A financial performance analysis of bundura nickel ltd by mr lenon watambwa (2019) abstract
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| Value chain analysis: According to Dr. Michael Porter (Harvard Business School, Value Chain is a tool used to identify sources of competitive advantage specifically seeking to optimize Opportunities to secure cost advantage, Opportunities to create product service differentiation. It is a tool used to closely analyse internal firm activities with the main goal of recognizing which activities are the most valuable to the organization. (Strategic management insights 2013). Having a looked at Bindura Nickel Corporation (BNC), being a mining firm with the primary activities of producing Nickel (Copper and Cobalt as byproducts) its value chain can be categorized as a manufacturing based. This means that, the firm’s value adding activities are directly linked to the produce they make. The firm’s chain of distribution is from the supplier of raw materials to the distributors of the final product (Nickel and its byproducts. Raw Material Supplier e.g. Human Capital Mining Activities (Nickel, Copper, Cobalt) Electronic copy available at https://ssrn.com/abstract=3521211 14 Distributors of the Products Fig 1.1 This also gives the value chain of the firm a vertical linkage. This entails that, the activities of the raw materials suppliers has a direct effect on the overall activities of the firm e.g. since the firm is in the mining industry with its reliance on human capital and machinery, any machinery breakdown or disturbance in the workforce directly affects the firm. Similarly, the activities of the distributors has an effect on the firm as the produce of the firm fails to meet the market in one way or the other leading to any financial losses. Value Chain analysis is an important competitive tool especially when analysed internally. This enables the firm to review its in-house activities in relation to their competitors. According to the firm’s financial statements (2017-18), its activities are directly linked to its debtors and creditors. Based on these reports, the following computations have been made in order to analyse the relationship between its account payables and receivables. The overall goal of this firm in this case is to deliver maximum value for the last possible total cost. Value Chain as stated earlier seeks to add value to the products a firm is producing at the lowest possible total cost. The aim is to gain a competitive advantage in the industry at the same time operating profitably. Below are some of the important factors to take into consideration for BNC’s to operate profitably using this approach Value Chain acts as a systematic tool for examining the activities of the firm and how they interact with one another and affect each other’s cost and performance. Presents opportunities for integration with other systems within the organization or industry as a whole. Helps the firm stay out of the No Profit Zone Aligns spending with value processes in and outside the firm’s operations. The firm gains competitive advantage by performing these activities better or at a lower cost than its competitors. Electronic copy available at https://ssrn.com/abstract=3521211 |