lit rev adv
Post on 04-Jun-2018
219 Views
Preview:
TRANSCRIPT
-
8/13/2019 lit rev adv
1/25
9
Chapter 2 Literature Review
2.1 Introduction to Advertisement
As known for decades, advertisement is one of the main strategies in marketing
either a product or service. It can be defined as An Advert that does not create a
buying response, or at least produce a desire to want to know more is not an advert
(Quinn, 1985). The Table 2.1 holds the summary to the types of advertising being
exercised (Aaker and Mayers, 1975).
Table 2.1: Types of Advertisement Targeted on Customers
To Inform
a. Telling the market about the new product
b. Suggesting new user for the product
c. Informing the market of a price change
d. Explaining how the product works
e. Describing available service
f. Building company imageTo Persuade
a. Building brand preference
b. Encouraging switching brand
c. Changing customers perception of a product attribute
d. Persuading customers to purchase
e. Persuading a customer to receive a sales call
To Remind
a. Reminding consumers that the product may be needed in near future
b. Reminding them where to buy it
c. Reminding how to check for quality (originality)
d. Keeping in their minds during off seasons
e. Maintaining its top-of-mind awareness
-
8/13/2019 lit rev adv
2/25
-
8/13/2019 lit rev adv
3/25
11
better understanding on how the business is being done nationwide. The five main
categories identified from the study are explained in the sections below.
1. Television
2. Radio
3. Print media
4. Web advertising
5. Other media
2.2.1 Television
Currently there are 7 television channels in Malaysia including ASTRO and
MiTV. The traditional television stations such as RTM1, RTM2 and TV3 are sharing
the advertising budget with the other channels. As in Malaysia the television have
towering percentage of penetration but it involves very high budget and suitable only
for big companies.
For example, it cost RM23340.00 (MediaBase, 2004) for just a single 60
seconds of film let (moving advertising which is not a still picture) advertisement
during prime time in TV3. However, these big companies normally have their own unit
for advertisement as done by Dunhill (Dunhill Tobacco). Nevertheless, most of the
time, the companies make use of the service of the advertising agencies rather than
having their own advertising unit since it is more cost effective.
As a conclusion, the television advertisement is far reachable as it involves a
high cost and is not affordable by the small and medium companies. However, it is still
the most effective and popular way of reaching the customers, especially with the
arrival of satellite televisions such as ATSRO. More people have tuned into the
television.
-
8/13/2019 lit rev adv
4/25
12
2.2.2 Radio
There are many radio channels available in Malaysia and there are even local
channels for some specific states. For example, Radio Manis in Kelantan and Radio KL
FM in Kuala Lumpur. This gives flexible choices for the companies to choose the
coverage level they desire. For example, a catering company based in Perlis, which is
situated in northern state of Malaysia, does not need to advertise in a media that can be
heard in Johor that is in the southern state of Malaysia.
Therefore, radio stations with different frequency and coverage level allows the
companies to choose a suitable station for them. Besides that, the cost to produce the
advertisement and to air-cast is lower compared to the TV channels. There are alsoradio channels, which have nation coverage such as the Time Highway Radio and the
AI FM, which is a Chinese Network.
Other than that, the radio station also allows the companies to sponsor a
program from 15 minutes to 1 hour to talk freely about their product or services
(MediaBase, 2004). This has received a high demand from the companies where they
are able to provide more information about their products. Radio is the most widely
used advertising method in Malaysia where it involves a cost effective method besides
being flexible and far reaching advertising media.
2.2.3 Print Media
The print media involves both magazines and newspapers in Malaysia. There
are newspapers and magazines in all four major languages in Malaysia, which areEnglish, Malay, Mandarin and Tamil. There are about 18 daily newspapers in
peninsular Malaysia, 9 in Sabah and 10 in Sarawak in the year 2003 (MediaBase,
2004). This print media also involves a low budget and has a more specific target group
of customers.
