Uses of the value chain

The value chain can be used in a number of ways. First, it can form the basis for analyzing a single organization, identifying the systems that support the creation of the product, evaluating their importance in creating customer value and looking for ways to improve efficiency or enhance customer value. It can also be used to analyze the operation of marketing channel, evaluating the contribution of each member to the value delivered to the final customer. This can provide a guide to relationship development by identifying complementary processes. The real power of the value chain model is in forcing the analyst to view the organization as a set of processes – this engenders the systems thinking that is crucial to the success of RM.

Ethics and RM

Given RM’s emphasis on trust and commitment, the adoption of an ethical approach to the treatment of customers and other stakeholders must receive overt attention in the planning process. According to Vinten, the ethical organization is the only viable form of organization in the long term:

An organization that creates a negative ethical impact may find the withdrawal of public approval and of the market for its products. It may benefit in the short term but the nemesis is always potentially just around the corner.

(Vinten, 1998)

Quality awards such as ISO9000 and the Malcolm Baldridge National Quality Award include criteria regarding the contribution to the well-being of staff, customers and the wider community. In short, corporate ethics have a significant impact on the sustainability of a business strategy, and the perceptions of organizational quality.

The social audit

Vinten provides a definition of the social audit, which he argues, should form part of the planing process:

A review to ensure that an organization gives due consideration to its wider and social responsibilities to those both directly and indirectly affected by its decisions, and that a balance is achieved in its corporate planning between these aspects and the more traditional business-related objectives.

(Vinten, 1991)

He identifies the work of Social Audit Ltd as a model of practice. Social Audit Ltd is a not-for-profit organization concerned with improving public accountability of government and private business. The work in question examined the Avon Rubber Company Ltd, and reported on the following aspects of the business:

• Organization, management style, resource use, investment;
• Employee relations, pay and conditions, job security;
• Customer relations and product benefits;
• Community relations;
• Environmental impact (Vinten, 1998).

The above forms a comprehensive list of the issues that should be covered by the social or ethical audit.

In terms of measuring the organization’s impact under these headings, Natale and Ford (1994) suggest a number of approaches:

• The inventory approach: a simple list of programmes the organization has implemented to deal specifically with social problems;
• The process audit approach: a systematic assessment of costs, benefits and achievements of the firm’s activities from the perspective of its various stakeholders;
• Cost-benefit approach: an attempt to quantify costs and benefits of the company’s activities in money terms;
• Social indicator approach: the use of social criteria (e.g. the provision of employment, contribution to the economy etc.) to evaluate the impact of corporate activities.

Whatever method is used, the effectiveness of the social audit can be enhanced by the involvement of all stakeholders in the process. Planners should, therefore, seek to engage customers, suppliers, employees and the wider community in the process of analyzing the company’s ethical performance and developing plans for future improvements.