Value Chain Analysis Discussion

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BUSI 730-B01 LUO Rene Aleman May 19, 2019 Discussion Forum 1 BUSI 730, Strategic Allocation of Financial Resources Discussion Forum 1 Table of Contents Value-Chain Analysis…………………………………………….……………………………….3 Value Engineering………………………………………………………………………………...4 References………………………………………………….……………………………………...6 19 May 2019 Page 2 of 6 BUSI 730, Strategic Allocation of Financial Resources Discussion Forum 1 Value-Chain Analysis A company is successful when their attention is in the details of their operation. Customers benefit from this attentiveness and are presented with products they would buy even at a premium price over the competition. One method is value-chain analysis and “is a strategic analysis tool used to better understand the firm’s competitive advantage; to identify where value to customers can be increased or costs reduced; and to better understand the firm’s linkages with suppliers, customers, and other firms in the industry” (Blocher, 2016, p. 42). Companies look to add value to their business and applies to businesses of any size. For example, Boeing offers after sale service where 24x7 customer service support is provided to the customers from all around the World (Khan, 2019, p. 6). Other activities could include improving a manufacturing process, product improvement through testing and surveys, and product research. “A company’s value chain consists of the linked set of value-creating activities the company performs internally” (Kirli, 2019, p. 309). Internally, a company can improve on its systems and processes to improve employee productivity which can improve customer relations with the company. There are two steps in value-chain analysis: (1) Identify the value-chain activities and (2) develop a competitive advantage by reducing cost or adding value (Blocher, 2016, pp. 43-44). For example, Lincoln Electric is a welding manufacturing company located in Cleveland, Ohio. I worked for one year in this company as part of a training with industry partnership with the Army. This company manufactures most of its welding equipment in its global headquarters and all of its welding materials. They consistently welcome customers to walk their plants to see their manufacturing but they also reduce their costs by using efficient assembly lines in the same building as their welding school, human resources, and logistical operations, which is a successful business model. This can be an advantage as described by Dr. Prescott C. Ensign who 19 May 2019 Page 3 of 6 BUSI 730, Strategic Allocation of Financial Resources Discussion Forum 1 states “It includes the primary activities of inbound logistics, operations, outbound logistics, marketing and sales and service” (Dr. Ensign, 2011, p. 21). Each industry will use different strategies in value-chain analysis, but the concepts remain the same as each company will look to improve their operations internally to reduce costs and improve their products and customer relations. Value Engineering Value engineering is a driving force in product innovation in today’s markets, domestically and globally. “Value engineering is used in target costing to reduce product cost by analyzing the trade-offs between different types of product functionality and total product cost” (Blocher, 2016, p. 531). An example of value engineering is cell phones. Each year, at least it seems, a new cell phone with new technology hits the market and usually from Samsung or Apple. Their innovations keep their customers happy through new and improved technologies that maintain their product lines within the satisfaction of their customers who are loyal to the brand. If you are older, such as I am, you have seen products grow smaller but faster and more convenient while also dropping the cost to produce such products through careful analysis and customer feedback. “In value engineering practice, areas of poor value are identified by analysis 1 and studied at a very early stage in the design cycle, and at various stages right through manufacture to distribution and operation” (Engineering Industry Training Boar, 2010, p. 10). Our government also incorporates value engineering in their development and procurement of products for governmental use. “Over the past thirty years, the return on investment on value engineering projects has been approximately sixteen to one” (Office of Deputy Assistant Secretary of Defense Systems Engineering, 2011, p. 5). This has helped steer away from the older practices of accepting the lowest bidder for equipment and contracts to 19 May 2019 Page 4 of 6 BUSI 730, Strategic Allocation of Financial Resources Discussion Forum 1 emphasis on quality of products and services. I have personally seen the change from faulty equipment to a much more proactive approach to spending on quality equipment and services in the last 10 years in the military. The Defense Acquisition University has also published their own findings in the same areas finding that their focus is value over quantity. “The goal is not to spend the budget, it’s to get all the value for the budget” (Tubell Jr., 2017, p. 7). Currently serving in my position of leadership, I am involved in the annual budget used to operate the organization. I have realized that everything is considered before allocating funds to pay for any service or equipment. Knowing and operating under a budget has made me realize that careful consideration and analysis must be involved in order to maintain the operations of an organization within that budget. 19 May 2019 Page 5 of 6 BUSI 730, Strategic Allocation of Financial Resources Discussion Forum 1 References Blocher, E. S. (2016). Cost Management A Strategic Emphasis. New York: McGraw-Hill. Dr. Ensign, P. (2011). Value Chain Analysis and Competitive Advantage. Journal of General Management, 18-42. Engineering Industry Training Boar. (2010). Value Engineering. London: The Engineering Industry Training. Khan, A. (2019, May 13). Boeing Strategic Anlaysis. Retrieved from Academia: https://www.academia.edu/4626722/Boeing_Strategic_Anlaysis Kirli, M. (2019, May 13). The Implementation of Strategic Management Accounting Based on Value Chain Analysis: Value Chain Accounting. Retrieved from International Journal of Social Sciences and Humanity Studies: http://www.sobiad.org/ejournals/journal_ijss/arhieves/2011_1/mustafa_kirli.pdf Office of Deputy Assistant Secretary of Defense Systems Engineering. (2011). Value Engineering: A Guidebook of Best Practices and Tools. Alexandria: Department of Defense. Tubell Jr., W. (2017). Value Engineering. Alexandria: Defense Acquisistion University . 19 May 2019 Page 6 of 6
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Value-Chain Analysis
I agree with you that although each industry uses different strategies in value-chain
analysis, the concept remains the same as each company looks to improve their operations
internally to reduce costs, promote their products and also improve their customer relations.
Value-chain analysis is a tactical analysis method used for the better understanding of the
competitive benefit of the firm. The competitive advantages of the firm include; identification of
where the value to customers is to be increased and costs reduced, and to get a better
unders...


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