Value Chain

 The word ‗value chain‘ was first introduced by Michael porter in his
book ‗Comparative Advantage‘ during 1985. Value chain is defined as
―the full range of activities which are required to bring a product or
service from conception, through the different phases of production
(involving a combination of physical transformation and the input of
various producer services), delivery to final customers, and final disposal
after use‖.
 Value chain comprises of full range of activities required to bring a
product or service from the stage of conception, production and
distribution to consumers (Kaplinsky and Morris, 2001)
Supply chain versus value chain

Supply chain covers the activities of the downstream flow of

activities from source (supplier) to consumer. But, value chain
flows reverse i.e., from consumer to supplier. This is also referred
as ‗demand chain‘, as consumers are the source of value and the
demand is created due to value. The focus of supply chain is on
upstream activities i.e., integrating the supplier and producer and
improving efficiency.
While value chain focuses on downstream activities such as
consumer satisfaction. The supply chain is on reducing costs and
increasing efficiency in operation and value chain is towards
innovative product development and marketing.
 The ultimate aim of value chain studies is to identify
cost effective value chain for the actors separately or for
the whole value chain. A value chain has mainly two
components viz., actors and activities.
i. Actors: Actors are the drivers of the value chain
who are the major driving force in operating the value
chain. Ex: Suppliers, producers, wholesalers, retailers.
ii. Activities: A typical value chain consists of
activities such as design, production, marketing,
distribution and support to the final consumer.
 Value chain activities in fisheries include fishing,
aquaculture production, processing, transport, wholesale
and retail marketing. Food loss and food waste (FLW) occurs
at all levels of the fisheries and aquaculture value chain.
Simple and complex value chain

 Simple value chain comprises of input supplier, producer,

 wholesaler, retailer and consumer with single channel only. It doesn‘t
 have interactions and inter-linkages among the actors. But, in practice,
 value chain is too complex and very difficult to manage.
Complex value chain comprised of two or more chains with many actors involved in
variety of activities. There is often interactions and inter linkages among actors with
many final destinations. Like other sectors, fish value chain is also complex.
Value chain analysis in fisheries
 Value chain in fisheries is used as a managerial tool to reduce
processing costs and improve quality and productivity of the product
and reduces distribution cost. The advantages of studying value chain
in fisheries are,
 i. Increase the producers‘ share
 ii. Minimum cost of the processes
 iii. Increase the efficiency and effectiveness of the actors
 iv. Eliminate the unwanted processes i.e., non-value addition
 v. Quality assurance in product development
 vi. Ensure consumer satisfaction
 The value chain approach is a useful practical tool towards assessing
the status of development of fisheries and aquaculture. It also analyzes
the opportunities and constraints for future development. It is useful
for the key actors such as fishers, managers and policy makers towards
streamlining their activities in a cost effective way.
 The value chain framework helps organizations identify and group their own
business functions into primary and secondary activities.

 Analyzing these value chain activities, sub activities and the relationships
between them helps organizations understand them as a system of
interrelated functions. Then, organizations can individually analyze each to
assess whether the output of each activity or sub activity can be improved --
relative to the cost, time and effort they require.
Primary activities

 Primary activities contribute to a product or service's physical creation, sale, maintenance and support. These
activities include the following:

 Inbound operations. The internal handling and management of resources coming from outside sources --
such as external vendors and other supply chain sources. These outside resources flowing in are called
"inputs" and may include raw materials.

 Operations. Activities and processes that transform inputs into "outputs" -- the product or service being sold
by the business that flow out to customers. These "outputs" are the core products that can be sold for a
higher price than the cost of materials and production to create a profit.

 Outbound logistics. The delivery of outputs to customers. Processes involve systems for storage, collection
and distribution to customers. This includes managing a company's internal systems and external systems
from customer organizations.

 Marketing and sales. Activities such as advertising and brand-building, which seek to increase visibility, reach
a marketing audience and communicate why a consumer should purchase a product or service.

 Service. Activities such as customer service and product support, which reinforce a long-term relationship
with the customers who have purchased a product or service.
Secondary activities
 Procurement and purchasing. Finding new external vendors, maintaining vendor
relationships, and negotiating prices and other activities related to bringing in the
necessary materials and resources used to build a product or service.

 Human resource management. The management of human capital. This includes

functions such as hiring, training, building and maintaining an organizational culture;
and maintaining positive employee relationships.

 Technology development. Activities such as research and development, IT

management and cybersecurity that build and maintain an organization's use of
technology.

 Company infrastructure. Necessary company activities such as legal, general

management, administrative, accounting, finance, public relations and quality
assurance.
Governance
 Market. Market governance involves transactions that are relatively simple, information on
product specifications is easily transmitted, and producers can make products with minimal input
from buyers.

 Modular. Modular governance occurs when a product requires the firms in the chain to
undertake complex transactions that are relatively easy to codify.

 Relational. In this network-style governance pattern, interactions between buyers and sellers are
characterized by the transfer of information and embedded services based on mutual reliance
regulated through reputation, social and spatial proximity, family and ethnic ties, and the like.

 Captive. In these chains, small suppliers are dependent on a few buyers that often wield a great
deal of power and control. Such networks are frequently characterized by a high degree of
monitoring and control by the lead firm.

 Hierarchy. Hierarchical governance describes chains that are characterized by vertical integration
and managerial control within a set of lead firms that develops and manufactures products in-
house. This usually occurs when product specifications cannot be codified, products are complex,
or highly competent suppliers cannot be found.