Value chain is a concept developed by Michael Porter in 1985. The concept was fist he described in book "Competitive Advantage: Creating and Sustaining Superior Performance”. A business may be seen as a chain activities that transforms inputs into outputs to create customer value. Value chain analysis attempts to understand how a business creates customer value by examining the contribution of different activities within the business to the value. According to Wheelen, (2012) "A value chain is a linked set of value - creating activities that being with basic raw materials coming from suppliers, moving on to a series of value added activities involved in producing and marketing a product or service, and ending with distributions getting the final goods into the hands of the ultimate consumer.” Similarly, "value chain analysis (VCA) refers to the process where by a firm determines the cost associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing these products” (David, 2011). Value chain analysis allows the firm to understand the parts of its operations that create value and those that do not. Understanding these issues is important because the firm can earn return only if it creates greater value than the cost incurred to create that value (Zamora, 2016). The value chain shows how a product moves from the raw - material stage to the final customer. Value chain analysis helps build sustained competitive advantage through the following process:
Value chain activities are identified and assessed
Core competencies arise in some activities
Some core competencies evolve into distinctive competencies
Some distinctive competencies yield sustained competitive advantage.
In my point of view an organization is normally not able to perform all the activities from product design development to after sales service. Organizations have their specialized function. In this way the organization can be viewed as a part of the overall value system. Value chain for Kp MACLANE, a producer of Polo Company is clearly explain in 3 terms in Figure 4.1. The first one is supply chain and the cost on supply chain is $ 10.00. Similarly the cost on operation is labor cost and cost is $ 11.50 and the distribution cost is $8.17. The large percentage of cost is in operation cost and the main operation cost is $11.07, which is approx. 35% of total manufacturing cost of Polo T - shirt.
Since, KP MACLANE is a cloth manufacturing Startup Company, I think this company should invest heavily in Research and Development (R&D) and its human resource’s capital because if it brings more quality clothes in the market then its success is guaranteed. Nowadays the clothes industries are going in fancy nature and everyone wants quality, flexible and fashionable cloths which is difficult task for company. So they invest their huge money in research and development. They need high no. of capable human capital to manufacture high quality product. So all most 35% cost is needed only for manufacturing labor and they need more cost on Marketing, distribution and other where also need a human capital. The fashion clothes needed a high marketing and publicity. So they need high cost for marketing and distribution.
As per my opinion, supply chain management is important in securing or maintaining a competitive advantage for KP MACLANE and the supply chain for KP MACLANE a producer of polo shirt manufacturing company is fuel, energy, raw material, parts, and competition because they need to manage their flow of goods, keep their raw material and inventory safely (Binkley, 2012).
At last, the competitive advantage of an organization also depends on the capabilities of competitors. Hence, it is necessary for a firm to outperform the competitors through superior performance. For this, development and understanding of standard is important. So the value system is a form of inter-organizational unity and relations needed for value creation. Value chain analysis involves cost-effective analysis and products features analysis (Parker, 2000).
Value chain is a concept developed by Michael Porter in 1985. The concept was fist he described in book "Competitive Advantage: Creating and Sustaining Superior Performance”. A business may be seen as a chain activities that transforms inputs into outputs to create customer value. Value chain analysis attempts to understand how a business creates customer value by examining the contribution of different activities within the business to the value. According to Wheelen, (2012) "A value chain is a linked set of value - creating activities that being with basic raw materials coming from suppliers, moving on to a series of value added activities involved in producing and marketing a product or service, and ending with distributions getting the final goods into the hands of the ultimate consumer.” Similarly, "value chain analysis (VCA) refers to the process where by a firm determines the cost associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing these products” (David, 2011). Value chain analysis allows the firm to understand the parts of its operations that create value and those that do not. Understanding these issues is important because the firm can earn return only if it creates greater value than the cost incurred to create that value (Zamora, 2016). The value chain shows how a product moves from the raw - material stage to the final customer. Value chain analysis helps build sustained competitive advantage through the following process:
Value chain activities are identified and assessed
Core competencies arise in some activities
Some core competencies evolve into distinctive competencies
Some distinctive competencies yield sustained competitive advantage.
In my point of view an organization is normally not able to perform all the activities from product design development to after sales service. Organizations have their specialized function. In this way the organization can be viewed as a part of the overall value system. Value chain for Kp MACLANE, a producer of Polo Company is clearly explain in 3 terms in Figure 4.1. The first one is supply chain and the cost on supply chain is $ 10.00. Similarly the cost on operation is labor cost and cost is $ 11.50 and the distribution cost is $8.17. The large percentage of cost is in operation cost and the main operation cost is $11.07, which is approx. 35% of total manufacturing cost of Polo T - shirt.
Since, KP MACLANE is a cloth manufacturing Startup Company, I think this company should invest heavily in Research and Development (R&D) and its human resource’s capital because if it brings more quality clothes in the market then its success is guaranteed. Nowadays the clothes industries are going in fancy nature and everyone wants quality, flexible and fashionable cloths which is difficult task for company. So they invest their huge money in research and development. They need high no. of capable human capital to manufacture high quality product. So all most 35% cost is needed only for manufacturing labor and they need more cost on Marketing, distribution and other where also need a human capital. The fashion clothes needed a high marketing and publicity. So they need high cost for marketing and distribution.
As per my opinion, supply chain management is important in securing or maintaining a competitive advantage for KP MACLANE and the supply chain for KP MACLANE a producer of polo shirt manufacturing company is fuel, energy, raw material, parts, and competition because they need to manage their flow of goods, keep their raw material and inventory safely (Binkley, 2012).
At last, the competitive advantage of an organization also depends on the capabilities of competitors. Hence, it is necessary for a firm to outperform the competitors through superior performance. For this, development and understanding of standard is important. So the value system is a form of inter-organizational unity and relations needed for value creation. Value chain analysis involves cost-effective analysis and products features analysis (Parker, 2000).
References
Binkley, C. (2012). Polo Puzzle: What Goes Into a $155 Price Tag? Retrieved from WSJ: wsj.com/articles/SB100014240529702...
David, F. R. (2011). Strategic Management Concept. NewYork: Library of Congress Cataloging-in-Publication Data.
Parker, J. (2000). ‘Lean, Mean, Vulnerable… Up the Value Chain’. traffic would, Vol. 263 .
Wheeler, T. L. (2012). Management and Business Policy Strategic Management. Library of Congress Cataloging-in-Publication Data .
Zamora, E. A. (2016). Value Chain Analysis: A Brief Review. Asian Journal of Innovation and Policy, 5 (2), 116-128.