Value Chain and E-Strategy – Components of Commercial Value Chain

Introduction

All companies undertake series of activities in order to deliver a product to the customers. These series of activities like procurement of raw material, storage, production, distribution, etc. are referred as value chain activities. The function of value chain activities is to add value to product at every stage before it is delivered to the customers. There are two components, which make value chain - primary activities and secondary activities. The primary activities are directly associated with the manufacturing of products like supply management, plant operations, etc. The secondary activities are referred to as support functions such as finance, HR, information technology, etc.

In the era of advanced information and communication technology, many businesses have started operations on the internet as its medium. Through the internet, many commercial activities like buying, selling, auctioning is taking place. This online commercial activity is known as e-commerce. E-commerce value chain has series of activities like electronic fund transfer, internet marketing, distribution channel, supply chain etc.

Value Chain and E-Strategy

Every activity within a physical value chain has an inherent information component. The amount of information that is present in activities determines, company’s orientation towards e-commerce. It has been observed that companies with high information presence will adopt e-commerce faster rather than companies with lower information presence.

For example, a computer manufacturer has high information presence, i.e. they can provide a great deal of product information through their website. Consumers also have flexibility to determine the product configuration using the website. Such computer manufacturers and companies with comparative business model are also likely to adopt e-commerce.

Activities which comprise of the value chain are undertaken by companies to produce and sell product and services. Some of the activities done within the value chain are understanding customer needs, designing products, procuring materials for production, production, storage of products, distribution of products, after sale services of products and customer care.

Understanding Information Presence

There are two ways to assess information presence. The first way is by looking at the industry, and second way is by looking at the product. In an industry with high information presence, it has been observed that:

• Industry will have large number customer base.
• Production process is complex.
• Order turnaround cycle is long.

For a product with high information presence following is observed:

• Product is simple to manufacture.
• Product has multiple functionalities.
• Product requires in dept end user training.

Industry and product which satisfy above conditions are likely to adapt e-commerce.

E-Strategy

Companies with high information presence were the first to look at e-commerce as an alternate way of conducting business. For example, software companies, much of there is business is done through the internet. Their website provides in-depth product information through e-brochure, video, client opinion, etc. Sales leads are generated online; purchase and fund transfer is done, and also after-sales service is done online.

These high information companies have made substantial investment in human resources and information/communication technology.

Challenges

Companies which are moving towards e-commerce need to have business model developed to support online activities. The dotcom burst of 2000 has served hard example about companies doing e-commerce.