Literature Review Value Chain.docx

Literature Review Introduction A literature review or narrative review is a type of review article. A literature review is a scholarly paper, which includes the current knowledge including substantive findings, as well as theoretical and methodological contributions to a particular topic. Literature reviews are secondary sources, and do not report new or original experimental work. Most often associated with academic-oriented literature, such reviews are found in academic journals, and are not to be confused with book reviews that may also appear in the same publication. Literature reviews are a basis for research in nearly every academic field.[1] A narrow-scope literature review may be included as part of a peer-reviewed journal article presenting new research, serving to situate the current study within the body of the relevant literature and to provide context for the reader. In such a case, the review usually precedes the methodology and results sections of the work. Producing a literature review may also be part of graduate and post-graduate student work, including in the preparation of a thesis, dissertation, or a journal article. Literature reviews are also common in a research proposal or prospectus

Previous studies on value chain Porter’s Value Chain Porter’s Value Chain The concept of value chain has received widespread attention in management literature with the publication of the book Competitive Advantage8 by Michael Porter in 1985. Porter (1985) used the concept of value chain to include all of the inter-linked activities required to design and delivery of a product or service. According to Porter, a firm’s competitive advantage depends on how they perform these strategically important activities in a cost effective manner. Porter explains that, a firm's value chain is embedded in a larger stream of activities called ‘value system’ comprising ‘suppliers value chain’, ‘buyer's value chain’ and ‘channel value chain’. According to Porter, firm's value chain comprises of nine generic [value] activities9 that are linked within the value chain. It is through the linkages and relations to these activities, value has been created. Competitive advantage10 is derived from linkages among activities in two ways: optimisation and co-ordination. 8 9 10 Porter (1990) presents a useful model for understanding competitiveness in a better way. Porter identified four determinants that are necessary to create and sustain competitiveness of firms. These are: Factor conditions: The factor condition includes human resources, physical resources, knowledge resources, capital resources and infrastructure. Demand conditions: Porter stressed the importance of the home market: the home market gives local firms a clearer or earlier picture of buyer needs than foreign rivals can have (p.86). Co-localised and support industries: This gives the advantages of cheap inputs, better co-ordination between steps in the value chain, and access to innovation and upgrading (p.101). Firm strategy, structure and rivalry: Nations or districts can have advantages in having clearer goals, being better organised and by being more competitive due to competition in the home market (p.107). The author presents these four determinants in the form of a diamond, a mutually reinforcing system, signifying the advantage in one determinant can create or enhance advantages in others. Porter had found that, the existence of a large domestic market and a

large number of firms with intense competitive rivalry among them are most critical for their success. This is because, resulting competition itself leads to creation of supporting industries and services which further enhances the innovation and competitive advantage of the industry. An important contribution of this model is the paradigm shift from the comparative advantage to competitive advantage. It questions the traditional wisdom about focusing on those industries in which the country has a cost advantage. Porter found that, in many examples he studied, the traditional factor conditions (raw materials) were in fact adverse, since basic raw materials were often imported. Other factors such as skilled labour, technology, specialised infrastructure, design and marketing skills were created by firms either individually or through trade associations, under pressure not to fall behind.

Edakkandi Meethal Reji Value Chain Development In recent years, the concept of value chain is widely used as a facilitation tool for integrating small enterprises into high value market. The value chain development programs focus on improving the competitiveness of the industry/sector in which the firm operates [17]. The core of the value chain approach is the recognition that, the strategies for enterprise development needs to focus on the entire value chain rather than focusing on a particular aspect of provision of credit or input supply. The value chain approach emphasizes on identifying the opportunities for and constraints to industrial growth by considering the value chain actors (firms), linkages among firms, supporting markets, end markets, and the business enabling environment at all levels [18]. The value chain approach also emphasizes on other factors that influence the chain’s performance, including access to and the requirements of terminal markets, the legal, regulatory and policy environment, and the availability and quality of support services such as financial services, equipment manufacture and repair, business management services and information technology. Value chain development is fundamentally about strengthening market relationships so that businesses work better together to compete more effectively in the global market [19]. Kula et al. [18] provides a step-by step guide to intervention design for achieving competitiveness that benefits the poor: first industries are selected with potential for competitiveness, and then a value chain analysis is carried out; a strategy is developed to improve competitiveness and achieve an equitable distribution of benefits; an action plan is devised to achieve this strategy; and finally a system of performance monitoring and impact assessment is devised to evaluate the effectiveness of value chain interventions. It is argued that integration into value chains helps the small firms to: 1) increase the efficiency of its internal operation; 2) develop inter-firm linkages that reduce transaction costs; and 3) upgrade along the value chain (introduce product branding, new products, and improved version of existing products in the market faster than the rivals) [20]. Studies also reveal that, by forging extensive collaborative ties between the firms facilitate: sharing of knowledge, technologies and inputs [21]; develop greater responsiveness to global demands [22]; and attain greater export levels as a result of collective efficiency [23] and improving competitiveness.

