A Scoping Study of How Can Firms in the UK be Encouraged to Create More Value.docx

1、A Scoping Study of How Can Firms in the UK be Encouraged to Create More ValueMoving to the Next LevelA Scoping Study of How Can Firms in the UK be Encouraged to Create More ValueBackground and Focus of the StudyGovernment reports (Porter and Ketels, 2003; Cox, 2005) and the press (Smith, 2006; Giles

2、, 2006) have highlighted a growing concern about the UKs productivity performance and competitiveness. “The Competitiveness Report” published by Porter & Ketels (2003) highlights the need for the UK to transition to a higher value economy. This report has triggered further research into what can be

3、done to improve the UKs situation. One of the reports triggered by Porter and Ketels has been “Post Porter Where does the UK go from here?” (Birdi et al., 2003), it states “In order to remain competitive and consistently increase profitability, firms need to move up the value chain in their industri

4、es over time” (p21).The theme of competing on value added has led to a paper entitled “How Can Firms in the UK be Encouraged to Create More Value?” (Edwards et al 2004) proposes three strategies as a means of increasing a firms value add. The three strategies are:1) Adopting promising practices2) Cr

5、eating value - Product, process and service development3) Re-positioning along the value chainThe focus of this literature review is the third strategy that of re-positioning along the value chain. The researchers believe that there is less understanding of this strategy and further work is required

6、 on this subject. The other two strategies have been well covered in the literature on strategy, marketing, innovation and general management literature (for example Nick Bloom, John Bessant etc).At the outset the literature review aims to map the current literature in the area and answer some of th

7、e initial research questions (including, how do firms reposition in the value chain? And is it worth it?), and identify gaps in knowledge for further investigation.Literature Review MethodologyThe research team adopted a systematic approach to reviewing the literature (Leseure et al., 2004). The pro

8、cess of the systematic review started with identifying the need for the review and the preparation to include a review protocol.The focus of the review was agreed to be an examination of the literature that discussed the strategy of repositioning along the value chain. The initial research questions

9、 for the study were: What is the value chain? What are the ways for companies to move in the value chain? Do companies that move up the value chain get the productivity gains they expected? What are the links between productivity performance (at the firm and national level) and applying the strategy

10、 of moving up the value chain? It is Is notTo establish what has been done already An evaluation of value chain modelsAn in depth analysis of the literature on productivity Figure 1 Scope of the Literature ReviewFigure 1 illustrates the discussions of the research team had on the scope of the litera

11、ture review.Figure 2 - Review ProcessFigure 2 shows the process followed to build up the list of papers to review. The keywords (see appendix 1) were identified by the seven members of the research team and validated by the principal investigator. The data sources used are listed in appendix 2.The r

12、esearch team followed the methodology for ranking the articles used by Leseure et al. (2004). From a list of 62 articles the research team were asked to grade the articles titles and abstracts by the following criteria of A (should be in shortlist), B (uncertain), or C (should not be in shortlist).

13、Appendix 4 contains a list of the reviewed papers.Measures of Productivity at a National and Firm LevelBefore getting into the main focus of the literature review, re-positioning in the value chain, the research team had some preliminary discussions on how this strategy ties up with the AIM research

14、 theme of productivity. There was also a level of pre-understanding work that was required to ensure the research team had a common understanding. This called for a basic review of the literature on productivity. A measure of economic activity at the national level is Gross Domestic Product (GDP). T

15、he UKs GDP performance per person is according to Porter (2003) is influenced by the following factors the amount of people and time contribution to the labour force and the productivity performance of the labour force.To be able to close the productivity gap that the UK has with its international c

16、ompetitors (Porter, 2003) the connections between the indicators at a national level and a firm level need to be made.The level of the firm is the unit of analysis for this study. So we needed to be clear on how productivity could be measured at this level. The research team agreed that Value Added

