Value Chain

Topics: Management, Marketing, Hotel Pages: 7 (2107 words) Published: April 29, 2013

Proceedings of the 8th International Conference on Innovation & Management

Analysis on Hotel Service Innovation and Value Promoting Paths Based on Value Chain Theory∗ Fan Linsheng 1, Han Yu2, Wang Na2 School of Management, Wuhan University of Technology, Wuhan, P.R. China, 430070 2 Shijiazhuang Broud Business Consultation Co. Ltd, Shijiazhuang, P.R. China, 050011 (E-mail:,, 1

Abstract: It has positive significance for promoting hotel value by analyzing hotel service innovation and the way of value improvement. This paper uses value chain theory for reference. It describes value composition of hotel service industry based on comparing and analyzing the value chain structure and the implementation process of general business and service industry. Finally it analyses the way of hotel value improvement, and provides some suggestions of hotel service innovation and value improvement. Key words: Hotel service; Service innovation; Hotel value improvement

1 Introduction
Michael Porter first proposed the “Value Chain” concept in his book “Competitive Advantage: Creating and Sustaining Superior Performance”(1985). The value chain theory points that, there is the value chain between the upstream and downstream businesses, and also in the internal enterprises. Porter believes that “each enterprise is the collection of various activities in the process of design, production, sale, sending and supporting their products. All of these activities can be indicated by a value chain.” Porter distinguishes primary activities and support activities in the value chain. Primary activities are directly concerned with the creation or delivery of a product or service which can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary activities is linked to support activities which help to improve their effectiveness or efficiency. There are four main areas of support activities: procurement, technology development (including R&D), human resource management, and infrastructure (systems for planning, finance, quality, information management etc.). With Michael Porter's value chain tool, it can achieve the decomposition of total value of the enterprise from the company's internal processes, to enable enterprises to fully understand the production processes which create value, and how to improve it to promote corporate value. Value chain management emphasizes the effect of the overall enterprise operation, rather than one-sided pursuit of optimization of individual business activity.

2 Value Realization Process of the Hotel Service Industry
In fact, enterprises should keep competitive advantages in specific links of the value chain to remain and enhance value. By analysis of value chain, it could find critical value regions that help enterprises get the core competitiveness to form and consolidate the competitive advantage in the industry. Value realization process in service industry is rather different from the general manufacturing industry. The manufacture product experiences the R & D processes, which is product innovation, and then production processes, marketing, service and other aspects (exchange processes), finally it’s sent to the users to meet customer needs. The staff of manufacture enterprise contact products indirectly, that is different from hotels and other service enterprises whose staffs contact customers and provide services to consumers directly. Generally speaking, the hotel service product is a series of the visible product and invisible service to meet the customer lodging, catering, amusement, and other demand. From the viewpoint of customer, in the hotel, they consume a series of products. In detail, firstly, the material products, that is the physical products consumed by customer, such as food and beverage. Secondly, the sensual pleasure, the customer feels...
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