Chapter 3

The firm as a value system

In this chapter we explain our approach to value creation and value capture.19 We consider the firm as an open system which is made up of three core activities: sourcing, operations and selling. This system acquires inputs like know-how, raw materials, components and power, transforms these into products, and then sells the products. The purpose of the system is to generate a flow of cash. This is a simplified representation of the firm, but one that focuses on the essential processes of value creation and value capture. Most firms will have many different functions, departments and a hierarchy of managerial positions. We are arguing that it is necessary to clarify what role any positions and functions ...

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