organizations do not achieve the profits they anticipate by using incorrect methods or models to determine the true costs of products and services. This failure to correctly assess the costs associated with business not only affects the profit margin, but the organizations competitive advantage as well. In order to asses whether the organization is failing to realize optimum resource allocation, the organization should look at the methodology first popularized by Michael Porter titled the Value Chain Analysis (VCA). "VCA seeks to define the entire chain through which goods are supplied to a customer" (Booth, 1997, 2). The VCA can be a powerful tool in increasing an organization's competitive advantage; by correctly pricing products and assessing the true costs of materials and labor, organizations can align the improvements in efficiency, quality, and profits with its strategic objectives.
Olav Jull Sorensen (2009): “Formation, Organisation and Management of the (Global) Value Chain I a Theoretical Perspective”