AGRC7050 - Agribusiness Value Chain Management

Concepts of value and value creation

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What is value?
• Concept of value is multifaceted.
• The value or utility the consumers receive when purchasing a
product.
• Customer value is the ratio of what they receive (perceived
value) relative to what they give up (perceived costs).
Costs

The value equation Benefits

Value

• Ability of a company to provide a superior value to its

customers is considered as one of the competitive strategies in
the 1990s.
Barnard et al., (2012) Agribusiness Management, 4th Ed, Routledge, London
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 Value creation
• Value could be created by enhancing the consumer’s perceived
value or decreasing the perceived costs.

• Once value is created the consumer is either

1. willing to pay for a novel benefit,
2. willing to pay more for something perceived to be better, or
3. will choose to receive a previously available benefit at a
lower unit cost.

Priem, R. L. (2007). Consumer perspective on value creation The Academy of Management Review, 32 (1), 219-235.

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Adding value – The total product concept
The Core Product The Expected Product

The Augmented Product

The Potential Product

Levitt, T. (1980). Marketing success through differentiation – of anything, Harvard Business Review, Jan-Feb, 1-10
Adding value – The total product concept
The Core Product The Expected Product
The generic product Product with minimal purchase conditions
Eg: freshness, taste, colour, quality

The Augmented Product

The value added to the offering above and
The Potential Product beyond the minimal expectations
With all customers requirements Eg: Packaging, branding, quality standards
Eg: Sustainability, animal welfare

Levitt, T. (1980). Marketing success through differentiation – of anything, Harvard Business Review, Jan-Feb, 1-10
Based on Juan Palma’s Case study of the Chilean blueberry
industry
Blueberries in Food Service
‘Ready To Eat’

The Core Product

The Expected Product

The Augmented Product

The Potential Product

Biodyna
mic®
Eg. Chilean Biodynamic® blueberry program,
certified by Demeter Association, Inc.

‘When the quality is right, about 90% of consumers say that price is less relevant” ( Marieke Appel, 2015 Global Berry Congress)
Anderson et al. (2006). Customer value prepositions in business markets, Harvard Business Review, 91-99.

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Customer value propositions

Anderson et al., 2006. Customer value prepositions in business markets, Harvard Business Review 91-99
Markets are driven by consumer value
Objective
Enabling forces
How companies see the
market
Key marketing concept
Company marketing
guidelines
Value propositions
Interaction with
consumers
Marketing 1.0 Marketing 2.0 Marketing 3.0
Product-centric Consumer-oriented Values-driven
Marketing Marketing Marketing
Sell products Satisfy and retain the Make the world a better
consumers place
Industrial Revolution Information technology New wave technology
Mass buyers with physical Smarter consumer with Whole human with mind,
needs mind and heart heart, and spirit
Product development Differentiation Values
Corporate and product Corporate mission, vision,
Product specification positioning and values
Functional Functional and emotional Functional, emotional, and
spiritual
One-to-many transaction One-to-one relationship Many-to-many collaboration

Kotler, P., Kartajaya, H. and Setiawan, I. (2010), Marketing 3.0: From products to Customers to the human spirit, Wiley & Sons, Inc., New
Jersey, USA
Types of operations of a company
Seven typical wastes
1. Overproduction
Non-value adding activities 2. Waiting
(NVA)/Waste 3. Transport
4. Inappropriate processing
5. Unnecessary inventory
6. Unnecessary motion
7. Defects

Necessary but non-value

Ex: Packing, unpacking,
adding activities transport
(NNVA)

Value-adding activities Ex: Processing, branding

(VA)

Hines, P. and Rich, N. (1997), “The seven value stream mapping tools”, International Journal of
Operations & Production Management, 17 (1), 46 -64.
Squizzing the costs down – The easiest
approach
Non-value adding activities
(NVA)/Waste

Necessary but non-value

adding activities
(NNVA)

Value-adding activities
(VA)
The best approach - Being efficient and
effective

Non-value adding activities Reduce waste to decrease costs

(NVA)/Waste

Necessary but non-value Being more efficient

adding activities
(NNVA)

Value-adding activities
(VA) Add more value (effective)

Two dimensions of SC performance - Being more effective (doing the right thing) and
efficient (doing it in the right way)
Creating shared value
• Value can be created at any point in the chain.
• Value creation can be effectively done through chain
collaboration both with suppliers upstream and buyers down
stream.
• This raises the need for VCM.

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References
• Anderson et al. (2006). Customer value prepositions in
business markets, Harvard Business Review, 91-99.
• Barnard et al. (2012). Agribusiness Management, 4th Ed,
Routledge, London.
• Daniel T. J., Huchzermeier, A. and Mitchell, A. (2011).
Creating shared value with consumers, International
Commerce Review, 10 (1).
• Levitt, T. (1980). Marketing success through differentiation –
of anything, Harvard Business Review, Jan-Feb, 1-10.
• Priem, R. L. (2007). Consumer perspective on value creation
The Academy of Management Review, 32 (1), 219-235.
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