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Restructuring the internal value chain

Traditional models of the value chain (such as Figure 6.8(a)) have been re‑evaluated with 

the advent of global electronic communications. It can be suggested that there are some key 

weaknesses in the traditional value chain model:

● 

It is most applicable to manufacturing of physical products as opposed to providing 

services.

● 

It is a  one‑  way chain involved with pushing products to the customer; it does not high‑

light the importance of understanding customer needs.

● 

The internal value chain does not emphasise the importance of value networks (although 

Porter (1980) did produce a diagram that indicated network relationships).

A revised form of the value chain has been suggested by Deise et al. (2000); an adaptation 

of this model is presented in Figure 6.8(b). This value chain starts with the market research 

process, emphasising the importance of  real‑  time environment scanning made possible 

through electronic communications links with distributors and customers. For example, 

leading e‑tailers now monitor, on an hourly basis, how customers are responding to promo‑

tional offers on their website and review competitors’ offers and then revise them accord‑

ingly. Similarly, manufacturers such as Cisco have feedback forms and forums on their site 

that enable them to collect information from customers and channel partners that can feed 

through to new product development. As new product development occurs the marketing 

Figure 6.8

Two alternative models of the value chain: (a) Traditional value chain 

model, (b) Revised value chain model

Source: Adapted from Deise et al. (2000) Figure 6.4(b).

Market

research

New

product

development

Market

products

Procure

materials

Inbound

logistics

Production

Human resources

Primary value chain activities