Page 98 - Marketing the Basics 2nd

90 Marketing: the Basics
flows create complex behavioural systems, which in turn affect individuals, departments, companies and even economies.
Customer value is created when the needs and wants of the customer are satisfied. Those firms that create partnerships to best align these flows to improve the performance of the system create what is known as a value network. Value networks are more effi- cient than linear supply chains because every aspect of the system is aligned to the purpose of creating customer value, not maxi- mizing short-term profit.
THE VALUE NETWORK
A value network is a system of interdependent organizations needed to source, support and deliver a product that provides customers with the highest level of value. Upstream, suppliers offer value by guaranteeing the quality and time of delivery of the product. Downstream, intermediaries act as marketing channels to the targeted customer. A value network offers many advantages. The first is that it increases specialization. Since each company is guaranteed a source of supply, each firm can concentrate on those activities that they do best. The second advantage is that it allows every member of the network to become aware of disturbances in the supply chain much more quickly. If problems arise upstream or downstream, all members of the network are affected – a consider- able incentive to ensure cooperation is used to resolve the problem. Finally, a value network increases the likelihood that firms will integrate certain parts of their operations with adjacent partners to ensure the network is operating smoothly. A well-managed and properly designed value network decreases cost and increases effi- ciency. What’s more, by orienting a firm’s operations to maximizing customer value the firm in turn becomes better at ‘sensing and responding to’ customers’ needs.
An example of a value network is Airbus and the way it is manufacturing the giant 555-passenger A380. Airbus has chosen a number of what are called Tier I producers, which they use to supply key modules and sub-assemblies. Airbus then assembles the behemoth in Toulouse, France. Among their many Tier 1 suppliers are TRW for ailerons and rudder, Rockwell Collins for avionics,