Virtual Value Chain

Kelly Dresser
Internet Marketing
May 21, 2008
Virtual Value Chain

The article that I chose is titled Exploiting the Virtual Value Chain and is written by Jefferey Rayport, John J. Sviokla and Hendrik Bruinette. The article discusses how all business today have two worlds in which they compete in, the physical world and the virtual world. The physical world being described as a tangible world where managers can see, touch and physically locate information and documents. A virtual world pertains to all the information and resources on the Internet or web that cannot be physically handled. Now that businesses compete in two totally different worlds, two value chains need to be considered. It is necessary to have two different value chains and to distinguish these two worlds because the processes for creating values in them are not the same at all. Fed ex recently created a virtual value chain by allowing customers to find and track packages on their website. FedEx offers this service for free but it has created value for the customer, and in turn has increased customer loyalty, which is essential in such a competitive market as FedEx is involved. Rayport JF explains that a sequence of five activities is required to create value within a virtual value chain: Gathering information, Organising the information, Selecting the information, Synthesising the information, and Distributing the information. Through these steps it is important that each step adds to the total value created and does not destroy the value created by other activities.

Rayport goes on to explain that the three stages that companies can make use of the value created by information are; visiblity, mirroring capabilites and new customer relationships. The first stage, visiblity, allows companies to "see" physical operations through information, coordinate activities, and lay the foundation for a virtual value chain. In the second stage, mirroring capability, companies substitute virtual activities for physical activites and begin to create a parallel value chain in the marketspace. Lastly in the third stage, new customer relationships, businesses use information to establish new customer relationships. Allowing for managers to draw on the flow of information in their virtual value chain to deliver value to customers.

The article also discusses the value matrix and how each stage in the value chain allows for many new extracts from the stream of information and how each could constitiute a new product or service. Rayport also refers to this as the matrix of value opportuintites. This article discusses different aspects of the value chain and what it can do for a company. In class, we discussed very similar aspects of the value chain such as how it is a customer centric, how it provides increased customer value and how it improves the business processes. Today thousands of companies immplement value chains by having established sites on the World Wide Web to advertise products, to obtain comments from customers and to automate the interface with the customer, through electronic mail and electronic commerce. All of these components are important to the customer because they feel as if they have the control, they have a say, their wants/needs are important to the company and are met. In turn, this value chain is important to the company because it portrays customers comments, concerns, want/needs, and by being able to meet this criteria they are awarded customer loalty and increased profit for their company. For more in-depth detail see link below for a copy of the article. http://findarticles.com/p/articles/mi_qa5377/is_200103/ai_n21469268