Value Configuration through Value-Chain for Competitive Advantage

Paper presented by Muhammad Zubir Mohd Hanifaha*

and ZainalAbidin Mohamedb

during the 8th AGBA-DUFE InternationalAcademic Conference, on September 15-17,2011, at Dalian China. [The DongbeiUniversity of Finance and Economics (DUFE) ]aPh.D Candidate, Graduate School of Management,Univerisiti Putra Malaysia, 43400 Serdang,Selangor, Malaysia.Corresponding Author: mzmh07@gmail.combGraduate School of Management, Universiti PutraMalaysia, 43400, Serdang, Selangor, Malaysia,Email: laniaz@usim.edu.my, and since 2012, moved toGraduate School of Muamalat, Universiti Sains IslamMalaysia.

ABSTRACT

Manufacturing firms do their value configuration throughvalue-chain activities and matching these with the resourcesthat they have. Firms manage them through structuring,bundling and leveraging their resources. This is a qualitativestudy and the data from the interviews after beingtranscribed, were then analyzed by using the Nvivo software.Secondary data were also utilised, for validation andtriangulation purposes. The value-chain activities need to beintegrated, and the resources structured, bundled andleveraged. The personnel need to have sound architecturalknowledge, maintain stable capability system, manage theirroutines well to deliver products of valued quality and toensure and sustain their competitive advantage.

Key words: Value Chain, Value Configurations Resource Management Process,

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structuring resources, bundling resources, leveraging resources,

INTRODUCTION

Porter (1991) contended that meaningful approaches tocorporate strategy must grow out of a deep understanding ofhow firms prosper from their individual businesses and theirbusiness units within them.

Porter’s value-chain framework (1985) is presently theaccepted language for analysing the logic of firm level valuecreation. Although his industrial organization competitiveanalysis framework (Porter and five forces, 1980) ischallenged in resource-based critiques (Barney, 1991), value-chain maintains its central role as a framework for theanalysis of firm-level value creation process.

Stabell and Fjelstad (1998) explained that the value-chainmodel acts as a series of linked technology, where value iscreated by transforming inputs into products. Value-chainmodel describe the full range of activities which are requiredto bring a product or service from conception, undergo throughdifferent phases of production (involving a combination ofphysical transformation and the input of various producerservices), delivery to the final consumer and final disposalafter use (Kaplinsky and Morris, 2002). The concept of thevalue-chain introduced by Porter is seen as a powerful toolthat would enable strategists to diagnose and enhancecompetitive advantage. Analysis of the value-chain allow theseparation of the particular underlying activities thatorganisations employ to design, produce, market and distributetheir products or services.

This paper is a result of a study which was motivated by thegaps in the literature and empirical studies on this issue. Itexplores the value configuration processes and relationshipwith resource management on manufacturing companies inMalaysia.

LITERATURE REVIEWThe literature review for this paper has been divided intosections discussing value configuration and its relationshipwith value-chain as well as how resources are managed.

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Value ConfigurationGenerally, the term value configuration has been given for theworth (recognised intrinsic goodness) of all the variousactivities within the organisations. Understanding where, howand why value is created within the company and the particularmarkets is the way to identify which of the activities andassets are distinctive enough to provide a platform forsustainable and profitable growth. In a world where nearlyeveryone faces possibility of abundant choices and scarceresources (as argued in Barney’s work on RBV in 2001), firmswill have to develop and sustain a uniquely attractiveproposition for both customers and employees. But the hardestchallenge is to do this in a way that also creates value.

The value created depends on finding and working on the demandside externalities. Stabell and Fjeldstad’s (1998) typology ofvalue configurations provide a fresh look at how organizationsneed to develop their internal capabilities. Organizationsneed to identify and exploit their respective resources andcapabilities in a distinctive manner to create unique andsustainable competitive advantage (Turner, 2004). Thesedifferent value configurations require different internalcapabilities. And the competitive advantage created isrelative to existing and potential competitors who are definedby their respective product and market scope.

Value Configuration and Value-chain When doing value configuration for any organisation, it has tobe linked to value-chain analysis. The term value-chain hasbeen used to represent a set of value creating activitiescommencing with the basic raw material coming from thesuppliers, before moving into series of value added activitiesinvolving production and marketing, and ending with thedistributors getting the final product to the final consumer(Porter1985b). Porter (1980) proposed value-chain analysis asa way to examine the nature and extent of synergies thatcould be obtained from internal activities of an organization.The well-known value-chain ‘diagram’ serves as an analyticaltool for the analysis of value creation in a specific firm’schain analysis. However, it directs too much attention to unitcosts, i.e., finding costs, development costs, and productioncosts (Stabell and Fjeldstad, 1998). It is not only difficultto assign and analyze activities in terms of the five generic

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primary value-chain categories, but the results often obscuresrather than illuminates the essence of some forms of valuecreation.

Value-chain as a concept and tool has been used for the last30 years to understand and analyze industries. It has provento be a very useful mechanism for portraying the chainedlinkage of activities that exist in the physical world withintraditional industries, particularly manufacturing. Porter’s(1985) value-chain is presently the accepted language forboth representing and analyzing the logic of firm level valuecreation (Stabell and Fjeldstad, 1998).

