Creating high performance value chain organisations (HPVCO)

Abstract

South Africa is experiencing difficult times on the economic front after the political transition in 1994. The country's average annual economic growth rate (GOP) declined from more than 5o/o in the 1960's to less than 3%> per year during seven years ending. The population growth increased at a relatively high rate with the result that per capita income decreased with unemployment increasing sharply. South Africa requires a GOP growth rate of at least 6 °/o to close the gap. It is pleasing to hear that the Reserve Bank is now starting to predict growth rates of up to 6 °/o in the year to come. The country cannot afford low economic growth given the implications for unemployment, poverty and political and social stability. A fundamental restructuring of the South African economy with the view to increase the growth capacity and actual growth performance of the economy is necessary. Considerable emphasis will have to be placed on the promotion of employment creation. The country's economic problems cannot be alleviated without sustained economic growth. Employment- creating growth to the advantage of all South Africans. Productive investment, higher exports and increased productivity hold the key to the resolution of the country's economic problems. Coherent and viable strategies are necessary, capable of ensuring sustainable growth and an improvement in the quality of life of all South Africans. The crafting and implementation of these strategies is mainly the responsibility of government and business. The focus of this study is mainly on the role of business. Management experts and corporate executives world-wide talk with greater insight about business concepts and goals achieving world-class status and best-in-class performance. The changes that overtook South Africa in 1994 with political transition, allowed a flood of new competition into the South African market whilst the opening of international opportunities took place at the same time. Competition is more intense with less protective barriers, import duties for instance, were dramatically reduced. At the core of the challenges facing South African businesses is the need for exceptional leadership, leaders that can meet the challenges of this new highly competitive environment, leaders to steer a company towards world-class performances. Events in the global business environment have lately turned the spotlight of management attention onto business optimisation. These events have been superimposed onto broad global change drivers to create a far more challenging business environment than we have seen in the history of the world. These change drivers include globalisation of competition, disintermediation and fragmentation along the value chain, commoditisation of products and services, digitisation of products and services, the rapid emergence of the knowledge economy and concentration of capacity in the search for economies of scale. With business optimisation occupying centre stage in many companies, it became appropriate to research the concepts and definitions of a High Performance Value Chain Organisation (HPVCO). The following elements were investigated in order to get further insight into the concepts and definitions of High Performance Value Chain Organisations (HPVCO): • Strategy formulation and implementation as the backbone of High Performance Value Chain organisations (HPVCO), discussed as part of the literature study. • Organisational renewal and what it takes to become a successful organisation. The General Electric (GE) model serves as an example with the focus on boundaryless behaviour which became one of Jack Welch's core strategies during his time at GE. • How companies explore growth opportunities and their funding capabilities with the focus on shareholder value and assessment of company performance. • Shareholder value was defined, calculated and analysed. • Economic Value Added (EVA) was explored as a more progressive measure to assess performance of a listed company and link EVA to the financial perspective of the Balanced Scorecard (BSC). • Value chain concepts and definitions were explored before focussing on the individual value chain elements itself. The research focuses on vertical integration strategies, but more specifically backward and forward integration. • The important value chain elements were identified with the focus mainly on the human element and Information Technology (IT) with a limited focus on processes. • Human talent and how to energise and mobilise this resourceful capacity to the best. • Process re-engineering and supply chain management. • Information Technology and Communication (lTC) with emphasis on Enterprise Resource Planning (ERP) systems and the ERP building blocks. • Value chain performance measures • The Balanced Scorecard as a management control system, an enabler to communicate and implement strategy throughout all the levels of the organisation. The essence of the research was to obtain clarity on above issues, which was accomplished by revealing the concepts of strategy and value chain, defining strategy and value chain and determining what is needed to create High Performance Value Chain Organisations (HPVCO) in order to improve shareholder value. As part of the literature study a theoretical context was used to explain the concepts of the strategy and value chains, which comprise the definitions, and complexity of the various elements involved in creating High Performance Value Chain Organisations (HPVCO).