17、(VA) per employee (Beachman, 2006) could be used as an indicator of labour productivity at the firm level. Value added, although it cannot be used in isolation, is one of the indicators that can be used to evaluate firms that have moved in the value chain to assess if they have made productivity gai

18、ns from moving.Value and its Many MeaningsIn the early stages of the research, there was also a need to clarify our understanding of value given the multi-disciplined background of the research team. Again we turned to the literature to clarify the meanings.The traditional “engineering” view of valu

19、e (value analysis, value engineering etc.) tends to look at ways of maximising the functionality whilst eliminating waste. This view is still seen today in engineering disciplines, with authors such as (Womack and Jones, 1994) encouraging companies to focus on the whole rather than the parts, thus a

20、llowing companies “to differentiate value from waste”. To Porter a firm is profitable if the value it commands exceeds the costs involved in creating the product (Porter, 1985). (Merrifield, 1991) defines value as the increase in value that occurs at each stage of the manufacturing process and value

21、 resides in the concentration of resources focussed on selected business areas. Moving from production towards exchange (Condra, 1985) interprets value as a fair return in goods, services or money for some things exchanged that are worth, in comparison, with something similar (competitors product).

22、(Treacy and Wiersema, 1996) go further, defining value as resulting from the fulfilment of customers expectations through which the organisation achieves the economic benefit. (Miles and Snow, 1978) say value comes from choosing customers and narrowing the operation focus to best serve that market s

23、egment; customer satisfaction and loyalty doesnt, by itself, create unmatched value.It is from the strategic management literature that the seminal contribution on the strategic value creation process has been developed, based largely on the works of Michael Porter and the concept of the value chain

24、 (1985). This permitted marketers to think beyond categories of perceived value to the strategic means and processes for delivering to or enabling the customer. This has more recently led to a focus on value in the context of the relationships that exist between suppliers and customers. Another conc

25、ept used in the literature is that of value propositions. (Treacy and Wiersema, 1996) suggested that there were three basis on which firms compete or “value propositions”, namely product leadership, operational excellence and customer intimacy. (Martinez and Bititci, 2006) developed this further. Th

26、eir “value matrix” builds on earlier value propositions developed by (Treacy and Wiersema, 1996). This matrix generates six, as opposed to three value propositions, which are identified as: Innovators, Brand Managers, Price Minimisers, Simplifiers, Technological Integrators and Socialisors.These “va

27、lue propositions” were initially designed to help companies to understand the basis on which they compete, and therefore the strategic and operational issues surrounding their competitive standing. More recently Bititci (2005) has suggested that the concept of the value proposition could also be use

28、d by organizations as a means to consider repositioning within the value chain. He suggests that there are many companies who wish to get out of the “price minimiser” situation so they effectively need to reposition themselves in the value chain. We will come back to this topic in the section, what

29、do we mean by moving up the value chain?Companies provide value through products and/or services by the way they arrange their activities, the activities they select to do and their ability to develop products/services to create value for the customer (Livesey, 2003a). With the value to customers be

30、ing the ability to meet a customers priorities, priorities being things that customers are willing to pay extra for or are so important that they will search out alternative suppliers if they can no longer get them. (Slywotzky and Morrison, 1997 cited by (Walters and Lancaster, 2000)The expectations

31、 of value that the customer is looking for is increasing in terms of time to market and need for innovative and customised products making value capture harder (Livesey, 2003a). That is assuming the manufacturer has the capabilities to exploit the value, in the example of the pharmaceutical industry

32、, new companies with the technology capability have the ability to exploit the value while the more established competition have to gain the relevant capabilities in order to compete. (Champion, 2001)Even the classification of the firms delivering value are becoming harder, there is no longer a clear distinction between a product, service or a combined service and product provider (Normann and Ramirez, 1993).Value ChainThe value chain has been defined as either a tool for analysis (Sturgeon, 2001), a business system (Walters and Lancaster, 2000) or a concept that offers a too