VALUE CHAIN ANALYSIS

Value Chain Analysis Model



Value Chain Analysis Model

Introduction

Adding an online channel to a pre-existing offline channel can present a variety of challenges to a company. The e-business strategy of the online channel must be properly aligned with the business strategy of offline channel, so that the two channels can work in harmony with one another (Jelassi & Enders, 2008, p. 265). When a company neglects to do so, their operations can end in organizational demise. In order to successfully implement an online channel, a company must address a number of strategic issues.

The first issue an organization must address is to determine which products or services they will offer through their offline channel. A company may choose to offer the same products/services through both channels; an entirely different set of products/services online which are not offered offline; or a combination of new and existing products/services (Jelassi & Enders, 2008, p. 264). When making such a decision, the company should evaluate their target audience and their preferences. They can also assess their competitors' strategies to see how customers are utilizing the channels. Products/services offered online are often complementary to the offline channel; however, the organization must ensure that the online channel does not cannibalize the offline channel.

David's Bridal, a wedding and formal wear retailer, for instance, offers a combination of new and existing products via their website. There is a large portion of products which are offered through both the physical store and website, as well as a group of products offered strictly online. Most wedding dresses are offered via both channels, as customers prefer to try the dress on in the store before buying; however, they offer a number of ceremony and reception products through the website only. Offering such products online helps to maintain costs in the physical store, as such products require additional shelf space and warehousing costs.

Another issue which a company must address when adding clicks to bricks is to determine their pricing strategy. A company must determine how they want to price their online products/services in comparison with their offline products/services. They may choose to charge the same prices via both channels or charge higher or lower prices online. Each of these options communicates a different message to the customer. Offering the same prices tells the customer that the additional value of purchasing online can be found in other ways than through price discounts; charging lower prices acts as a financial incentive; and charging higher prices expresses to the customer that the company incurs additional costs when offering products online (Jelassi & Enders, 2008, p. 264).

From my personal experience, I have found that most retailers charge either the same or lower prices via their online channels. It appears that many retailers charge the same price; however, they offer additional sales and increased savings when purchasing online. Many companies have online exclusive sales, which they do not offer through the physical store. As a consumer, I would not purchase a product through a website if the same ...