Worksheet (DW#8): Delivering the Value for Distribution Channel Strategy

1. Value Creation: The performance of actions that increase the worth of goods, services or even a business. Many business operators now focus on value creation both in the context of creating better value for customers purchasing its products and services, as well as for shareholders in the business who want to see their stake appreciate in value.
Value Delivery Network: Consists of the value chain, its suppliers, distributors and ultimately customers, all of which work together to add value to the customer. Increasingly companies are partnering with members of their supply chain to enhance the performance of the customer value delivery network.
A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. To add value, the organization must be doing more for its customers than simply carrying out the ‘face value’ of the activities, otherwise customers would presumably carry out the activities themselves. Customers either cannot carry out the activities at all, or cannot match costs, or don’t want to carry on the activities and so are willing to pay others to carry them out instead. * knowhow – suppliers often use knowhow that customers simply don’t have * economies of scale – suppliers often produce efficiently in huge volumes with each customer buying only a small proportion. Suppliers’ economies of scale simply cannot be replicated by each customer * risk – suppliers might shoulder production risks that customers don’t want * location – suppliers might be in a low-cost area while customers are in a high cost area * flexibility – suppliers are variable costs, while doing it yourself usually entails more fixed costs. 2. Channels of distribution move