Value chain analysis is useful at the business level to highlight specific activities in a business where information systems are most likely to have a strategic impact

Question

Discuss this model, identify the activities, and describe how the model can be applied to the concept of information technology.

Answer 1

The value chain model highlights activities in a business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact. This model identifies specific, critical leverage points where a firm can use information technology most effectively to enhance its competitive position. The value chain model views the firm as a series or chain of basic activities that add a margin of value to a firm's products or services. These activities can be categorized as either primary activities or support activities. Primary activities are most directly related to the production and distribution of the firm's products and services, which create value for the customer, including inbound logistics, operations, outbound logistics, sales and marketing, and service. Support activities make the delivery of the primary activities possible and consist of organization infrastructure (administration and management), human resources, technology (improving products and the production process), and procurement. In value chain analysis, you ask at each stage of the value chain, "How can we use information systems to improve operational efficiency and improve customer and supplier intimacy?" The model allows you to critically examine how you perform value-adding activities at each stage and how the business processes might be improved. You can ask how information systems can be used to improve the relationship with customers and with suppliers who lie outside the firm value chain, but belong to the firm's extended value chain where they are absolutely critical to your success. Here, supply chain management systems that coordinate the flow of resources into your firm, and customer relationship management systems that coordinate your sales and support employees with customers are two of the most common system applications that result from a business value chain analysis.