Thus the notion of value-chain analysis provides practitionersand researchers with a model for decomposing organizationsinto a series of activities and their impact on cost andvalues (Stabell and Fjelstad, 1998). The model works well forfirms that produce and sell standardized goods and servicesthrough a sequential, routine chain of activities (Woiceshynand Falkenberg, 2008). This enables organizations to identifyactivities that are important to their competitive advantage.Nevertheless, Stabell and Fjelstad (1998) pointed out thatthis value-chain analysis is more suited for manufacturingrather than service organizations since activities can bearranged in a linear and sequential manner.

Porter’s (1985a) work has been the key reference on value-chain and value configuration analysis for competitiveadvantage (Stabell and Fjeldstad, 1998). Reviews of the modelreveal a number of ideas that are implicit in Porter’s value-chain analysis framework. The framework postulates thatcompetitive advantage is understood by disaggregating thevalue creation process into discrete activities thatcontribute to the firm’s relative cost position and create abasis for differentiation. The logic of the framework impliesan analysis of competitive positioning based on variants ofcost leadership (Stabell and Fjeldstad, 1998).

Value-chain analysis is also helpful for analyzing competitorsthat share a market position based on similar value and costdrivers. Rivals will almost always differ in their investmentin the various activities. Competitors can also vary inwhether they perform an activity inside the company or

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outsource it to suppliers (Walker, 2007). The notion of Value-C has also framed our thinking about value and value creation.

Traditionally, strategists use the Value-C to analyze the firmand its major competitors and to identify gaps between firmperformance and a competitor’s performance (Peppard andRylander, 2006). The Value-C analysis framework postulatesthat competitive advantage is understood by disaggregating thevalue creation process of the firm into discrete activitieswhich are the building blocks by which a firm creates aproduct.

Different activities have different economics and contributedifferently to the value characteristics of the product. Theactivity disaggregation must be complete in the sense that itcaptures all activities performed by the firm. On the otherhand to maintain a strategic and manageable perspective onvalue creation, it is important that the activitydisaggregation be not too detailed, while still enabling oneto identify those activities that are strategically important(Stabell and Fjeldstad, 1998).

However the application of value-chain framework has itslimitations. Having undertaken extensive research on theapplication of the value-chain model to more than two dozenfirms from a variety of industries such as insurance, banking,metal processing, telecommunication, health services, down-stream and upstream petroleum, engineering and transportation,Stabell and Fjeldstad (1998) reported serious problems inapplying the value-chain framework. While the primary activitytypology of the value-chain appears well suited to describingand understanding a traditional manufacturing company, it wasfound to be less suitable for a number of the serviceindustries. In addition, Porter’s focus on strategies andcompetition as the main driving force in any industry is notvery well suited to the complexity of some industries today.

As products and services become dematerialized, the value-chain itself no longer have physical dimensions and theframework is no longer appropriate to uncover sources of valuein many industries today and (Peppard and Rylander, 2006). Thevalue-chain analysis needs to be transformed into valueconfiguration analysis, which in turn helps us to clarifycritical analysis assumptions (Stabell and Fjeldstad, 1998).

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Collaboration, competition, differentiation and low costs arecommon drivers. Furthermore, Porter focused heavily on thetangible outcomes of cost, revenue, margin and basicconfiguration of business activities. It obscures thecompetitive logic by focusing too much on the transaction-processing unit cost with little attention on the effect ofsuch strategies. The drivers shape the business value system,the industry, and thereby also the competitive position.Competitive position will also be a function of where theindustry is in the product life cycle (Stabell and Fjeldstad,1998).

Value Configuration and Resource ManagementOrganizations possess bundles of tangible resources that whencombined and deployed with labour and other intangibleresources create value and generate profit (Bowman &Ambrosini,2000). Amit and Schoemaker (1993) defined resourcesas stocks of available factors owned or controlled by a firm.These include know-how, human capital and funds as well asphysical assets.

Value configuration involves realizing revenue from thegeneration and production of products or services. Thisinvolves intervention of people in the transformation ofinanimate resources. It is the transformational process thatis a source of differentiation for firms. To ensure that it isbeneficial, the firm has to capture these values (Lepak, etal., 2007) and involves the producer appropriating andretaining the payments made by customers (Priem, 2007). Thisis done by minimizing cost flow to suppliers and maximizingvalue for money for the customers (Bowman & Ambrosini, 2000).

The resource-based view (RBV) provides insight into the valuecreation process through its emphasis on assessing the uniqueresources that create value (Bowman and Ambrosini, 2007).Several researches that are related to RBV largely treat valuecreation as exogenous and focus on incremental opportunitiesto sustain competitive advantage and adopt defensive measuresto impede the deterioration of competitive advantage (King,2007). The characteristics of the value-chain are most suitedto capture sequential flow dependent on cost economics, anddeemed value as primarily a function of quality of data and

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transformative process (Stabell and Fjeldstad, 1998). When thefirm produces greater utility for customers than theircompetitors, it enjoys competitive advantage (King, 2007).

Based on their review of the extant literature, Sirmon, Hittand Ireland (2007) conclude that merely having valuable, rare,inimitable and non-substitutable resources are not enough tocreate advantage. These resources create value only when theyare evaluated, manipulated and deployed appropriately. Theyargue that heterogeneity in outcomes of firms with similarresources is the result of differences in resource management.Others have used the term “higher order organizing principles”and “transformation” to refer to this ability to manage anorganization’s resources and capabilities (Amit andSchoemaker, 1993; Kogut and Zander, 1992).

