value+chain

=The Value Chain= The Value Chain describes those processes by which value is added to raw materials (or commodities) in various steps of producing a finished product or service.

Budget airlines
They're not as cheap as you might expect. [|Additional charges and poor service] are the rule rather than the exception, particularly for RyanAir, the world's most complained-about airline. 31-3-2011

Kickbacks to music teachers -- value-added, or just plain ripoff?
Read the article outlining how some retailers of musical instruments [|pay commissions to music teachers]for recommending instrument purchases.
 * What value might be added in this process, ie what benefits might there be in this practice for the music student?
 * What are the costs?
 * What is the ethical responsibility of a music teacher toward their student? Are the music teachers betraying a trust or breaching professional ethics?
 * What is the responsibility of the business (ie the instrument seller) towards their customer?
 * Should a business always tell the truth to its customers?
 * What factors help to make businesses more truthful in their dealings with customers?

The Value Chain -- commodities to finished product
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Example: Diamonds
For example, in the production of diamonds:
 * raw diamonds are taken from the earth
 * diamonds are cleaned, graded and sorted
 * rough diamonds pass through a commodities wholesaler such as de Beers
 * a diamond cutter turns a less-valuable rough diamond into a quality cut gemstone
 * a jeweller takes the gemstone and places it in a setting that further increases the value of the stone
 * a jewellery wholesaler fills the order of a jewellery retailer
 * the retailer sells the finished piece of jewellery to the final customer

Each step in which value increases is part of the Value Chain. These processes are often called //Value-Adding//.

The majority of high-quality diamonds for jewellery originate in Africa, with Russia, Canada and India increasingly important producers. The Australian miner Argyle Diamonds is the world's largest producer of uncut diamonds, but most Australian diamonds are lower-grade and used in super-hard industrial tools for drilling, polishing and cutting.

Source Consulted: [|Commodity Online]

Business and the Value Chain
Each of the above value-adding steps in the Value Chain involves a business: a miner, refiner, assessor, wholesaler, distributor, craftsperson or retailer.
 * Each step requires specialised expertise, suppliers, customers and a means of exchanging goods and currency.
 * Businesses generally prefer to operate in a stable, predictable business environment so they can make
 * For businesses to remain stable or growing they must make a profit; that is, their revenues (money coming in) must be greater than their costs (money going out). The value chain is the process by which each business at each step makes a profit and therefore remains viable.

Example: [|Value engineering]
Value engineering is the process of analysing costs and revenue to identify ways in which value can be maximised. The link is to a BizEd article on value engineering.

Exercise: Tracing the Value Chain
Take three of the following products and sketch out the value chain that took them from raw materials to finished product. Use the diamond example above as a guideline:
 * iPhone
 * desktop computer
 * automobile
 * refrigerator
 * microwave oven
 * a newspaper
 * a house
 * a bridge overpass
 * a jet aircraft

Wealth Creation
A short Flash animated cartoon that illustrates the process of wealth creation. []