Value Chain Relationship - A Strategy Matrix

Abstract

The mode of integration in the value chain can impact a business organization in multiple ways and affect the sustainability of its competitive advantage. Several studies on benefits of Value Chain integration have focused on comparing the ICM ratios (i.e. the cycle time for flow of Information, Cost and Material). Past studies have demonstrated that integration of the members of the Value Chain results in the improvement in productivity and profitability of organizations. However, such integration is operational in nature and results in incremental/ differential improvement. But the fundamental success of the value chain would depend on the mode of relationship between the members. The mode of relationship is fundamental to the design of the value chain. The objective of this article is to identify appropriate factors, which would indicate the mode of relationship between value chain partners and develop a “Decision Support Strategy Matrix” to facilitate appropriate choice of relationship. Value chain integration takes place over a period of time and to varying degrees based on the relative size, scope, ownership, and stakeholders′ interest. The value chain partnership mode decision matrix has been applied to develop the strategy of south Asia’s largest steel company. Finally, the implications for practices and scope of future research are identified in this paper. This research article is a blend of theoretical framework and practical application for managers.

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