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Virtual Value Chain
Internet Marketing
Dr. Mary Wolfinbarger
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Value Chain
The series of _____-adding activities
connecting a companys ______ side
(raw materials, inbound logistics andproduction processes) with its ______
side (outbound logistics, marketing and
sales).
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Value Chain
Idea: By analyzing ______ of a value
chain, can redesign internal and
external processes to improve _______and ___________
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Mirroring Capability
When companies move activities
from the _____ to the _____, they
begin to create a virtual value chainthat parallels but improves on the
physical value chain.
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Value Chain
Original VC model treats info only as a
_________ element
But ____ can be a source of value Example: FedEx online tracking
In the ________managers create value
with info
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Virtual Value Chain
Rayport and Sviokla suggest businesses
operate in two words:
A ________ world (marketplace) A ________ world (marketspace)
The two spaces are two interacting
value-adding processes
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Virtual Value Chain
Example:
For consumers, a phone answering machine
is in _______
Electronic answering services are in (virtual)
__________
_________ often sells in both types of spaces
If it can be_______, it can be done in themarketspace
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Creating Value in the VC
Involves Information:
1. Gathering
2. Organizing3. Selecting
4. Synthesizing
5. Distributing
(Sounds like_________!)
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Creating Value in the VC
Just as someone takes raw material and
refines it into something useful as in
the sequence of tasks involved inassembling an automobile on a
production line so a manager today
collects raw information and adds
value through these steps.Rayportand Sviokla
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Three stages of value-adding
informational processes
1. Visibility: ability to track ______
operations more effectively
2. Mirroring capability: substitute ______activities for _______ones
3. Create new ________relationships:
use flow of info to deliver value tocustomers in new ways
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Visibility
IT allows managers to ___ ________
more effectively
Example: Frito-Lays info revolutioninitiative
Managers can visualize the entire chain
from ordering corn to planning localpromos
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Visibility How does Frito-Lay do it?
Employees in field collect info on sales ofproducts daily and feed it to co.
Field employees also collect store infoabout sales and promo of competing andnew products
Frito-Lay continuously optimizes, reducinginventory and supplier risk, planning truckrouting
Still technology plays a support role only
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Mirroring Capability
Goes beyond simply using information
in a _____role
Central issue: How can activities bemoved from the _________to the
_________to become faster, better,
more flexible, cheaper?
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Mirroring Capability
Example: Fords use of a virtual design
team and testing of prototypes in
simulated environments with colleaguesover a computer network around the
world
Suppliers were even drawn into the
design process
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Mirroring Capabilities
Every manager knows that stayingcompetitive today depends on achievinghigher levels of performance forcustomers while incurring lower costs inR & D and productionOn the VVC,companies may find dramatic low-costapproaches to delivering extraordinarilyhigh-value results to customers. Rayport & Sviokla
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Mirroring Capabilities
Can provide mirroring which movescustomer from place to space as well
Example: eCommerce brings
customers to the _____ Bad Example?: Lands End shop with a friend
Opt-in email mirrors direct marketing
Arbitrons portable people meter
Online course registration
Online classes?
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New Customer Relationships
Not just creating values in the space,but extracting value from it
Establish space-based _____withcustomers
Also ____ _____with competitors inco-opetition: example: webrings and
reciprocal marketing (e.g. Amazonsnumerous partners)
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New Customer Relationships
WWW Examples:
Virtual or limited ________ _______(software or sampling music)
R-tech (_________ technology) Example:Amazon.com -- Listmania, product
suggestions based on purchase history(collaborative filtering), ability to read reviews of
products, Just Like You Planetfeedback.com (entire biz built on new
ways of gathering info)
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New Customer Relationships
More Examples:
Using customer ________to go into newbusinesses (USAA insured boat owners, then
designed financing packages for boatpurchase)
Customer as _______ (underground music;tracking your order at Dell)
Personalized pages (for B to C & B to B) Affiliate programs (Customer as__________)
Your idea here.
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Implications
In the marketspace, many of the
business axioms that have guided
managers dont apply. Rayport &Sviokla
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Five principles:
1. The Law of Digital Assets
Digital assets not _____ ___
when consumed Music, content, entertainment,
pictures.
Can price aggressively
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Five principles:
2. New Economies of Scale
__________ services that rely on info
can efficiently be utilized www.myway.com
Musicmatch allows users to customize
styles of music or artists you listen toon your personalized radio station
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Five principles:
3. New Economies of Scope
Can ______ _____of operations
by using present customer info
(use info about present customers to
suggest new products/business
directions)
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Five principles:
4. Transaction-Cost Compression
Transaction costs of ______
_______about customers andtheir behavior is lower than ever
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Five principles:
5. Rebalancing supply and demand
Combines previous 4 principles focus is shifting from ______-side to
______-side thinking More opportunities to ______ and
______ to customer desires Example: Amazon sends email when an author Ive
previously purchased releases a new book they knew I
wanted it before I did! Some e-commerce providers are sending sweeteners to
customers who abandon shopping carts
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Assignment: (in class)
How does and how could CSULB and/orCollege of Business Administration and/orthe Marketing department use the VVC to
1. Increase visibility of operations?2. Mirror activities currently carried on in the
marketplace (physical world) in themarketspace (virtual world)?
3. Increase strength of relationships with itscustomers (students) and potentialcustomers?