The Value Network

Activities and linkages that add value do not stop at the organization’s boundaries.

A firm’s value chain is connected to other value chains in what J&S called a Value Network.

The Value Network is the set of inter-organizational links and relationships that are necessary to create a product or service.

Porter used the term Value System, Value Network is a better term since it emphasizes the interconnectedness of separate organizations.


It is possible to capture the benefit of some of the value generated both upstream and downstream in the value network:

(a) By vertical integration through acquisition of supplies and customers.

(b) Large and powerful companies can exercise less formal power over supplies and customers by using their bargaining power to achieve purchase and selling prices that are bias in their favor.

(c) A more subtle advantage is gained by fostering good relationships that can promote innovation and creation of knowledge.


Using the value chain, a firm can secure competitive advantage in several ways:

• Invent new or better ways to do activities.
• Combine activities in new or better ways.
• Manage the linkages in its own value chain.
• Manage the linkages in the value network.


(source: BPP Learning Media)



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