-
8/13/2019 lit rev adv
5/25
13
The companies can advertise in this print media when they have addressed their
target group of customers. The print media is also suitable when introducing a new
product because the budget is smaller and can be advertised much faster compared to
other advertising methods. The production is normally done in house, as there is not
much complication and rules involved as in the other medias where any health claims is
not allowed either in radio or television. This is due to the strict government policy to
control the radio and television advertisements. This is also done to protect the
consumers from manipulative advertisements.
On the other hand, the print media has a very high potential coverage where
more than 5.6 million Malaysian adults read daily newspaper at least once on an
average day representing 54% reach of adult population in the year of 2001 (Ministry
Of Information, 2002). This makes the print media one of the powerful methods of
advertising.
2.2.4 Web Advertising
Web advertising is a method that has been developed in the late 90s and has
been boomed with the development of the Dot.Com business. It is a wide industry with
big terminologies such as Internet Marketing Service, Banner Advertisement, Link
Exchange and Ezines. This huge advertising source is an industry by itself and
excluded in this research, since it will widen the scope of the research.
2.2.5 Other Media
This method of advertising involves the outdoor boards, transport advertising on
taxis and buses, shopping complexes such as Mega Mall and in petrol stations. This
method of advertising also involves having cutouts in theatres, airports and railway
stations where more people pass by. These methods are normally used to remind the
customers about an established product and the advertisement boards could not be
-
8/13/2019 lit rev adv
6/25
14
changed frequently. The advertisements on the boards beside the roads and highways
normally involve a 6 months contract (MediaBase, 2004).
2.3 Company Background
The company chosen is an advertising agency. The agency was established in
1994 February with the minimum staff of two people whom are the managing director
and the senior consultant. They have started the business in a small-scale and
concentrated only on Minnal FM booking which is the Tamil Language radio dedicated
for the Indian community in Malaysia.
Within the years, their business has evolved but their business activities
concentrate more on the radio-based advertisements. This is due to the main reason that
radio advertisement is the main method of advertisement in Malaysia and also has a
broad coverage station like Minnal FM, which has a full coverage from the northern
state of Perlis to the most southern state Johor.
2.4 Recent Change in Agency
There has been a dramatic change in the agency recently when they merged
with another advertising agency that has been in the business for quite some time. IJS
have taken over their business. Thus, they have to face some new challenges in the
business since the other agency has more customers whom advertise in other medias
than the radio. They are also involved in television advertisements and the printed
media, which are the newspapers and the magazines. This also makes the selected
-
8/13/2019 lit rev adv
7/25
15
agency a suitable candidate in this research implementing the VCA in developing a
new automated system for an advertisement agency.
In conjunction to this, the agency needs to have more new staff to oversee
bookings and running the business operations. Unfortunately the agency does not have
clear ideas about how the business is being done in the television and printed media
monopoly. There are also some additional staff, who have been recruited in the process
of maintaining their expended new business.
The agencys new organisational structure is explained in Figure 2.1. The chart
explains the employee structure in the agency after merging and the employment of the
new staff. The Managing Director (MD) who is also the owner of the agency leads the
management and finalises decision-making activities in the agency. MD and the
consultants represent the agency in the meetings held by the advertising medias. They
also spend most of the office time with customer relationship.
Consultants in the agency are normally involved in explaining available
advertising opportunities to the customers. They also help the customers to choose the
appropriate media and channel to place advertisements. Their involvement in customer
relation is significant.
The experienced senior administrative staff has been working in the agency for
a long period and understands the working procedures in the industry well. There are
specific administrative staff that will receive booking and send it to the particular media
to be air-cast. Before that, they need to confirm the booking in advance. The normal
-
8/13/2019 lit rev adv
8/25
16
administrative staffs refer to the senior administrative staff if they need any
clarification in their job.
These staff spends most of their time writing out booking and typing invoices.
