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44 THE IMPACT OF VALUE CHAIN ANALYSIS ON THE GLOBAL COMPETITIVENESS OFACQUISITIONS
Vikas Tiwari, Dr. Chetan Joshi
Abstract - The paper will be aimed at addressing the analysis of value chain of Acquisitions. India has been facing plenty of challenges in terms of their Indian industry, it being thecore earning source for their people. This importance is evident in the quantity andrepresentation of value chain components represented by producers and industry that they arespecific, without considering the distributors. The integration of markets and governmentalsupport for the country would create an increasing standardization of demands consumers, thespread of productive activity around the world. The systematic transition in the Indian industrywould begin to develop international strategies focusing on the specifics of different regions inwhich they operate. Value chain analysis in the Indian industry is key to a comprehension of business sectors, their connections, the investment of various performing artists, and the basic imperatives. It is involved in the farthest point of the development of domesticated animals‟ creation and thusly the intensity of smallholder ranchers.
Therefore, a better and improved value chain procedure would positivelycomplement the Acquisitions, endowing their people with better employmentopportunities too. The research approach used in the paper is based on secondary qualitativedesign. This approach enabled the researcher to extract relevant information regarding the topic, efficiently.
Keywords: Global value chains, industrial policy, GVCs, global supply chain management, economic development.
1 INTRODUCTION: AN OVERVIEW The development of global value chains (GVCs) and their economic impact on countries, industries, and firms has been much discussed in the business and economics literature. This introductory paper reviews and highlights some of the key topics covered in GVC literature, aiming to give readers a comprehensive overview of the relevant material to enhance their understanding of GVC research. These agriculturists at present get just a littledivision of a definitive estimation of their yield, regardless of the fact that, in hypothesis, hazard andrewards ought to be shared down the chain. Hence, thepaper will be focused on addressing the impact of valuechain analysis on the Indian industry of India, along withits global competitiveness. The association amongstmilk and the general population of numbers on house ofprayer help, on dividers of different structures the Indiais antiquated.
A good distribution network will undoubtedly provide a competitive advantage for acompany (Rushton et al., 2010). Competitive advantage is created through the creation ofever-increasing value as a result of cooperation between organizations involved in thedistribution
activities of the company's products (Walters and Rainbird, 2004).
Gooddistribution can reach a large number of consumers and at the same time provide moreconvenience and benefits to the customers. A major part of the distribution strategy is todecide which functions are needed and which organizations will be responsible for thesefunctions. Intermediaries offer the importance of cost and the advantage of time in thewide product distribution. The consideration of price also affects the effectiveness ofdistribution channels used.
Supply chains that are connected to one another, due to various technologicaladvances, require a more integrative and structural approach to solve various issues (Porter, 1996). The main cause of complex problems in the supply chain is due to theincreasing connectivity between the value components and how the value is created anddelivered. Thus, a problem has nothing to do with a value component that is created, butit has to do with the strength of connectivity and delivery of value creation that isinterrupted or
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45 wasted. The higher the mutualrelationship among the value elements, themore complex the problem a supply chain has. The complexity of value connectivity hasmade a mechanistic approach irrelevant because it focuses more on a value component than on the value connectivity. The competition to capture a limited market has made theplayers in the supply chain pay more attention to the value chain system. The value chainapproach was first developed by Porter (1985). It was initially designed to introduce atemplate to analyze the value chain in a manufacturer. Later, it was developed to analyzemany players along the supply chain in order to obtain a broader picture of the issues andobstacles a manufacturer might face.
1.1 Porter’s Value Chain
Michael Porter first presented the concept of value chains in his influential 1985 book, Competitive Advantage: Creating
and Sustaining Superior Performance.
Porter identifies a value chain as a set of activities that a firm performs to deliver a valuable product or service to the market.
A value chain can be broken down into five primary activities:
The Michael Po rter Value Chain is a model that helps to analyze specific activities through whichcompanies create value and competitive advantage.That is, a set of activities that an organization undertakes to create value for its customers. The waythe activities of this chain are made determines thecosts and affect profits. The Value Chain Modeloriginally proposed by Porter (1989) is a structurecomposed of two sets of activities that enable integratedorganization to enhance its margin. The complexity ofthe operational activities of an educational institution, intensive hand skilled workforce, allow reflect aboutmodels and structures to assist in qualified educationaloffering.