Sirmon, Hitt and Ireland (2007) propose an alternativeframework when configuring values from the resourcemanagement point of view. They argue that resource managementinvolves three stages namely resource structuring, bundlingand leveraging. These are basically the activities involved inthe process of obtaining the resources, how they are packagedfor the customers and what value-added activities done tocreate wealth.

Structuring of Resources Organizations structure their resources through acquiring,accumulating and divesting resources. i. Acquiring involves purchasing resources from the

market. These resources can be in the form ofcommodities, intangible resources, and complexcombinations of tangible and intangible resources aswell as real options that provide preferentialaccess to future opportunities.

ii. Accumulating resources refers to the internaldevelopment of resources. Sirmon, Hitt and Ireland(2007) explain that this is usually necessarybecause the needed resource is not available in themarket. Accumulation can involve training, learningthrough alliance formation and investment in realoptions.

iii. Divesting resources refers to shedding off resourcesthat are under its control that no longer arecontributing towards its competitive advantage.

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Such acquiring activities are considered and monitoredcontinuously to enable the firm manage its resourcesefficiently

Bundling of ResourcesBundling of resources involves integrating anorganization’s resources into unique combinations thatenable the organization to create value. The bundling ofresources is where transformation takes place to createvalue. Bundling of resources can involve resourcestabilizing, enriching or pioneering. i. Stabilizing involves making incremental improvements

to existing capabilities. Sirmon, Hitt and Ireland(2007) explain that this is typically necessary tomaintain an organization’s advantage by improvingits ability to bundle resources.

ii. Enriching is the process of extending andelaborating a current capability. This can happen bylearning new skills that extend the present role oradding of a complementary resource to the existingstock in the current bundle. Sirmon, Hitt andIreland (2007) argue that this may enable firms tocreate a greater value than its competitors.

iii. Pioneering of resource involves integration of acompletely new and recently acquired resource tocreate new capabilities and/or a new competitiveadvantage.

Leveraging of ResourcesSirmon, Hitt and Ireland (2007) defined resourceleveraging as the application of a firm’s capabilities tocreate value for its customers and wealth for its owners.Leveraging resources involves mobilizing, coordinating anddeploying the organization’s resources. i. Mobilizing involves the identification, designing

and configuration needed that will enable it toexploit opportunities and develop competitiveadvantage. Sirmon, Hitt and Ireland (2007) proposethat organizations can mobilize resources throughthree approaches:

Resource advantage strategy: This involvesutilizing capability configurations that create adistinct competence.

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Exploit market opportunities strategy: Thisinvolves careful analysis of the competitiveenvironment and focusing on those opportunitiesthat can be exploited using the organization’scapability configurations.

Creating entrepreneurial opportunities. Thisinvolves developing capability configurations toproduce new products that require newmarkets. .Sirmon, Hitt and Ireland (2007) arguedthat the ability to mobilize resources is anecessary but insufficient condition for valuecreation. The capability configurations developedthrough resource mobilization must be implementedin an appropriate manner which requires that theybe coordinated and deployed.

ii. Coordinating resources involves integrating themobilized capabilities into comprehensive sets oforganizational skills that can create value. Thisrequires developing effective communication andknowledge sharing.

iii. Finally, deploying resources is about physicallyusing the organization’s capability configurationsto implement its leveraging strategy. This is thestage where actual value delivery happens. Sirmon,Hitt and Ireland (2007) argued that this involvescomplex processes that rely on explicit and tacitknowledge. Organizations resort to codifying theroutines involved to reduce complexity.Nevertheless, this codification is an imperfectprocess because much of the knowledge is tacit andtherefore cannot be completely codified.

The choice of specific resource management approaches will beaffected by the competitive approach of an organization. Thespecific approaches chosen in structuring, bundling andleveraging of resources will be shaped by managements’perception of the capabilities configuration needed to createcompetitive advantage. An organization’s value configurationhas a major influence in this assessment.

The value-chain model of Porter (1985) as extended by Stabell& Fjeldstad (1998) to the resource management perspective ofvalue configuration brings different contributions in the

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aspect of crafting corporate strategy. It can be looked at asin the table below.

The Value-Chain Analysis as adapted for theResource Management perspective

VALU CHAIN

a.Structuring

i. Acquireii. Accumulateiii. Divest

b. Bundling i. Stabiliseii. Enrich

iii. Pioneerb. Leveraging i. Mobilise

ii. Coordinateiii. Deploy

METHODOLOGY

The research is to answer the main question of ‘to whatextent, firms will do value configuration to achievecompetitive advantage?’ This is then broken into twooperational research questions, namely:

i.To what extent do firms adopt the resource management framework?

ii. Specifically, how do firms structure, bundle and leverage their organizations’ resources respectively?

