Sample Thesis Paper
Value chain in today’s world is considered to be the Holy Grail for many progressive and change oriented organizations. A value chain can be defined as a high level model of how businesses receive raw materials as input and add value to the raw materials through different processes and then sell the finished product to the customers (Hines 2000). Value chain integrates all the resources and this chain actually starts from the vendor’s vendor. Value chain management focuses on minimizing waste and error oriented production. This chain maximizes capacity-based solutions and financial resources. Therefore, it can be stated that if the value chain is designed in a proper manner than it optimizes value for the customer’s customer (Fellner 2001).
A value chain is basically a chain of different activities. Products that are included in this chain pass through all the activities of the chain and in every step a certain level of value is added (Hugos 2006). The concept of cost that occurred throughout these activities cannot be mixed with the value chain. A diamond cutter can be used as an example to explain the difference between the cost incurred and the value added. The cutting activity of the diamond may have a very low cost but this process adds much value at the end of the product. That is the reason why a road diamond is less valuable then a cut diamond.
The core concept of value chain was developed by Michael Porter in 1985. He discussed this phenomenon in his best seller ‘Competitive advantage: Creating and Sustaining Superior performance’. Porter stresses on the point that each organizations value chain “is embedded in a large stream of activities” and he calls these activities as the “value system” (Porter 1998). The value system that was developed by Porter is consistent with the general theories of marketing (Priem 1992).