Information and Strategy - The Virtual Value Chain

Information and Strategy

In today’s digital age information technology and information systems play an important role in success of organization. Information technology has challenged the way the business gets conducted. A company with superior product and service content become market leaders. There is a constant urge for the companies to provide a better and competitive content.

Organizations invest in research and development for superior content production, or they acquire/merge with companies. The purpose of acquisition is to either expand current product offering or add content as to provide end to end solutions.

Organization strategy can be devised using Porter’s Five Force model. Organization’s strategy should be to increase customer base and provide customized solution. Service also plays an important role in organization strategy. Service is the key factor in maintaining good customer relationship. Organization needs to devise a strategy which is convergence of technology, brand marketing, product innovation and world-class service.

Virtual Value Chain

A physical value chain consist procurement of raw materials, operations, delivery, sales and marketing and service. Information technology has changed the way we look at the value chain. Information technology has introduced concept of virtual value chain.

The components of a virtual value chain are as follows:

  • Gather: Information age has helped digitization of information. Proliferation of information is higher than ever before. The internet provides data and information about markets, economies, government policies, etc. Companies gather information relevant to them as a first stage in the virtual value chain.

  • Organizing: Information gathered in the first stage of the virtual value chain is in form of text, data tables, video, etc. The challenge in the second stage is to organize the gathered information in a way to retrieve easily for further analysis.

  • Selection: In the third stage of virtual value chain, organizations analyze captured information to add value to customers. Organizations develop better ways of dealing with customers, product delivery, etc. using information.

  • Synthesization: In the fourth stage of virtual value chain, organizations synthesize the available data. The data reaches the end user in the desired format.

  • Distribution: The last stage of the virtual value chain is delivery of information to the end user. In a physical value chain, products are delivered to customers, in the virtual value chain this is replaced by a digital product. For example, digital movie streaming of movies compared to mail delivery of DVD. Therefore, today’s businesses are also known as information business.

Importance of Virtual Value Chain

The concept of a virtual value chain was devised looking at current internet penetration. It provides addition to existing value chain. Information technology helps in holistic view of physical value and making it efficient and effective.

Today’s information systems are capable of capturing information from every part of the value chain. This information is utilized to optimize performance at each stage. However, this information can also be utilized to improve customer experience at each stage. This enhanced experience can be through new product and services, thus generating more revenue to the company.


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Management Information System