They prepare the documentations involved in the administrative process and keep track
of the cartridge number for each booking. They are also involved in preparing the
payment for the artist in the advertisement production and manage the producer
payment for the programs.
Figure 2.1: The Organisation Chart in Iklan Jaya Sakti
2.5 Description of Current System
The advertising agency currently does not have any computerised system. They
have adopted the file-based system, which have many drawbacks. They record and file
up all the information needed manually in everyday working environment.
ManagingDirector
ConsultantConsultant
Senior AdminStaff
Admin Staff Admin StaffAdmin StaffAdmin Staff
-
8/13/2019 lit rev adv
9/25
17
When there is a new customer, he will be first asked whether he needs
consulting service on advertisement. Some customers know the industry well while
others have no idea about this advertising industry and the procedures involved. If the
customer requests for consulting service, a consultant will attend to them. The
customers are provided guidance on the customers target market and the advertising
options available for them.
The consultant will then pass on the booking to the agency and administrative
staff will note down the booking. Later the booking is written back in the appropriate
format in the booking form and the booking is faxed to the desired number (based on
the media). The staff need to include the cartridge number for both radio and television
segment booking.
However the program booking is much complicated. An earlier meeting will be
conducted to discuss the time and content of the program. An advertisement number
will be provided if both parties agree on the terms during the meeting. This meeting
will be conducted between the customers, officer from the particular channel with the
attendance of one of the consultants from the advertisement agency.
This similar situation also takes place in the magazine booking. The
advertisement number is important before confirming the magazine booking. This is to
avoid the desired page on the particular date to be booked by someone else.
As the final step in the booking process, the administrative staff then have to
type out the invoice for all the combination of booking. Invoices are solely dependent
-
8/13/2019 lit rev adv
10/25
18
on the bookings that have been faxed earlier. The administrative staff also need to
include the production cost for cartridge or the producer cost involved in the invoice.
2.6 Competitive Systems
These days, on shelf systems has emerged as the major business solution
parallel to the fast world where they are able to see, purchase and use the system the
next day. However choosing an appropriate system especially to an advertisement
agency is always a challenging task. Looking close at the on shelf programs, the
choices are variety, but mostly are created by foreign companies and they do not meet
the criteria and requirement of the local agencies. But studying through and comparing
the products gives basic guidelines for the development of the new product.
Subsequently, two widely used on shelf system and one locally developed (in
Malaysia) ageing system was compared with the selected agencys current file based
system.
2.5.1 Workzone
Table 2.2: Workzone Advertising System
Description a) Recently developed software using latest technology.
b) Shelf ware that developed originally by an American software company.
c) An ad agency extranet software.
Advantage a) Speeds up the review and approval process in the business. Not only
does the work move faster, it is better organised and fully documented.
b) Increases customer dependence. The benefit of customer extranetsolutions becomes one more reason why the customer would want to
continue working the same advertising agency. This works as a customer
locking mechanism.
c) Takes more control of the customer management.
d) Give everyone, or just someone, a view of the files. The software allows
choosing who has access to a file.
-
8/13/2019 lit rev adv
11/25
19
e) Complete record of what everyone says, and when they say it.
f) Reduce non-billable time and increase agency income.
Drawback a) Concentrates more on the cable-TV advertisement where in Malaysia
ASTRO and MiTv are the only options.
b) Less online support for easier assessment from other places. The
customers always have to attend to the office for consultationc) Always needs an experienced consultant to advise and guide the new
customers and to explain to them about the current trends and options
available.
2.5.2 Fuimus
Table 2.3: Fuimus Advertising System
Description a) Complete solution software.b) The production company is in the business for a long time and they
understand the business well.
c) Developed by a European company for the local advertisement agencies
(in Europe).
d) It is widely being used in the advertising agencies.