The primary activities relate directly to thephysical creation, sale, maintenance and support of aproduct or service. These primary generic activities areas follows:
• Inbound logistics: All processes related to receiving, inventory control, transportation marking. At thispoint, the relationships you have with suppliers is adecisive factor for creating value.
• Operations: includes machinery, packaging, assembly, equipment maintenance, testing andother value-creating activities that
transform inputsinto the final product to be sold to customers.
• Outbound logistics: the activities associated with thedelivery of your product or customer service, including the collection, storage and distribution andcan be internal or external to the organization.
• Marketing and Sales: Are the processes that thecompany uses to convince customers to buy yourproducts or services. Value creation sources hereare the benefits it offers and how it transmits.
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46• Service: the activities that maintain and increase thevalue of products or services after purchase. Hereinclude customer support, repair and /or installation services, training, upgrades, etc.
A value chain could also include secondary or support activities that facilitate the efficiency of the primary activities, such as procurement, technology research, product development, human resource management, and firm infrastructure building. Porter notes that these activities form a firm‟s value chain, each creating and adding value at every stage toward the end product or service. He suggests that a firm must understand its own value chain to develop and sustain a competitive advantage (Porter 1985).
Supply chain is another commonly used term. Early discussions on supply chains were more logistics-oriented. Since the mid-1990s, however global manufacturing networks have become increasingly integrated and interdependent. As a result, supply chains have been increasingly associated with business functions and processes beyond logistics within and across companies.The Council of Supply Chain Management Professions (CSCMP)4 defines a supply chain as the links between companies which interchange materials and information in the logistics process, stretching from acquiring unprocessed raw materials to delivering finished goods to end users (Vitasek 2013). These links generally encompass three functions:
(1) Supply of materials to a manufacturer;
(2) The manufacturing process; and (3) The distribution of finished goods to
final customers through a network of distributors and retailers.
1.2 Challenges for the Local Industry 1. Lack of Empowerment
2. No Enabling environment 3. Weak Infrastructure 4. Unfair Equity
5. Information Constraints
6. Skill and Knowledge Constraint 7. Market Access Constraint
2 REVIEW OF LITERATURE
The value chain concept was first introduced and popularized by Michael E.
Porter in1985 (Porter, 1985). A Value Chain shows how a product moves from the stage of rawmaterials to the end consumer. This includes a wide range of activities required to handlea product or service from the conception, through various phases of production (involving a combination of physical transformation and input from various services producers), delivery to the final consumers, and final disposal after use.
The Value Chainconsists of a set of primary and supporting activities. For the main activities these consistof incoming logistics, operations, outbound logistics, marketing and sales as well asservices.
The supporting activities consist of a company‟s infrastructure, human resource management, technology development, and activities to achieve something. Eachfunction in the organization must know what happens to the product at each stage toensure value is being added to the product. When the products add value, the business willgenerate profits.
Sturgeon (2003) notes that the production structure of the electronics industry is extremely modular, with semiconductor foundries carrying out chip fabrication, full-services contract manufacturers assembling circuit boards and final products, and the vendors of production equipment, such as Applied Materials and Siemens, driving process technology. This type of industry structure allows “virtual” lead firms and
“fabless” design houses without in-house production to carry out global production strategies, while creating a new class of globally operating suppliers with vast capabilities in production as well as cross-border value chain activity integration (Sturgeon 2003; Sturgeon and Kawakami 2011).
3 VALUE CHAIN
Porter (1985) defines value as the maximum amount an individual is willing to pay toprocure a good or avoid something undesirable from a provider.
Alternatively, Pitelis (2009) describes value as the “perceived worthiness of a subject matter to a socioeconomicagent
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47 that is exposed to and/or can make use ofthe subject matter in question.”
