Question

What is splitting up the value chain?

   What is splitting up the value chain?

Principles of Microeconomics for AP® Courses

Principles of Microeconomics for AP® Courses

Steven A. Greenlaw,… 2nd Edition

Chapter 19, Problem 10

Instant Answer

Solved by Expert Srikar Katta

08/18/2019

Step 1

A value chain is a series of activities that businesses go through to produce a product or service. This can be broken down into different stages, such as sourcing raw materials, manufacturing, distribution, and after-sales service. Show more…

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What is splitting up the value chain?

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Key Concepts

Value Chain

The value chain represents the full range of activities that businesses engage in to bring a product or service from conception to delivery, including design, production, marketing, and support. It highlights the internal processes that add value at each stage of the production and delivery cycle, thereby contributing to competitive advantage.

Value Chain Disaggregation

Value chain disaggregation refers to the process of breaking down the traditional, vertically integrated value chain into separate components that can be individually outsourced, specialized, or recombined. This fragmentation allows businesses to focus on core activities while leveraging external expertise for non-core functions, aiming for improved efficiency and flexibility.

Outsourcing

Outsourcing is a strategic decision where a company delegates certain business functions or processes, such as manufacturing or customer service, to external suppliers. In the context of a split value chain, outsourcing enables companies to concentrate on their core competencies while taking advantage of specialized skills and economies of scale offered by third-party providers.

Core Competencies

Core competencies are the unique strengths and capabilities that give a company a competitive edge in its market. When companies split up their value chain, they often focus on developing and investing in these core competencies, while outsourcing other functions that are less critical to their strategic objectives.

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