Advantage a) Show prospective customers the work not presented at presentation.
b) Provide more online support. Can be accessed by the authorised person
from anywhere and booking can be done online.
c) It is through the time / cost accounting module and resulting reports.
d) Ease the process of calculating the percentage. Automatically generates
a cost accounting recap after the billing is completed.
e) Preparing the estimation for a production job sets the stage for total job
cost control as the job progresses.
f) Print media option. The Print Media Control Module is designed to be
used by the media department to control print media insertion deadlines,
camera-ready art deadlines and audit contract usage.
Drawback a) Allow the bookings to be done outside from the organisation, which isnot appropriate in Malaysia due to security reasons.
b) Have unnecessary functions that are not relevant for a growing
advertisement agency such as the Iklan JS.
c) Measurements for the printed media follow the Europe standard, which
is the effect of the international software.
-
8/13/2019 lit rev adv
12/25
20
2.5.3 Bluebplez
Table 2.4: Bluebplez Advertising System
Description a) Locally developed software that has been outsourced.
b) Used in a local advertisement agency for the past 7 years.
c) Proposed by one of the consultants to be adopted to reduce the cost andsave time in development.
Advantage a) Customised to meet the agency requirements.
b) The language and the jargons that are being locally used in the agency
have been adapted to the system.
c) Keyed to a date sensitive billing cycle, which can handle essentially
unlimited numbers of transactions per month.
d) The employees takes much shorter time to learn and they are more keen
to learn since they have been involved the in the development process.
e) Its works with the employees mindset and fulfil the local requirements
such as getting script approval problem.
Drawback a) The development process of the system takes up to 11 months to
compare to the promised 5 months where most of the employees have
lost interest.
b) Hard to maintain the software since it was developed with an old
programming language.
c) The database and the system interface were not well planned for the
future adoption of changes.
2.5.4 File Based
Table 2.4: File Based Advertising System
Description a) The system which is currently being used in Iklan JS is file based
b) The have been using the system since the early stage of the agency since
it started as a small business with minimal employee.
Advantage a)
It is very flexible due to the file based.b) There is no fix format so the data can be stored at the staffs preference.
c) Can be done manually and works much faster.
d) The language and the jargons that are being locally used in the agency
have been adapted to the system.
Drawback a) Highly prone to mistakes while conducting the businesses due to the
nature of the business where many sensitive datas and numbers are
-
8/13/2019 lit rev adv
13/25
21
involved. A small mistake could cause the agency big loss
b) The critical information are often missed out
c) Searching across information is always difficult and time-consuming
process.
Besides that, few assessments and measures were identified after reading
through and discussing with the people in the industry. These measures should be given
heavier dosage of consideration while developing or choosing software for an
advertisement agency. Advertisement agency software should be developed with the
mindset that, the agency knows better how to service their customers and the software
is simply a tool that helps them do it even better.
Besides that, below are some basic requirements that software should meet
when it will be used in a real life advertisement field.
1. Does the system support the way business is done currently? The changes
introduced should be minimal.
2. Recording the customers all year advertising habit will be an advantage for
future consultation and planning.
3. Will the staff want to use it? If it takes more than an hour to learn, the software
is likely to have a bigger failure rate.
4. The software should use the language of advertising, the language of the
advertising agency.
It should represent a custom solution that supports the unique nature of each
relationship especially in advertisement booking.
2.7 System specification
-
8/13/2019 lit rev adv
14/25
22
1. The system should provide a complete database to support the both
administrative and operational functions of the agency.
2. The system should contain functions that will be helpful increasing the agencys
competitive advantage.
2.8 Common Attribute of Value Chain Analysis
Serving the research motives, a detailed study was carried out to have a better
understanding about the value chain analysis (VCA) before continuing with this
research. Following are the few definitions that were explained by few authors in their
articles and in books about the VCA.
The value chain is a systematic approach in examining the development of
competitive advantage. It was introduced by one of the pioneer in the ICT and business
industry Porter (1980). Potter also explains the sources of cost reduction and
differentiation within a firm. Potter treats every firm as a collection of activities carried
out to develop, strategically market, deliver and maintain its products or services.
