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Value Creation Models

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  • Essay length: 6255 words
  • Submitted: 28/01/2005
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AS and A Level Information Systems and Communication

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Value Creation Models

The Value Shop and the Value Network are two additional models of value creation. Managers need to re-think some familiar strategic insights.

The world has changed. From 1960 to 1999 manufacturing companies' share of GNP in the US, as well as its workforce, fell from 30 per cent to 15 per cent, with the consequence that such businesses are now a minority of the S&P500. Banks, transportation, building, healthcare, research pharmaceuticals and other services companies have taken over.

Strategic models of the world, however, have not changed. When managers develop strategies for their companies, they still use the tools and language of the manufacturing organisation - most commonly the concept of the Value Chain (see Figure 1 - see PDF or print), introduced by Michael Porter. His seminal work, Competitive Advantage: Creating and Sustaining Superior Performance, (Free Press 1985), argued that you could create sustainable competitive advantage by tailoring your Value Chain to your competitive strategy. A large number of prescriptions for good strategic management were developed.

The question managers now need to ask themselves is where these strategic prescriptions come from - and whether they still are valid. Does

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