be part of the internal value chain of a company. Porter’s original work considered both
the internal value chain and the external value chain or network. Since the 1980s there
has been a tremendous increase in outsourcing of both core value-chain activities and
support activities. As companies outsource more and more activities, management of the
links between the company and its partners becomes more important. Deise et al. (2000)
describe value network management as:the process of effectively deciding what to outsource in a constraint-based, real-time envi-
ronment based on fluctuation.Electronic communications have facilitated this shift to outsourcing, enabling the trans-
fer of information necessary to create, manage and monitor partnerships. These links are
not necessarily mediated directly through the company, but can take place through inter-
mediaries known as value-chain integrators or directly between partners. In addition to
changes in the efficiency of value-chain activities, electronic commerce also has implica-
tions for whether these activities are achieved under external control or internal control.
These changes have been referred to as value-chain disaggregation(Kalakota and Robinson,
2000) or deconstruction(Timmers, 1999) and value-chain reaggregation(Kalakota and
Robinson, 2000) or reconstruction(Timmers, 1999). Value-chain disaggregation can occur
through deconstructing the primary activities of the value chain and then outsourcing as
appropriate. Each of the elements can be approached in a new way, for instance by working
differently with suppliers. In value-chain reaggregation the value chain is streamlined to
increase efficiency between each of the value-chain stages.
The value network offers a different perspective which is intended to emphasise:
the electronic interconnections between partners and the organisation and
directly between partners that potentially enable real-time information exchange
between partners;
the dynamic nature of the network. The network can be readily modified according to
market conditions or in response to customer demands. New partners can readily be
introduced into the network and others removed if they are not performing well;
different types of links can be formed between different types of partners. For exam-
ple, EDI links may be established with key suppliers, while e-mail links may suffice for
less significant suppliers.Figure 2.6, which is adapted from the model of Deise et al. (2000), shows some of the
partners of a value network that characterises partners as:1 supply-side partners (upstream supply chain) such as suppliers, business-to-business
exchanges, wholesalers and distributors;
2 partners who fulfil primary or core value-chain activities. The number of core value-
chain activities that will have been outsourced to third parties will vary with different
companies and the degree of virtualisation of an organisation which involves out-
sourcing non-core services;
3 sell-side partners (downstream supply chain) such as business-to-business exchanges,
wholesalers, distributors and customers (not shown, since they are conceived as dis-
tinct from other partners);
4 value-chain integrators or partners who supply services that mediate the internal and
external value chain. These companies typically provide the electronic infrastructure
for a company and include strategic outsourcing partners, system integrators, ISPs
and application service providers (ASPs).CHAPTER 2· THE INTERNET MICRO-ENVIRONMENT
Value network
The links between an
organisation and its
strategic and non-
strategic partners that
form its external value
chain.