Potter stresses to collectively group these activities using VCA. Value chains
can be understood better from the business perspective (Potter, 1985). It is the impact
of transactions on value-chain activities that determines the longer-term economic
benefits and strategic advantages of firms. Transactions can either optimise the
collective actions of the firm or minimise its total costs in comparison to competitors.
-
8/13/2019 lit rev adv
15/25
23
Other researchers have also supported this suggestion by Potter. They claim that
the value chain describes the full range of activities, which are required to bring a
product or service from conception, through the different phases of production
(involving a combination of physical transformation and the input of various producer
services), delivery to final consumers and final disposal after use (Kaplinsky and
Morris, 2003).
Significant of VCA
Apart from the VCA primary focus on understanding the links between the
internal structure of an individual firms functions and activities to its company specific
advantages, it can also be used to study the benefits and costs of inter-firm relationships
(Porter and Fuller, 1986). Besides that, the definition of the VCA can also be discussed
as VCA facilitates the organisation opportunities to create a new value adding service
to the customers and help them to strategise ideas on how to maximise the value. It
concentrates on options whether through superb products, great services, or jobs well
done. Manktelow (2002).
This is followed by Owens (1998) explaining that Value chains have to do with
integration, collaboration and synchronisation. Internally to a company we talk about
integrating the supply chain functions across the enterprise. Externally we talk about
collaborating with both vendors and customers. More to the point, the recognition that a
firms competitive position is affected not only by the set of linkages within the
companys own value-chain activities, but also by the value-chain linkages between
buyers and suppliers (Mattson, 1997).
-
8/13/2019 lit rev adv
16/25
24
It is important that relationships are rooted in broader networks to encourage
growth. In the network approach, markets are described as sets of interconnected
exchange relationships between actors controlling resources for production (Johanson
and Mattson, 1992). The inter-connections between firms and the emergent aspects of a
network have been demonstrated by much of the research in the IMP literature
(Anderson et al., 1994). Comprehensively, explains about synchronising the supply
chain functions across all parties involved. The core idea of the analysis is to break and
command. The strategy is to break up the chain of activities that runs from basic raw
materials to end-use customers into strategically relevant segments in order to
understand the behaviour of costs and the sources of differentiation (Shank and
Govindarajan, 1992).
But Jacinto (2004) claims in his research paper that in reality, value chains tend
to be extended to more activities within each links between different value chains,
regardless of difficulties. He also explained that VCA could deepen inquiry into the
disjuncture between high levels of economic integration into national and global
product markets. This can be extended to countries where people actually gain from
such integration (Jacinto, 2004). This makes VCA even suitable for the international
projects to project its strength.
After the solid background study about the VCA, the analysis continued
concentrating on more detailed study on the VCA model. Below are the VCAs two
main parts in the analysis process.
2.8.2 External Value Chain
-
8/13/2019 lit rev adv
17/25
25
The external value chain concentrates on the overall value of the business and
its associates. To be specific it concentrates on the key roles information played
throughout the business process. The key roles in the business are evaluated based on
the organisations ability to maximise their profit while minimising their cost in both
production and supply (Warhoe, 2004). To have a better understanding on how the
business is being carried out, the organisation should be treated as black box (how
the business processes are carried out inside the organisation should be ignored at this
stage). More importance should be given to the end customers, the external factors like
suppliers, government policies and other procedures that can influence the business
(Ensign, 2001).
All the possibilities in each key of information should be identified clearly
before proceeding to the next step. The keys should be evaluated critically, to examine
how the process can be improved and how much effect they have on the business
process (Ward and Peppard, 2004). This will be vital in the business reengineering
process.
2.8.3 Internal Value Chain
The figure 2.2 is the VCA model that has been created by Potter {Porter &
Millar, 1985).
