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Value Process Framework (VPF)

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CH 8
Value Process Framework (VPF)
• Measure effectiveness of strategy
• Bring together Value Chain analysis & Five
Forces
• Main elements
– Value creation
– Value capture
Value created =
Perceived use value –
Cost
Perceived use value
– The price that a customer is prepared to pay for
the product if there is a single source of supply
– Subjective
– Categories for creation of value use:
– Quality – functionality, durability, reliability
– Speed – how fast a company can deliver a product
– Brand – trust, emotional benefit
Exhibit 8.3 Producers completely capture the value created in a (quasi-)
monopolistic environment
Value capturing
Value creation
€
Price = Willingness to
pay
Perceived Value
use value created
Costs
Value
created
=
Producer
surplus
Cost
– Cost of resources – labour, materials, information,
capital
– Cost of production, marketing, delivery
– Selling costs
Value creation: First necessary condition
for building competitive advantage
Value created must be larger than that of
its competitors, imperfectly imitable and
substitutable
Not sufficient – does not talk about
distribution from producers to
consumers
Select an industry
Be prepared to discuss how at least 5
different companies in that industry
create and capture value.
- Value drivers
- Cost Drivers
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