Research Design and Data CollectionThis study primarily applies the triangulation method on thequalitative data gathered. Multiple sources of evidence werecollected to address a broader range of historical,attitudinal and behavioural issues which will also allow thedevelopment of converging lines of inquiry. Strauss and Corbin(1998) propose the validity of doing qualitative researchrelies on the nature of the research problem, the experiencesof the personnel involved, as well as the type of questionsemployed (Meriam, 2002) Grounded Theory as proposed by Strauss and Corbin not onlyprovides detailed and systematic procedures for datacollection, analysis and theorizing but is also concerned withthe quality of emergent theory. They stated that there arefour primary requirements for judging a good grounded theory:

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i. It should fit the phenomenon, provided it has beencarefully derived from diverse data and is adherent tothe common reality of the area;

ii. It should provide understanding, and be understandable; iii. Because the data is comprehensive, it should provide

generality, in that the theory includes extensivevariation and is abstract enough to be applicable to awide variety of contexts; and

iv. It should provide control, in the sense of stating theconditions under which the theory applies and describinga reasonable basis for action.

Selection of the Respondents The respondents were personnel from firms in the manufacturingsector in Malaysia and who are familiar with valueconfiguration. The firms comprise of automotive industry (likeProton, Menang Nusantara and Sipro), quarries, computer chips,office accessories, marines products and others that aremanufacturing-related. They were selected through purposivesampling as well as based on the requirements of this studywhich are i. the respondents were recipients of knowledge

ii. they were involved in the transfer of the knowledgegained

iii. they fulfilled the requirements of the terms of studyfor value configuration.

Mode of AnalysisThe qualitative data gathered from the open-ended survey andthe follow-up interviews were coded (Lincoln and Guba, 1989;Strauss and Corbin, 1998). As suggested by Miles and Huberman(1994), three steps of analysis were applied for summarizingthe data.

i. It involved summarizing the written interview dataindependently. Key themes were identified andresearchers met to discuss their findings.

ii. This was followed by summarising the data of eachtheme, in which the data was presented to the researchteam (committee members) and findings were negotiatedusing the group mind process (Lincoln and Guba, 1989).Rules were revised as needed and all salient phrases andsentences were read to ensure they were placed in theappropriate theme.

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iii. The next step involved drawing conclusions andverifying the findings. Contradictory evidence wasexamined, decision was firmly established andconclusions were made.

Findings were summarized to reflect the major themes thatemerged in the analysis and will be supported by quotationswhere appropriate.

DATA ANALYSIS AND FINDINGThe research questions were continuously addressed throughoutthe study to determine the characteristics, attributes andstructures of the value configuration process and link them toresource management. However, several aspects related to thedata analysis require some deliberations.

Data collection Data were collected based on purposive sampling. It startedwith the selection of the criterion (a) to be applied.Subsequent sample was chosen based on findings that emergedfrom the previous one. It involved the selection of 30participants from a list of manufacturing and service providerfirms. Permission was obtained to conduct interviews and theconversations were tape recorded. The data collected and othersecondary sources were utilised and analysed.

Open Coding of data Open coding is part of the analysis done and is concerned withidentifying, naming, categorizing and describing the phenomenafound in the interview text. Essentially, each line, sentence,paragraph etc., was read in search of the answers to therepeated question "what is this about? What is being referredto here?" (Glaser and Strauss, 1967; Strauss and Corbin,1990).

Classifying the data The classifying process is done by selecting one open codingcategory for the central phenomenon which is also the majorresource. Among the reasons why the major resource has beenchosen to be the central phenomenon of the study are:

i. Most of the discussions with the informants were centredon this phenomenon. For the manufacturing firms, thediscussion was focused on the staff, human capital, theprocess and the system itself and other related issues.

ii. The major issues trigger further discussion.12

Axial CodingAxial coding was done next. Here, data were grouped in newways. This is achieved by utilising a ‘coding paradigm’, i.e.a system of coding that seeks to identify causal relationshipsbetween categories (as favored by grounded theorists) via acombination of inductive and deductive thinking. Its aim is tomake explicit connections in order to understand thephenomenon and to fit things into a basic frame of genericrelationships. The frame consists of the three steps which arethe elements of the phenomenon, causal conditions, and thecontexts within which the intervening conditions and theaction strategies interact and result in the consequences.These elements will be used in analysing the research datawhich are related (Glaser and Strauss 1967; 1998). Thisprocess is often referred to as the ‘paradigm model’.

Outcome of the analysis and the proposed Substantive ModelWhile the whole research covers both the manufacturing andservice sectors, this paper will only present the former asthe two are not the same and showed different outcomes intheir value configuration activities.

As previously discussed, the value-chain framework is suitablefor manufacturing firms in studying how they do their valueconfiguration. These firms configure values through the useof their resources such as machines, tools and labours toproduce goods for the market. Based on the data frominterviews with the manufacturing firms (such as Sipro, GBKuari, Menang Nusantra, Harn Accessories and Proton), thesecompanies are large, and involved in a range of activities,from handicraft to high-tech products. They design processesaccordingly, transform raw materials into finished goods andensure that their systems are consistent with the expectedquality standards. All of them have obtained at least the ISOstandard of quality.

The outcome of the analysis are laid out based on Sirmon etal’s (2007) model for value configuration and how they utilisetheir respective resources. Thus these will be discussedunder the three broad categories of structuring, bundling andleveraging.

Structuring resources:

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This is closely linked to the activities related toacquisition, accumulation and divestment oforganisation’s resources. In addition, they are shaped bythe features of the sequential value chain activitieswhere resources, assets and processes link variousplayers in the chain. As recorded from the interviews,( INTEL, Menang Nusantara, Sipro , and Proton), managingof the various resources have resulted in them developingtheir respective production system. As they were focusedon finished products, they adopt the appropriatetechnology to suit the production system. Acquiring therequired resources need to be done systematically and hadto be developed and together with the chain of activitiesform what can be termed as the architecture of theproduction system. Thus the process of acquisition of thevarious resources has to fit into this architecture andeach will have their own way of structuring them.