Silberzahn & Jones 2011 Many business people seem to operate under the unconscious assumption that they’ll gain a competitive advantage through a careful daily reading of the business press. They won’t. The same goes for fund managers seeking to generate “alpha”: the business press alone certainly won’t get you there. They’re also unlikely to gain a decisive edge by combining the daily parade of conventional economic data with stale “strategic” frameworks like the BCG Matrix (which dates back to 1968), Porter’s Five Forces (created in 1979), or Value Chain Analysis (introduced in 1985). Anyone who has studied business in the last 30 years – including your competition – uses these. They also probably read the same newspapers and buy the same economic data. In short, the old-school “Business Strategy 101” toolkit is like a white shirt in your closet: always safe, sometimes useful, but not a decisive business edge. Face it: apart from their other limitations (see below), these old strategy models are fully depreciated. How is the unconsidered imitation of commonplace ideas “strategic”?

There is no clearer path towards creating a strategically autistic culture or organization than by mistaking the very definition of strategy. That’s why to gain a competitive advantage in today’s world, you have to do more. In my view, that “more” starts by gaining an understanding of what actually constitutes business strategy, i.e. understanding the deep, structural forces that bear on the long-term success of firms, and how these forces can be engaged and harnessed. In the classes that I teach at IE, I argue that these deep forces are geopolitical. The metaphor that I use to explain my approach is that geopolitics shapes the climate of business, whereas the daily news and conventional economics – even macroeconomics – simply address the weather of business. What makes a truly strategic understanding of business hard to achieve is that much of what passes for corporate strategy is actually tactics. The same goes for much of the advice dispensed by illustrious strategy consulting firms. “Strategy” sounds more important than “tactics,” so everyone calls their analysis and recommendations strategy, and then moves on to dispensing advice. What may sound like a linguistic quibble, however, is crucial because the distinction between these two words bears directly on how you think about building a source of sustainable advantage for your business. As I related here, we get the word “strategy” from the Greek word strategos (στρατηγός), which has the literal meaning “army leader”. In the Classical context, however, a strategos was someone who was both a military general and a civilian

politician. In other words, a strategos was expected to employ every aspect of power at his command in pursuit of victory. He was charged with understanding and harnessing the full gamut of structural forces that affected his city-state’s future. In contrast, the word “tactics”, comes from the Greek taktike (τακτική); it was a far more narrow term that encompassed only how an army was organized. To return to today: traditional business “strategy” largely grew out of Economics departments. Like a general who thinks only of narrow military matters, economists almost by definition deal in market-based taktike; they treat the larger “rules of the game” as fixed, or at least outside of their purview. They tend to call anything that disturbs the holy trinity of customers, competitors and suppliers or other market-based factors (e.g. NGOs, new regulations, or even an invention), an “exogenous factor”. (Exogenous is another Greek word. It is used in Economics to mean “stuff we don’t want to talk about”). But by taking deep structures for granted, and by assuming away numerous other natural and human factors, much of reality ends up outside a business model! In my view, if you address only economically-defined market forces, you are by definition engaged in a tactical business discussion. Sometimes that’s OK – tactics are important! The problem is, calling tactics “strategy” keeps trulystrategic matters from moving to the top of the business agenda while there is still time to craft a long-term response. So where should one begin to think about strategy? I suggest that strategic thinking should begin at the level of Geostrategy. Geostrategy looks at how geopolitical factors inform, constrain, and affect business over the long term