Moving-up the value chain is a value chain in the whole series of activities that create and build value at every step. The total value delivered by the company is the sum total of the value built up gradually all throughout the company.
It is the primary and secondary facilitations offered by a company. Low facilitation to highest facilitation by a company then leads to movement from low level to highest level. For example, in a steel industry, if they make specialized steel for automobiles, rather than selling basic steel, which is taken by another company who makes specialized steels to automobiles. Since the company makes it directly now, they get more money for their product, and thus higher revenues. This will eventually lead to higher profits. The value chain concept separates useful from the wasteful activities which hinder the company from becoming a leader in the market. Focusing on the value-creating activities gives the company many advantages. It involves primary activities like Inbound logistics, Operations, Outbound logistics, Marketing, sales, Services, etc. and Support activities like Procurement, Technological development, Human resource management etc. Value chain management requires coordination and collaboration, Technology investment, Organizational process, Leadership, Employee/ Human resources and Organizational culture and attitudes. For example: The ability to charge higher prices; lower cost of manufacture; better brand image, faster response to threats or opportunities.
Outsourcing: The fragmentation of the production process across various countries has given rise to restructuring in firms including the outsourcing and shoring of certain functions. Outsourcing involves the purchase of intermediate goods and services from outside specialist providers, while shoring refers to purchases by firms of intermediate goods and services from foreign providers, or to the transfer of particular tasks within the firm to a foreign location. *** shoring includes both international outsourcing where activities are contracted out to third parties abroad and international in-sourcing to foreign affiliates.
