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The issue of whether effective value chain management should be targeted towards the market is a complex and controversial one. Different people hold different views due to their respective angles. In the following analysis, I would like to reason and provide evidences favoring the successful value chain management should be focusing on the market. Before discussing, I would like to simply introduce the concept of marking and value chain management.
To simply put, a value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver something valuable, whether it's a product or a service. A business unit is a suitable level for the construction of a value chain, not at a divisional or corporate level. Products pass through the process of a chain in order, and at each of the process stage the product gains some value. The value-chain concept has been extended beyond individual firms. It can apply to whole supply chains and distribution networks. The delivery of mixture of products and services to the end customer will mobilize different economic factors, each managing its own value chain http://en.wikipedia.org/wiki/Valuechain. To a large extent, reality have demonstrated that a market is one of many varieties of systems, institutions, procedures, relations, customers and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers to offer their goods or services (including labor) in exchange for money from buyers. http://en.wikipedia.org/wiki/Market Thus, in other words, we can conclude that, the foundation target of value chain is marketing. A value chain is a type of activities that making an organization to create value to their customers. The essence of value chain management is through the optimization of the core business process, reduce the enterprise organization and management cost, improve the market competition of enterprises. Therefore, market competitiveness has certain advantages, can be regarded as the company's value chain is effectively.
In the first place, the important reason that can be presented to develop my point is that value chain management is based on the customer's values. A good example may be found in the case that Wal-Mart value chain information management. Wal-Mart retail chain group as a commercial myth. As a matter of the fact, the successful of Wal-Mart on value chain can contribute to global sourcing strategy, distribution system, commodity management electronic data systems, and everyday parity strategy in the industry and so on. Besides, all the success is mainly based on one of the most important aspects: customers. Min and Mentzar have stated that the objective of marketing is creating exchange, and the output of it is the customer's satisfaction. In other words, if the customers satisfy your performance that means the value chain of the enterprise is efficiency in a way.
To regard the promotion customer value as the goal, set up for the customer's value chain management. Yuan sheng Li stated that Wal-Mart's success is based on its business model which focused on satisfying its customer needs with low price products. In short, at the beginning the value chain is from supplier, until customer value realization of a series of value added activities and the corresponding process. The relationship among various kinds of business activities in value chain is not only in the enterprise internal value chain, and in enterprise value chain and suppliers and channel between the value chains. The competition between enterprises does not exist among enterprise, but happened in enterprise value chain. Only to effective the various links in the value chain (business process) of the business enterprise, it will be possible to gain a real market competitive advantage. Yuan sheng Li also stated that in order to achieve the objectives of satisfying customers, enhancing shareholder value and creating the profits, Wal-Mart has three important priorities: growth, leverage and returns. Wal-Mart is not only focuses in lowering the costs and improving the gross margin, but also put effort on reducing inventory and storage or handling costs associated with excess safety stock. The enterprise and the customer should focus on same target. The traditional sense of the goal of enterprise and customer target moving in opposite directions, the group of enterprises hopes more profit and the customers' group is to lower the price. As long as make key information in the enterprise and customers to share, the enterprise and customer relationship can convert into both groups could benefit from each other.
To summary, we can conclude from this case study that enterprise should establish customer as the center of business process. Through reducing customer costs to realize the value of the enterprise. Enterprise should improve the quality of services so that to cultivate customer loyalty or make customer satisfaction, instead of reducing or sacrifice their own interests. If the enterprise in the customer cost minimization than competition rivals, it will be successful to avoid the trap of "the price war", get more profit.
In addition, there is another reason for supporting effective value chain should focus on marketing which is to establish an up and downstream value chain of information transmission system. To illustrate, a case in point in this respect is about Suning Appliance Group. Suning Appliance Group was established in 1990. After 20 years of development, it has become the largest commercial enterprise in China. It is one of the "National Key 15 Largest Commercial Enterprises in China" specially supported by the Ministry of Commerce. Suning Appliance Group takes appliance chain development as its main business, and at the same time deals with the commercial real estate business, synchronizing the development of such industries as residence development, high-level starred hotel and shopping center chain business, thus having formulated an industrial layout of coordination development in the three fields of commerce, real estate and the service industry. The value chain management is the basic goal is to improve the transparency of the process of management to improve the whole value chain of the allocation of resources efficiency and profit level, to realize information resources sharing. So we can make the core of the value chain of enterprise internal and value chain alliance between enterprise get timely, agile, operational information resources, and make them fully grasp the relevant value chain alliance the cooperation between enterprises information, product market information, other enterprise decision-making information, etc., also can make the enterprise from the overall situation of the value chain to arrange production and service.
Suning based on the value chain management concept; by using value chain upstream suppliers and downstream customers as the value chain is the realization of the maximum profit. In the upstream value chain link, Suning has been building B2B partnerships with SONY and MOTO, through the partnership, Suning was benefited between its upstream value chain from: well-timed and accurate grasp of Suning order processing condition, which enabled Suning's business personnel well aware of its purchasing order and the corresponding delivery information; Detailed and accurate invoice information and sales confirmation information provided convenient way for business department to inquires the sales data; Accurate and fast purchase invoice information, improve the payment and settlement work efficiency; New product information, price adjustment notice, AR statement by FTP information, use of email which made the business more fluent and convenient.
In the building blocks of the downstream of the value chain information transmission system. Suning built online sales platform, opened online payment functions for using China merchants bank, China Construction bank, for making costumers online shopping easy and logical. Suning has also established perennial customer information database, for old customer, they were given the consumer points card, the VIP program updates improvement; which made card to card points exchange possible. Based on the requirements of the after sales, to strengthen the effective management of the preserved card, improving the service quality, develop and improve the insurance card management process, to achieve the insurance card registration.
Under this circumstance, it is obvious that a market orientation positively and indirectly influence firms to implement value chain. Min and Mentzar stated that a market orientation also helps implementation value chain by provide value market information on customers, competitors, potential supply chain partners, and market environment; suggestion a model of information sharing and organizational learning; and augmenting the practical of relationship marketing that contributes to success of value chain.
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