Support Activities
-
8/13/2019 lit rev adv
18/25
26
Primary Activities
Figure 2.2: The Value Chain Analysis Model
This is the basic model of the VCA and it has evolved to more new specifically
aimed at the new media value chain models based on different industries (Loebbecke,
2001). The model in Figure 2.3 is developed specifically to serve the need of a
computerised system (Loebbecke, 2001).
Primary Activities
Figure 2.3: The Alternative Value Chain Analysis Model
CompetitiveAdvantag e
General Administration
Human Resource Management
Research, Technology and Systems Development
Procurement
InboundLogistics
Operations OutboundLogistics
MarketingAndSales
Service
Information Technology Infrastructure
Operations OutboundLogistics
Marketing& Sales
Service InboundLogistics
-
8/13/2019 lit rev adv
19/25
27
Analysing through the two available models, it is clear that the both models
have 5 same basic criterias, which are better known as the primary activities (such as
inbound logistics, operations, outbound logistics, marketing and sales, and service) and
secondary support activities (such as purchasing, technology development, human
resource management and firm infrastructure) (Clinton, 2004). These secondary
support activities typically represent the principal trading interface with external
partners in terms of the firms managerial, administrative and legal involvement with
each other. The secondary operations vary between value chains. Below are the
summary of primary activities and their traditional manufacturing industry explanation.
2.8.3.1 Primary Activities
a. Inbound Logistics
- Activities associated with receiving, storing and distributing inputs to the
product.
b. Operations
- All activities related with transforming inputs into the final product.
c. Outbound Logistics
- Activities correlated with collecting, storing, and physically distributing the
product or service to buyers.
d. Marketing& Sales
- The activities connected with purchases of products and services by end users
and the inducements used to get them to make purchases.
e. Service
- All activities related with providing service to enhance or maintain the value of
the product.
- Also includes the after sales service in providing customers assistance.
2.8.3.2 Support Activities
-
8/13/2019 lit rev adv
20/25
28
Support activities in VCA models often verify with each other. This is due to
the nature of the industry in which the value chain is being carried on. As for the model
in the Figure 2.2, there are four main activities involved (QuickMBA, 2004). The
activities are:
a. General administration
- Contains major activities, costs and assets relating to general management and
other transparency functions in the organisation.
b. Human Resources Management
- Employees are an expensive but a vital resource. This topic concentrates on the
activities involved in recruiting, hiring, training, development and compensation
of all types of personnel; labour relations activities and development of skills.
c. Research, Technology, and Systems Development
- This sector deliberates the activities, calculates costs and assets relating to
product research and development (R&D) process
d. Procurement
- The function of purchasing inputs used in the firms value chain, not to the
purchased inputs themselves.
Next will be the support activities in the model in Figure 2.3 where it has a
single activity to replace all the 4 different activities in the earlier model. This activity
is identified as Information Technology Infrastructure where it contains the cost
details of the hardware, software and other utility bills.
Comparing the support activities in both models have revealed that the support
activities mainly constrain on the cost factor. It is also a tool to evaluate if the project
undertaking is financially beneficial. However the VCA model Figure 2.2 is more in
detail and defines the supporting activities clearly.
-
8/13/2019 lit rev adv
21/25
29
2.8.4 Value Chain Examples
As a conclusion, the VCA process is a very powerful solution to the problems
faced by current industries and software development companies. It is widely used in
all fields of studies. Below are two different scenarios where VCA has been carried out
successfully.
2.8.4.1. Small Scale Fishery (Jacinto, 2004)
This research concentrates on small-scale fisheries in Philippines. Fishing is one
of the primary resources in the country but it is always overwhelmed by the problems
of resource degradation and extensive poverty in coastal communities. Whilst state
guidelines and open access to the countries most of the main fishing spots are unable to
maintain the progress of a competent fishing industry, Community Based Coastal
Resources Management (CBCRM) approaches centred on property rights are popular
among the fisherman and non-government institutes as both tactical necessity and
strategic is vital. Even the CBCRM celebrates its second generation in the country, both
success and failure stories been equal.
