Definitions for TrueValueMetrics
Value Chain Analysis
Value chain analysis is a technique that relates cost, price and and profit ... and value consumption and value creation in a complete transaction matrix. The value chain analysis explains the aggregate of value consumption or destruction and the aggregate of value creation and value adding and reconciles the aggregate with the winners and losers at different stages of the value chain.
The value chain analysis may be applied either over time, over geographic space, or between organizational entities. Value chain analysis shows how critical local community based economic activities are to the community and how damaging many profitable global value chains are to society.
Consolidation accounting is a part of this paper because hardly anything is as simple as it seems, and consolidation accounting has the essential critical logic that helps to sort this complexity into its component parts. Community is impacted by many different economic entities and activities, and the way in which these interact and are recorded has been defined comprehensively in the accounting principles associated with consolidations.
Very few transactions are simple an have impact only on the direct participants ... most have other ramifications which are important in the money accounting of the business world, but have even more importance in the context of the combined flows of value and money around the community.
Modern corporate accountancy is complex. Most of the rules apply to the way an organizations reports to the financial stakeholders and, to a much lesser degree, to the public. These reports are the result of complex consolidation that takes into consideration the way the internal and external value chains impact costs, revenues and profits.
Managing these value chains makes it possible for a corporate organization to minimize its exposure to taxes, duties and other regulations that impact its financial performance ... and understanding and having data about value chains makes it possible for the public to hold organizations accountable for their performance in the community and towards society as a whole.
Value chain analysis is used to identify the winners and losers in various parts of the economic structure, and makes it possible to understand the systemic flaws in the way the economy operates. Value chain analysis is used to show cost and profit distribution across multiple areas and organizations as in the petroleum industry, or across time as in the case of education and the student's subsequent career.
TVM uses value chain analysis so that what appears as a success in one part of the value chain can be associated with the impact ... positive and negative ... in other parts of a value chain.
Value chain analysis can be used to identify the winners and losers in various parts of the economic structure, and makes it possible to understand the systemic flaws in the way the economy operates. Value chain analysis is used to show cost and profit distribution across multiple areas and organizations as in the petroleum industry, or across time as in the case of education and the student's subsequent career. Value chain from raw material to consumer is important. It shows why some companies are very profitable and others are not. The value chain show how costs accumulate and profits are extracted from the value chain. For example:
Petroleum The TVM petroleum value chain explains the costs and profits between the origin of oil in a poor part of the world to gas being used in rich places. It explains how excellent crude oil in the Niger Delta makes some Nigerians super rich, with the country remaining terribly poor. It explains the links between high gas prices at the pump and production costs ... and how markets work!
Coffee The TVM coffee value chain does the same for coffee. How is it that coffee consumed in a retail coffee shop is many times more to buy now than years ago ... but the price paid to farmers for their coffee has increased so very little. Where is the money going? Value chain shows that some of the organizations that were created to make the economic playing field fairer for the farmer have ended up being merely a way of extracting profit from the value chain without doing anything in return.