Evaluating Investments for Services: A Value Chain Analysis Framework

Abstract

This paper presents a framework based on value chain analysis to evaluate investments for services. The rationale for this approach is that to properly evaluate the benefits of any services investments, the value and cost interactions resulting from different business processes or activities need to be considered. To achieve reliable cost estimations, the framework employs a costing system, which integrates activity-based costing with the economic value added performance measure. The proposed framework is illustrated using a hypothetical case of an information technology investment in a car repair shop.

Keywords: ABC, activity based costing, business proces, cost estimation, costing system, economic value added, performance measure, service sector, services investments, value chain, value chain analysis

JEL Classification: G00, L00, M40, M41