While the raw materials acquisition might not be toocomplicated, the human resource component can be. Humanresources acquired (externally) have to fit into thearchitecture and organisations select them for theoperational levels that are capable of taking care of thetasks. Internally, existing staff (common for operationalstaff) were also identified and selected. This can bedone by having proper job training, (in-house orexternal), and job rotation.

Capabilities then need to be developed. Organisationsdeveloped their respective human resources not onlythrough training but also knowledge acquisition throughexperience and business acquaintances with time. But thekinds of capabilities that they developed were focussedon the existing technology and production system. Thiswas necessary to meet the tight production schedule andcould not afford to be fluid or flexible. Thus they haveto maintain a capability environment that is stable. Atmost, they can do refinement of existing capabilitiesaround the core technologies adopted.

For the form of knowledge that their resources need topossess, (and noting that stable capability environmentneed to be maintained), the whole production system whichis prone to articulation, codification, and proceduraladaptation have to be known. Tacit knowledge has to be

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made explicit. This whole spectrum of knowledge of theproduction system is what the resources must possess.This is termed the architectural knowledge of the firm.It refers to the shared understanding of the linkagesbetween the elements of a firm (Kang, Morris and Snell,2007). Building it involves the articulation andcodification of knowledge related to the maintenance ofthe organization’s production system. The value of thehuman resources acquired depends on their ability tooperate within the established architecture. Internaldevelopment such as training that took place, werecentred on the architecture knowledge to enhance theirability to run the stable production system.

Sirmon, Hitt and Ireland (2007) argued that the internaldevelopment of resources is part of the accumulationprocess and will increase the firm’s advantage and ensureits maintainability. The accumulation process in Value-chain firms takes place within the context of a stableand sequentially arranged process. Divestment does occurwhen technology becomes obsolete and processes need to bereengineered with time.

These different approaches in structuring resources willalso affect how the other two value configurationcomponents perform namely bundling and leveraging theirresources.

As a summary, resource acquisition in Value-chain firmsis shaped by the architecture of the production systemwhich encompasses the sequential resources, assets andprocesses that link various players in the chain. Humanresources acquired have to fit into this architecture. Asreported in the interviews ( INTEL, Menang Nusantara,Sipro , and Proton) the forms of knowledge that isnecessary is architectural knowledge that will help themdevelop the competitive advantage. With the knowledge,they would then develop a form of capabilities that isstable to be effective and efficient.

Bundling resources:

At this second stage of value configuration,organisations need to integrate all their resources intounique combination so as to create value for the

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customers. However they can look at this bundling effortfrom three different perspectives namely stabilising,enriching or pioneering them.

Stabilising the process involve making only smallchanges to existing capabilities. This ensures a certaindegree of stability while at the same time maintain acertain degree of flexibility to enable incrementalimprovement. Sirmon, Hitt and Ireland (2007) point outthat the stabilizing process can be sustained for a longperiod only under conditions of high certainty. Frequentchanges in a highly uncertain environment disfavourstabilization and erode the firm’s competitiveness.Stabilizing the resources on the other hand need to beplanned accordingly and comes in packages involving thestaff, system and processes involved. It was reportedthat value-chain firms did pay attention to stabilizingtheir resources as well.

For a Value-C firm, maintaining a stable organizationalarchitecture (process and resources) requires developinga tight coupling system that rely on complicated,detailed, analytic processes and dependent on existingknowledge and sequential execution of activities toproduce consistent outcomes (Eisenhardt and Martin,2000).

However acknowledging the dynamism and volatility of thecompetitive environment, organisations also recognise theneed to enrich and even pioneer the bundling exercise soas to remain of value to the customers. Lepak, Smithand Taylor (2007), argued that firms that are facingmore uncertainty are more likely to innovate. From theresources acquired, the process of bundling them can be ina tight coupling form (for stabilising), but in order toenrich and pioneer, then managing the resources takes ontheir own distinct patterns.

Managing the resources is highly linked to the knowledgedeveloped in each of the value configurations activitiesalong the value chain. All these need to be integrated tocreate and enrich the capabilities. To do this, eachvalue configuration has to develop routines unique totheir value creation approach. Specifically, they will

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require different routines to support the use of theirknowledge. The value chain firms (Intel, Proton, and it’svendors like Menang Nusantara and Sipro ) claimed thattheir organizations have both stable and static routines.These routines are used to regulate the on-goingoperational activities. Static routines ensure that thestability of the organization’s architecture ismaintained and operated efficiently.

As pointed out Kogut and Zander (1992), firms need todevelop higher order organizing principles that areneeded to transform expertise into products and services.This will have implications for how these valueconfigurations bundle and leverage their resources.

