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