This definition considers “subject matters” which is independent to
“willingness to pay”.Value is the characteristic of a performance, facility, and attribute, and all other aspectsof goods and services to which consumers are willing to give their resources (Prahaladand Ramaswamy, 2004). In principle, any value consists of four components: the object, either as a physical or abstract variable; the attribute that determines the quality or natureof an object; the internal relationship between objects; and the environment where thenetwork of value exists.
A value chain originally represents a set of activities that a focal firm operating in aspecific industry performs in order to deliver a valuable product or service for the market (Porter, 1985). A value chain is then broadened to describe a series of organizationalactivities that creates, delivers, and captures value at each step, starting from theprocessing of raw materials to ending with the finished product in the hands of the endusers.
Value chain management can be defined as the process of managing all sequencesof the integrated activities and information to transfer value along the entire supply chain.
Porter (1985) explains that Value Chain Analysis (VCA) is a strategic analysis tool that isused to better understand competitive advantage, to identify where customer valueincreases or decreases cost, and to better understand the company's relationships withsuppliers, customers, and other companies in the industry. The Value Chain identifies andconnects a range of strategic activities of the company (Kaplinsky and Morris, 2001).
Womack et al. (1990) define VCA as "a technique widely applied in the fields ofoperations management, process engineering and supply chain management, for theanalysis and subsequent improvement of resource utilization and product flow within themanufacturing processes."
Alternatively, Shank and Govindarajan (1992) simply defineVCA as a tool for understanding the value chains that make up a product. Value
Chain isderived from such activities as handling raw materials, delivery to the consumers, andafter-sales services. The nature of Value Chain depends on the nature of the industry, thusthe nature of a Value Chain for a manufacturing company, a service company, and a non- profit organization will each be different.
VCA views a company as one part of the Value Chain of a product. The Value Chainof a product is an activity that originates from the raw materials to the after-saleshandling. The Value Chain includes the activities that occur because of the relationshipwith the suppliers (supplier linkages) and relationships with the consumers (consumerlinkages). These activities are separated but very dependent on each other (Porter, 1996).
Furthermore, Francis et al.
(2008) applied the value chain analysis method to examine the beeffoodservice sector. The beef value chain is characterized by the high level of regulatorycontrol, power relationships, and low profit margins. The analysis showed that thecollaboration between producers and processors could eliminate unwanted wastes.
GVC linkages allow greater economies of scale in specialization and better leveraging of cross-border complementarities. GVC participation provides not only competitive alternatives to domestic sourcing, but also greater variety and quality of foreign inputs available to a local economy (Amiti and Konings 2007; Topalova and Khandelwal 2011; Bas and Strauss- Kahn 2015). These participation benefits can lead to productivity gains in GVC- participating firms.
VCA helps managers to understand the company's position in the Value Chain of a product and to enhance the product‟s competitive advantage. The purpose of VCA is to identify the stages of the Value Chain where the firm can increase value to the customer or lower costs. The decrease in expenses or increase in value added of a product will make the company more competitive.
Fearne et al. (2012) state that the approach of value chain analysis is the frontier in building sustainable corporate value. An organization must provide value in order to attract and retain its
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48 customers. Value is a performancecharacteristic, feature and attribute, or any other aspect of either the goods or services that customers are willing to provide a price for both the goods and the price received, which is usually in the form of money (Porter, 1985; Ilyas et al., 2006).
Prahalad and Ramaswamy (2004) coined co-creating value between customers and the firm. The interaction between the firm and the consumer represents the locus of value creation and value extraction. Value is jointly created by both the firm and the consumerat multiple points of interaction. The basis of value is a co-creation experience. The new practice in value creation becomes a forum for conversation and interactions between stakeholders.
Concomitantly, Vargo and Lusch (2004) imply that value creation is interactional. They propose service dominant logic based on the premise that firms can only make a value proposition as consumers participate in the value- creation process. Service dominant logic does not advocate that only the customer is involved in the process of co-creation of value, but also the firm‟s partners in the supply chain network.
The latest variant of value chain concept is proposed by Porter and Kramer (2011), namely creating shared value (CSV) that describes firms are mutually dependent with its surrounding communities. The capitalization of the deep links between societal and economic can enhance competitiveness. The shared value process allows stakeholders to participate to include positive (social and environmental) externalities within the economic system.
