Value Chain for Higher Education Sector-Case Studies of India and Tanzania

By Makkar, Urvashi; Gabriel, Elisante ole et al. | Journal of Services Research, February 2008 | Go to article overview

Value Chain for Higher Education Sector-Case Studies of India and Tanzania


Makkar, Urvashi, Gabriel, Elisante ole, Tripathi, S. K., Journal of Services Research


This paper is an effort to develop what ought to be a new dimension of the value chain, which will cater to the service sector with special reference to the Higher Education sector. Porter's Value Chain has been used as a reference to build another value chain for services. Besides this, the present paper attempts to trace the major challenges arising in the global and domestic higher education environment due to fast changing environmental factors. A discussion on value management, co-creation and delivery of value forms part of this paper. Higher Education sector of Tanzania and India have been used as the reference in conceptualising a general value chain for services. This paper also suggests some innovative measures to enhance the competitiveness of higher education services in the era of knowledge economy.

INTRODUCTION

For many decades marketers have been considering service as a separate concept from 'product'. With the inception and growth of the service sector around the globe, there is a significant growth of marketing of services. Indeed, now we have to perceive service as a product with different characteristics from the physical product. For this peculiar difference, the value chains of these two categories of products (tangible and intangible) ought to be different though having some commonalities. Porter (1985) has developed a value chain with five primary activities and four supporting activities. The said value chain is very applicable to the manufacturing sector but, as it is, the model cannot be used directly in the service sector1.

VALUE MANAGEMENT

Value could be defined as the customer's perception about the whole bundle of benefits, either tangible or intangible, which satisfies his or her needs timely, effectively and efficiently. It must be borne in mind that 'satisfaction' ought to be from the customer's point of view. Value is always and will continue to be subjective, since what satisfies customer X, might dissatisfy customer B as not all customers are equal. Perhaps the most important rule of marketing is the Rule of Focus. No matter what size your company is, any attempt to serve too many diverse needs is not sustainable. Therefore, the Rule of Focus forces you to identify and serve the customers whom you can do your best and give value-for-money. The term 'niche' is over-used in marketing circles for a very good reason. Not every customer (or potential customer) will think your offer is the best. In most cases, they will seek out a completely different customer experience altogether. However, there is tremendous value to understand why they think this way. For starters, develop a profile of your most and least profitable customers. What is different about each group? Do any of your least profitable customers have the opportunity to become most profitable customers? If so, what would you have to do? Is there a better investment you could make in your best customers? It is a trade-off, but take the time to review your alternatives. You need close links with your customers so that you can deliver the right value to them. Therefore, value needs to be co-created (marketers and customers together). Though value is considered as a bundle of benefits, customers have to incur some costs to obtain the value (Kotler 1994). These costs can be in the form of money, efforts, time, opportunity cost, etc. Therefore, for the customer to be satisfied or dissatisfied depends on the net value between the total customer value and total customer cost. This net value is called Customer delivered value.

Customer Delivered Value (CDV) = CV - CC

Where; CV = Customer Value, and CC = Customer Costs

Value Co-creation System (VCS)

There is a need for the value to be created both by the service provider and service user. This will be compatible with the given definition of value that, it is a perception from the customer's point of view. Once there is no co-creation of value, there is a great chance of mismatch in the delivery system.

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