Managing Value Chain Strategy

Peter H. Antoniou
California State University San Marcos
The Ansoff Institute

Catherine E. Levitt
California State University at Los Angeles
The Ansoff Institute

This paper seeks to present a working model for evaluating the impact of autonomous and non-autonomous elements of the value chain on the corporate strategy of small and medium sized enterprises engaged in outsourcing (off-shoring) toward better utilization and better management of the components of the value chain. While there is much discussion, both academic and practical, about the strategic advantage sought through outsourcing and, equal discussion about the process of making the decision to outsource, little has been done to examine how best to manage the outsourced value chain. Both successful and poor outcomes of these outsourced processes have been reported, but no model has been developed to improve the possibility of replicating success. This model seeks to fill that void.

With this model, the channels of information, communication, authority and factor resources which structure the value chain are examined. The differences in flows through each component may be evaluated so that the relationships between components (and between the components and the enterprise) are more clearly seen. The balance between competition and collaboration within the chain is calibrated for external turbulence and internal aggressiveness producing affects, which then are aligned with the strategic position of the enterprise. With this alignment, the fragmentation of the applications of strategy is reduced, relationships between components become more transparent and the possibility of replicating or innovating successful practice is increased.

Use of this model in the strategic process should enable the small or medium-sized enterprise to answer the following questions: Are the participants in the value chain part of our strategy design and application? Are we treating the value chain participants as SBU's or SBA's? Do our value chain participants affect our encounter with the external environment? Does participating in this value chain change our organizational structure? How should the value chain be managed and by whom?

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