4 SIGNIFICANCE OF THE STUDY
A value chain is the set of activities performed by an organization from the relationships with suppliers and production cycles and sale to the stage of final distribution. In context to the topic, it is worth mentioning the importance of value chain in order to follow the various stages, supporting managers with financial information and reports that focus attention on factors that provide basic information to meet the established strategies. It is also important to monitor
the performance of activities to decide which the key elements in the implementation are of programs more effective tactical and for the company to achieve its strategic goals. It is significant to carry out this research work in order to endow the readers with an awareness regarding the significance of value chain for the Indian industry, bestowing them with a better competitive edge.
4.1 Research Objectives
To identify the impact of value chain analysis on the global Competitiveness of acquisitions
To analyse impact of value chain analysis on Acquisitions.
To understand the role of value chain in the globalcompetitiveness of Acquisitions
5 METHODOLOGY
This study is Conceptual in nature and tries to highlight concept and Literature of the value chain enhancement impact of acquisitions with special reference to Indian companies. Secondary data has been collected from extensive research through E-library, different available published articles, journals, books, internet, magazines, and seminar papers and the world-wide web.
6 DISCUSSION
The main motivation of this research is to argue that value chain thinking has lackedbehind the need to show its movement and contributions. The tendency of value chain thinking has been shifting from an internal perspective to an inter-organizationalperspective. Previous research has focused on providing different approaches to valuechain thinking. Nevertheless, there is not a single study attempting to propose rapidlyevolving applications of value chain thinking. The most consistent and prominentapproaches are based on the value chain in industrial production and organization (Gereffi and Frederick, 2010; Francis et al., 2008), local economic development (Humphrey, 2005; Kaplinsky and Morris, 2001), and agriculture (UNIDO, 2011; Rich etal., 2008).
Value chain approaches have been used to analyse the dynamics of markets
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49 and to investigate the interactions andrelationships between different chain actors. Valuechain approach is applied by many development interventions that intend to engage stakeholders either individually or collectively into the production of market orientedhigh value products or services. Concepts and analytical tools for analysing thefunctioning of value chain system are important to understand the impact of chaindevelopment interventions on chain actors and the supply chain system. This paper stimulates further investigation of value chain thinking. The interestingagenda is to explore how other value chain approaches fit in the proposed protocol. Thedevelopment of knowledge, tools and techniques also require further research.
7 CONCLUSION AND
RECOMMENDATIONS
Value chain is defined as the network ofdifferent actors that generate relations collective force, which directly influence the marketing and businessstrategies, as well as the decision-making of thebusiness. To better understand the chain, it is importantto know the main structures that make up the network.The better the value chain will be assembled andunderstood, the better use of it would be executed in theindustry. System actor is a subjective charactercomponent that represents an organized structure of asub-base segment of activity. As an example, they citean association of producers, anIndian farm, aIndian, adistributor, etc.Through this approach, they will be able toattain global, competitive advantage in the industry too.
A well-organized value chain system and technologicallyadvanced procedures would help the localities toimprove their sources of earning through Indian industry, along with the enhancement of their feeble livingstandards.
Value chain analysis was originally an analysis of activities that produce value both fromwithin and outside a company. The value chain concept gives the perspective aboutwhere the company lies in an industrial value chain. Value chain analysis helpscompanies understand the value chain which forms a product/service. Value starts fromthe raw
materials to the end consumer receiving the product/service. Value chain analysiscontains two main activities. The first activity is undertaken outside the company and theother activity is undertaken within the company, both of which have the same purpose ofcreating value. Companies must be able to recognize their position in the value chain andthe opportunities to create value in a competitive environment.
7.1 Limitation of this Study
Lack of empirical data to test themethodology and conceptual model presented here. Therefore, further research isrequired to verify Value Chain Thinking and to validate the appropriate value chainmethodology. This study offers a novel insight to the formulation of Value ChainThinking, which contributes to the academic discussion on value chains and is useful for practitioners managing supply chains.
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