A company value chain involves a series of processes or steps like supply chain management, operation, sales and marketing, distribution and several others. Each of the steps of the value chain must add value to the overall outcome. A company thus must monitor and make changes to the process if it’s not performing as expected. Figure 4.1 as of the book includes of a representative value chain for KP MacLane, a producer of Polo shirts. The answer below is based on the same records available (Gamble, Thompson & Peteraf, 2016).
The company has a total cost of $29.57 of which more than one third ($11.05) comprises of labor cost, which is the highest of all. (Gamble, Thompson & Peteraf, 2016) This cost is for the production and selling of a women’s polo shirt and thus may vary with the product however as per the records available, labor cost is the largest when it comes to company’s primary value chain activities.
KP MacLane would need all the support activities as described in Figure 4.1. The company has been able to make a name of its own and in the current age and time, a company must always be innovative to remain ahead in the game. KP MacLane doesn’t have the luxury to slow down in the category with other giants like Adidas, Nike, and Reebok all giving their best. R&D is vital for the business to research on what can be done for the product, how the cost can be reduced, quality enhanced and all different type of innovations (Mairesse & Mohnen, 2004). Then comes the innovation and improvisation on the technology and system development. Further, with labor being the largest contributor to the primary value chain expenses, human resources management is vital. With no proper system in place, chances of employee’s revolting with the growing dissatisfaction are higher as well. Having a HR unit in place ensures that the company can take care of the employee’s grievances and act on it sooner to ensure that it doesn’t spread and case negative implication to the organization in a bigger scale. Once that is taken care of general administration is required as well for the organization of that size with the resources widespread, it’s a nightmare to manage it all without a proper system in place. It also looks at finding and maintain a proper relationship with other strategic partners to collaborate and enhance the reach.
Brands like KP MacLane must always remain innovative as there are other similar but different brands in the market who can easily take up the market share of the company if they slow down or doesn’t meet customer demand (Chesbrough, 2007). The company thus need to focus on both primary and support activities to ensure that their competitive advantage withstands and the company can grow further. To do this, they need to have a solid supply chain management system in place. As this deals mainly with the management aspect of the overall supply process of acquiring materials required for the production, storage, to inventory management. A good supply chain helps the business cut down on this cost and thus enables the company have a smoother process in place so that they don’t have to stop the production process just because the materials aren’t there (Mentzer et al., 2001). In addition to this, the company must also ensure that the product R&D one of the support activity is up to the mark. With this the company can always remain innovative to come up with better materials to use for the manufacturing process and even in the product, can reduce the cost of the development process, and even make the process faster. This all adds to the profitability of the business and with better product output adds more value for the customer as well.
Chesbrough, H. (2007). Business model innovation: it’s not just about technology anymore. Strategy & Leadership , 35 (6), 12-17.
Gamble, J., Thompson, A., & Peteraf, M. (2016). Essentials of Strategic Management (5th ed.). New York: McGraw-Hill Education.
Mairesse, J., & Mohnen, P. (2004). The Importance of R&D for Innovation. The Journal Of Technology Transfer , 30 (1-2), 183-197.
Mentzer, J., DeWitt, W., Keebler, J., Min, S., Nix, N., Smith, C., & Zacharia, Z. (2001). Defining Supply Chain Managemnet. Journal Of Business Logistics , 22 (2), 1-25.