Lepak, Smith and Taylor (2007) argue that firms whichface more uncertainty are more likely to innovate. Ortonand Weick (1990) describe loosely coupled systems assystems where the elements are responsive and retaintheir separateness and identity. These elements affecteach other occasionally and in a limited manner. In sucha system, the elements are interdependent but are nottightly linked. As such the elements are distinct. Thisis different from a tightly coupled system where theelements are continuously interacting with each other ina highly dependent manner. The loose coupling providesthe flexibility in responding to frequent and uniquerequirements of its customers. Such a system is simple,experiential and leverages on quickly created newknowledge. The execution process involves iterativeprocesses to produce customer specific solutions(Eisenhardt and Martin, 2000).

In bundling the resources, Value-C configuration firmsnormally have a formal training plan to ensure staffs hasappropriate skills, knowledge and abilities. This is inline with the firms’ process and systems in productionsand operations where these employees are expected to havecertain levels of capabilities. Some of the job shops inproduction level have been planned according to thetechnical skill requirement. Job rotation among theirstaff is a normal practice at these firms. In the processof extending the existing capabilities, the firmsnormally conduct benchmarking for the process, system,and product. In the mean time they also search for more

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customers to create demand for their products. The firmsalso integrate their capabilities by routinelyevaluating their process, system, product and the staff.Value-C configuration firms have static routines whichrefer to the process mapping to ensure stability andoperating efficiency. Routine controls were done byapplying the KPI, ISO, and SOP. For the sake of costeffectiveness, the firms apply the concept of economicsof scale. Regarding to organisational structure, Value-Cconfiguration firms have centralised management and tightcoupling. This nature of organisational structure is tomake sure that everything is under control.

For a Value-C firm, maintaining a stable organizationalarchitecture requires developing a tightly coupledsystem. The characteristics of this system involvereliance on complicated, detailed, analytic processesthat rely on existing knowledge and sequential executionof activities to produce consistent outcomes (Eisenhardtand Martin, 2000).

New knowledge developed in each of the valueconfigurations can also be integrated to create newcapabilities. To do this, firms need to develop routinesunique to their value creation approach. Specifically,they will require different routines to support the useof their knowledge.

Given the relatively stable internal environment thatvalue chain firms seek to enact and the tight couplingof its processes, they will rely more extensively onhaving static routines (Pisano, 2000). The informationgathered (from Intel, Proton, and their vendors likeMenang Nusantara and Sipro) were directed towardsstable and static routines being practised.. Staticroutines need to be controlled to ensure that thestability of the organization’s architecture ismaintained and operated efficiently. These routinesbecome a part of the mechanism for the enriching process inthe bundling stage of resource management.

Value chain firms can seek to develop some flexibilityin their long-linked architecture by designing processesthat enable variations in their products at the end ofthe process (Sanchez, 2003). This allows for

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considerable stability in the earlier parts of theprocess while building a certain degree of flexibilitytowards the end of the process.

Leveraging resources: Value chain firms are profit oriented. Their operationalworks are based on the Key Performance Indicators (KPI).Performance wise, they hold to the concept of “meetingthe target and within the budget’. This is related tothe cost leadership stance of Porter’s generic strategy.Operation-Wise firms are bound to the productiontechnology and are always exposed to the competitivetrend. With regard to reputation, value-chain firms aremore geared towards product based, thus building-up thecustomers’ loyalty will be a part of their marketingstrategy.

In leveraging from the capabilities perspective, value-chain firms had the advantage of being able to separateproduction and consumption of their output by customers.There is a temporal and spatial interval betweenproduction and consumption. For value-chain firms,resource mobilization happens mainly at the point ofproduction. However, the deploying of the resources cantake place partly in a different location. This couldhappen at the retail outlets or at a place where thecustomer operates for industrial customers. Thoseinvolved in the production of the goods do not usuallyinteract with the end users. This is especially true forcompanies like Intel which have plants in severalcountries throughout the world. When it comes to theselling of their finished products, they appointretail outlets to deliver the products to the customer. Bowman and Ambrossini (2000) argued that the source ofdifferentiation for a firm is located in its internalprocesses. For a value-chain firm, most of the processesare hidden and invisible to the customer. Because theyare product-based, their customers are usually able toexamine and evaluate a firm’s products prior topurchasing it. The customer will typically assess theuser value and the exchange value of the product (Bowmanand Ambrossini, 2000). The user value is basicallyrelated to the quality of the product and the exchange

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value is tied to its price. As such, value-chain firmsdepend on the reputation of their output to win overcustomers.

From the analysis and Reflective Matrix, a diagram can beconstructed and proposed as the substantive model.

Substantive Model of Value Configuration for Value-Chain

Firms

The data from the study and the literature review clearly showdifferences of value chain firms manage the bundling of theirresources. As a result, it reflects differently on the issuessuch as the form of knowledge to be focussed, degree ofcoupling, the kinds of routines that need to be establishedand the level of control that need to be implemented

DISCUSSION, CONCLUSION, IMPLICATIONS ANDRECOMMENDATIONS

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Structuring

Bundling

Leveraging

Form ofCapabilities:

Form of Knowledge:Architectural

Routines: Stable &Static

Routine control

Coupling: Have to betight

Reputation ofProduct

VALUE-CHAIN

Firms in the manufacturing and service sector possessdifferent characteristics with regard as to how they look atvalue configuration from the resource management perspective.This paper however only presents findings on the manufacturingsector. This study is also motivated by the gaps in theliterature. In addition, only a few empirical studies hadbeen conducted on this issue especially in Malaysia. A managershould know where, how and why value is created within thecompany. An understanding in value configuration issues inparticular markets is the way to identify which of theactivities and assets are distinctive enough to provide aplatform for sustainable and profitable growth. In a worldwhere nearly everyone faces abundant choices, scarce resourceas argued in Barney’s (2001) work on RBV, will pose achallenge for all businesses to develop and sustain a uniquelyattractive proposition for both customers and employees.However, the hardest challenge is to do this in a way thatalso creates value.

