Extended Enterprise
Encyclopedia
An extended enterprise is a loosely coupled, self-organizing network of firms that combine their economic output to provide products and services offerings to the market. Firms in the extended enterprise may operate independently, for example, through market mechanisms, or cooperatively through agreements and contracts.
Alternatively referred to as a "supply chain
" or a "value chain
", the extended enterprise describes the community of participants involved with provisioning a set of service offerings. The extended enterprise associated with "McDonald's
", for example, includes not only McDonald's Corporation, but also franchisees and joint venture
partners of McDonald's Corporation, the 3PLs that provide food and materials to McDonald's restaurants, the advertising agencies that produce and distribute McDonald's advertising, the suppliers of McDonald's food ingredients, kitchen equipment, building services, utilities, and other goods and services, the designers of Happy Meal
toys, and others.
Extended enterprise is a more descriptive term than supply chain, in that it permits the notion of different types and degrees and permanence of connectivity. Connections may be by contract, as in partnerships or alliances or trade agreements, or by open market
exchange or participation in public tariff
s.
How an extended enterprise is organized and structured and its policies and mechanisms for the exchange of information, goods, services and money is described by the enterprise architecture
.
The notion of the extended enterprise has taken on more importance as firms have become more specialized and inter-connected, trade has become more global, processes have become more standardized and information has become ubiquitous. The standardization of business process
es has permitted companies to purchase as services many of the activities that previously had been provided directly by the business entity. By outsourcing certain business functions that had been previously self-provided, such as transportation, warehousing, procurement, public relations, information technology, firms have been able to concentrate their resources on those investments and activities that provide them the greatest rate of return. The remaining "core competencies" determine the firm's unique value proposition
.
Alternatively referred to as a "supply chain
Supply chain
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to...
" or a "value chain
Value chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...
", the extended enterprise describes the community of participants involved with provisioning a set of service offerings. The extended enterprise associated with "McDonald's
McDonald's
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by the eponymous Richard and Maurice McDonald; in 1948...
", for example, includes not only McDonald's Corporation, but also franchisees and joint venture
Joint venture
A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets...
partners of McDonald's Corporation, the 3PLs that provide food and materials to McDonald's restaurants, the advertising agencies that produce and distribute McDonald's advertising, the suppliers of McDonald's food ingredients, kitchen equipment, building services, utilities, and other goods and services, the designers of Happy Meal
Happy Meal
A "Happy Meal" is a meal specifically marketed at children, sold at the fast-food chain McDonald's since June 1979. A toy is typically included with the food, both of which are usually contained in a small box or paper bag with the McDonald's logo....
toys, and others.
Extended enterprise is a more descriptive term than supply chain, in that it permits the notion of different types and degrees and permanence of connectivity. Connections may be by contract, as in partnerships or alliances or trade agreements, or by open market
Open market
The term open market is used generally to refer to a situation close to free trade and in a more specific technical sense to interbank trade in securities.-Use of the term in economic theory:...
exchange or participation in public tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....
s.
How an extended enterprise is organized and structured and its policies and mechanisms for the exchange of information, goods, services and money is described by the enterprise architecture
Enterprise architecture
An enterprise architecture is a rigorous description of the structure of an enterprise, which comprises enterprise components , the externally visible properties of those components, and the relationships between them...
.
The notion of the extended enterprise has taken on more importance as firms have become more specialized and inter-connected, trade has become more global, processes have become more standardized and information has become ubiquitous. The standardization of business process
Business process
A business process or business method is a collection of related, structured activities or tasks that produce a specific service or product for a particular customer or customers...
es has permitted companies to purchase as services many of the activities that previously had been provided directly by the business entity. By outsourcing certain business functions that had been previously self-provided, such as transportation, warehousing, procurement, public relations, information technology, firms have been able to concentrate their resources on those investments and activities that provide them the greatest rate of return. The remaining "core competencies" determine the firm's unique value proposition
Value proposition
A value proposition is a promise of value to be delivered and a belief from the customer of value that will be experienced. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services....
.