The value chain's values: Interpretations and Implications for firm and industry analysis

How can e-business contribute to value creation? The answer is frequently given by a value chain analysis. Because the value chain is about activities that contribute to value creation, the definition of value is very important. From Porter’s original work and also from other current management and e-business textbooks one can derive two distinct interpretations: revenue and willingness to pay. This article discusses both of them. The willingness to pay is chosen as the appropriate interpretation. The article also shows that the value chain analysis frequently assumes zero costs for production and collection of payments. Therefore, to think about customer relations and business models the value chain analysis is incomplete and has to be supplemented by a payment chain analysis. We propose the extended value analysis. Short examples from the search engine industry illustrate that the subject of this article is not only of academic nature but has implications for practitioners, too.