The VCA was introduced in this situation to concentrate on the dynamic of
inter-linkages in the fishing industry. It is also commenced to describe the full range of
activities required to modernise fishery products from rural areas and old methods.
The researchs objective is to modernise the industry through the different phases of
production and delivery to final consumers. The research stress on both cultural and
logistic factors where it actually expands inquiry into the disjuncture between high
levels of economic integration into national and global product markets.
Implementation of VCA resulted in new value-added fishery products and
marketing systems to cultivate the fishermans involvement in both national and global
economy level. The success story of the VCA is also transparent since the research
-
8/13/2019 lit rev adv
22/25
30
results computed the optimal balance between production for local food security and
for the market (Jacinto, 2004).
2.8.4.2. Mobile Commerce (Barnes, 2001)
Mobile commerce, which is better known as m-commerce, is the latest revamp
competing with the internet facilities electronic commerce (e-commerce) Stimulated by
the increasing usage and advances of mobile technology, such as phones and personal
digital assistants (PDA), m-commerce gains its advantage over the e-commerce. It also
allows new strategy to the way business and certain activities are conducted. New
gadgets like micro-browsers and sophisticated mobile applications are the new era of
technologies that brings the internet to the customers pocket. This opens endless
possibilities including usage of m-commerce in activities such as banking, booking or
buying tickets, shopping and real-time news for a start.
This paper concentrates on creating a system to monitor the business-to-
consumer markets and to examine how value is added in the stream of activities
involved in providing m-commerce to the consumer. Besides identifying both internal
and external factors that influence the m-commerce value chain, the research also
develops a platform for the future strategic analysis for the industry. VCA also allows
the author to identify (Barnes, 2001) some of the key factors that may influence the
take-up of m-commerce, including technological issues. Adopting VCA into research to
create a system also allows the author to present his predictions regarding the future of
m-commerce based on the results.
2.8.5 Summary of Examples
Wrapping up the discussion, VCA is commonly used in a traditional good
manufacturing process. Nevertheless it is also a powerful tool that we can employ in
the service-based organisation, software development companies and other industries.
It is a flexible tool that has a high level of adoption to all challenges. It is also a very
-
8/13/2019 lit rev adv
23/25
31
powerful solution to the problems faced by the current industries. It is widely used from
a small-scale fishery (Jacinto, 2004) to the recent research on the emerging m-
commerce technology (Barnes, 2001).
-
8/13/2019 lit rev adv
24/25
32
2.9 Profit Factor
However, the main key that makes VCA not an industry based analysis is the
profit factor. The profit term adopted in the VCA also makes it suitable to a diversity of
sectors from small business to multinational corporations. The key calculation formula
(Ward & Peppered, 2004) used in the VCA to calculate is as in Figure 2.4.
Figure 2.4: Profit Factor Formula
2.10 Natural and Contrived Value Chains
The value chain is also improved with the two new concepts called natural and
contrived value chains (Osullivan and Geringer, 1993). The business can be done more
strategically with having better understanding about the role and information flow
between both the internal and external value chains. New opportunities can be
identified with this both new introduced theories. This theory has been further
explained by Ward and Pepper (2004).
2.10.1 Natural Value Chains
Value added (V) - cost (C) = profit (P)
V - Is the value added by the improved methods
C - The total cost occur to develop or apply the better method
P - The measurable si nificant rofit from the new methods
-
8/13/2019 lit rev adv
25/25
The key factor in this is what. It represents what have to be done to increase
the value added service in the business. It is used to analyse the value chain analysis in
term of the information complexity. It helps to understand the difficulties in the
business process and the information flow in within and with the external factors
associated with the company.
2.10.2 Contrived Value Chain
The key factor in this is how. It examines how the business process is being
carried out in the organisation. This concept concentrates on identifying new and
accelerated ways to improve the information flow and business opportunities.
Identifying this new value adding requirements also would allow the business
reengineering process.
top related