The technology of value-chain firms is centred on a stableproduction system, where considerable attention is given torecruiting high quality human resource (Stabell and Fjelstad,1998). Value configuration takes place through thecombination of the knowledge and experiences of the experts.In addition Sirmon, Hitt and Ireland (2007) argued that thisinternal development of resources occur at the accumulationphase (after acquisition), and increases the causal ambiguityand maintainability of the firm’s advantage.

This study makes several contributions in the area of valueconfigurations and resource management. As previouslydiscussed, firms from different industrial sector havedifferent ways of managing resources. Managing resourcesaccording to the nature of the organisations has been a majorchallenge for managers, and this has consequently prompted agreat deal of interest from researchers, academicians andpractitioners for a better strategic planning. Thus itprovides some insight on mapping of value configuration andresource management, and contributes to the body of knowledge. Contribution for managersAs indicated by the concept of value configuration andresource management processes in this research, the nature ofthe organisations, (in particular values configurations)support the way they manage their resources. This is crucial

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in determining continual organisational operations.Therefore, managers should promote and highlight thecriticality of understanding value configurations andencourage decision makers to do the right mapping towardsoptimal utilisation of the available resources for theirorganisations. Managers can use these inputs for decisionmaking which then creates a favourable business environmentconducive for achieving the goals and aspirations of theirrespective long term plans.

Implications on Theory Development

Even though Stabell and Fjelstad’s (1998) work on valueconfigurations has presented us with a deeper understanding ofhow firms create value, the theory on these valueconfigurations calls for further development. This paperseeks to contribute to the development of the theory on valueconfiguration by extending the discussion to encompass theresource management requirements of these configurations. Indoing so, it also contributes to the resource based view byhighlighting the contingencies of resource management andcompetence development.

Methodological ContributionsThe qualitative study which emphasises on Grounded Theory byStrauss and Corbin was adopted. This Theory accuratelydescribed the research method in which a theory is developedfrom the data, rather than the reverse. This study is aninductive approach which means that it moves from the specificto the more general. Grounded Theory has been used in otherdisciplines of research as well, especially in the field ofsociology, education, nursing studies, political science, andpsychology. Thus, its use for the research of valueconfiguration and resource management will further enrich themanagement research methodology.

This method was adopted due to a number of reasons. First,grounded theory research constructs theories in order tounderstand phenomenon. The phenomenon here answered theresearch question comprehensively with regards todifferentiating Value-C. Secondly, this method is inductivelyderived from data. Since there is a limited empirical researchin this area, Grounded Theory seems a somewhat good method toadopt. Thirdly, it is subject to theoretical elaboration, and

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lastly it is judged to be adequate to its domain with respectto a number of evaluative criteria.

Strauss & Corbin (1994) on the other hand describe groundedtheory as a set of relationships that offer a plausibleexplanation of the phenomenon under study, namely, the theorythat is grounded in data which are systematically gathered andanalyzed. Glaser and Strauss (1967) also do not regard theprocedures of grounded theory as discipline specific, and theyencourage researchers to use the procedures according totheir own disciplinary purposes.

Implications to Managerial PracticeIt is imperative for managers to understand the implicationsof this research as it highlights the proper method of mappingresources and modus operandi of decision making. Implicationsof the theory have been discussed earlier which include theconcept of value configuration, resource management process,and form of knowledge, coupling, routines, control of routinesand others as the main concepts to explain the value-chain.

This study shows that companies with particular valueconfigurations manage the main resources that are relevantto their business. Malaysian companies should be sensitivetowards changes in their business environment. As indicated bythe concept of value configuration and resource managementprocesses, the nature of the organisations, support the waythey manage the resources and is crucial in continuousoperations of the organisation. From a value-chainperspective, the way they structure, bundle and leverageresources are based on their stabilising the capabilities,enrich human resources with the architectural knowledge, haveroutines that are static and tightly controlled and manage atight coupling system, which enable organisations to formdistinct images and identities for the sake of production andreputation of the products.

The study also highlights the effects of value-chain firmsengaging in the concept brought by Stabell and Fejlstad (1998)and Sirmon ET. al (2007). By engaging the two concepts it willbring more perspectives in understanding value-chain. Byclarifying these concepts it is hoped that the person incharge of planning organisations’ resources will do itcorrectly and effectively. Managing resources according to the

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nature of the organisation plays an important role instrategic management decision making.

Therefore, managers should promote and highlight valueconfigurations and educate decision makers on the right methodof mapping out resources in the organisations. Management usesthese inputs for decision making which then create afavourable business environment conducive to achieving goalsand long term plans.

Areas for Further Research Based on the preceding discussion, several suggestions can beoffered for future research in value configuration andresource management. This study has demonstrated themultifaceted nature of value configuration and linked it withresource management. Rather than prescriptively or inductivelyvaluing the nature of organisations and the way they arestructured, bundled and leveraged their resources, researchefforts should be focused on the quality of their valueconfiguration. Future research should explore the dynamic ofthe themes, categories and how it is enhancing the effectiveresource management processes. Developing the measurementinstrument and deductive research can be done to furthervalidate the chosen measurement. Future research should alsolook at the total perspectives of business nature within thesystem and should consider looking at a larger sample size.

Intensity of competition internationally and globally,complexity in business organisation, and the way of doingbusinesses, did not emerge as an influence on valueconfigurations. Many research validates the Stabell andFjelstad’s (1998) study in the decision making process.Future research should adopt a contingency framework along theline of this study as the universal approach appears toreceive little support. Developing the measurement instrumentand deductive research can further validate the researchfinding in this area of study. Future research perhaps canalso explore more thoroughly the multiple operations of thecontract which not only test the proposition but alsotriangulate a better measurement which will be giving greaterconfidence in the instrument's measurement before anygeneralization can be proposed for the study area. The findingcan only be generalised to the chosen organisation and settingand not to industry as a whole. For richer data and better

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generalisation, more organisations should be included infuture studies. Future research should also look at the totalperspectives of business nature within the system and followedwith a larger sample size.

Limitations of the StudyThe cross-sectional design of this study is appropriate forthe purpose of establishing the extent to which a phenomenonis experienced by an organisation. In fact, several analysesof the value-chain firms have exposed the existing evidence ofvalue configuration in business practices. The significantlink between value configurations and resource managementprocess shows and explains the causality between emergingvariables. The suggestion of causality is made based on thesetting chosen by the study and it emerged from the findings.Although cross sectional design is criticised for beingdeficient in organisational research, it is still adequate forestablishing the extent of occurrence of a phenomenon in acase of highlighting the issue of value configurations andresource management.

The procedure adopted raised some concern about biasness inthe method. All the data obtained were collected through in-depth interviews and analysis of documents. Furthermore, theywere gathered from top management especially in humanresources and operations. However, since the setting andrelative findings were focussed on the absolute magnitude, theextent of biasness was minimised.

The scope of this study is also based on the identifiedresearch questions. The study was based on this setting and onthe findings of interviews and how detail the probing wasdone. The use of multiple informants gave a morerepresentative account of the phenomenon and enabled thesaturations point of particular issues to be reached.

The purposive sampling strategy adopted for this study whileit is acceptable for qualitative and organisational research,the purposive sampling strategy adopted by this study doesimpose some caveats in term of generalizability of findings.This method allows for the selection of firms that providerigorous findings to develop themes and categories in groundedtheory. The proposed substantive model seeks to throw light onthe issues of linking the value configurations and resource

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management. Even though it is not a true bloom of the theory,it will somewhat prove the general finding of the chosensetting.

CONCLUSIONThe value-chain framework fits well to understand howmanufacturing companies manage their resources and do valueconfiguration so as to develop and maintain competitiveadvantage. These are captured into three categoricalcomponents where the resources are systematically structured,bundled and leveraged together encompassing the variousrelated management issues. The companies need to have not onlyquality products to offer to the customers, but also requirethat they structure a unique package that encompass theirresources including the staff and blend with the system andprocesses to deliver products of quality, not only valued bytheir customers but also placed them in a competitiveadvantage position.

This ‘packaging’ as deduced from the qualitative analysis, wastallied with the current literature. From the outcomes of theopen coding, selective coding and categorising activities, thesubstantive model was developed based on the inductiveapproach. The analysis reveals that favourable structure andidentity are crucial in attaining the differences according tothe value configurations.

This paper is built on the grounded theory model forunderstanding value configurations and resource management atthe selected research settings. The findings also contributeto the body of knowledge and on managerial enrichment. Basedon the discussion in the foregoing section, the followingresults could be summarised as the conclusion of the study.

A manager should know where, how and why values need to becreated within the company. Understanding value configurationissues in a particular market is the way to identify theactivities and resources that are distinctive enough toprovide a platform for sustainable and profitable growth. In aworld where nearly everyone faces abundant choices, scarceresource as argued in Barney’s (2001), will pose a challengefor all businesses to develop and sustain a uniquelyattractive proposition for both customers and employees.However, the hardest challenge is to do this in a way thatalso creates value.

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The notion of value-chain analysis provides practitioners andresearchers with a method for decomposing organizations into aseries of activities and their impact on costs and values(Stabell and Fjelstad, 1998). The model introduced by Porter(1985b) suits companies that produce and sell standardizedgoods and services through a sequential, routine chain ofactivities (Woiceshyn and Falkenberg, 2008). This enablesthe organizations to identify and plan activities that couldenhance their competitive advantage. Stabell and Fjelstad(1998) pointed out that value-chain analysis is more suitedfor manufacturing organizations where activities are arrangedin a linear and sequential manner.

The research also makes contribution from the managerialstandpoint, especially in the line of strategic managementwhere the drive to be better than the competitor is a neverending task. It is expected to provide a clearer picture andawareness to Malaysian firms in dealing with these challenges.Furthermore, the understanding of the value configurationswill enhance firms in decisions related to resourcemanagement. Besides, this research also hopes to provide agreater understanding with regards to firms’ involvement inutilising their resources for better organizationalperformance. Finally, identifying the differentcharacteristics of the value configurations and improvingresource management process will provide more preciseunderstanding and proper directions for managers to developeffective business strategies.

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