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Value Chain Analysis

Value Chain Analysis

Value Chain Analysis
Consider the following scenario:

Miguel owns a Mexican restaurant. He has well-established relationships with local suppliers and has
fresh produce delivered daily. Carefully trained cooks craft authentic Mexican food in state-of-the-art
kitchen using a well-refined and systematic process. They interact seamlessly with fast, friendly wait staff
who typically deliver food in fifteen minutes or less to hungry customers. Customers come in large
numbers for good food at a good price. Miguel carefully tracks customer preferences to alter menus and

offer specials.

Despite being a small business, Miguel has successfully coordinated various internal activities and
established external relationships in ways that create value for his customers.

A well-functioning work team carefully assesses the strengths and weaknesses of each team member,
assigning activities to leverage their individual strengths. However, team members also carefully
coordinate tasks to ensure they combine their individual efforts in effective ways. Effective organizations
do the same by carefully selecting a strategy that maximizes the strengths in performing various activities.
They exploit relationships between internal activities to create a chain of activities that maximizes the
value of their product or service for customers. Companies large and small can derive additional benefit
from combining a strong internal value chain with those of external partners to establish a value system.


Value Chain Analysis

Brookside Dairy Company is an organization that is concerned with the processing of
raw milk into various end products that include pasteurized milk, yoghurt, fermented milk, butter
and cheese among others. This company operates in the Kenyan dairy industry and happens to be
one of the well-established milk companies in that country. The Kenyan dairy industry comprises
small and large organizations. Some of these companies include KCC (Kenya Corporative
Cremearis), Tuzo and Fresha among others (Kavoi et al., 2013). Most of Brookside’s suppliers
come from the rural areas from which they delivere milk to collection stations. This milk is then
collected by the company’s trucks and taken to the firm for processing. Milk processing involves
several stages that well-coordinated to yield the final product. These stages form the value chain.
Value chain is a series of activities or processes that an organization operating in a given
industry executes to deliver or provide valuable services and products. This concept is founded
on the process view of firms and takes into consideration the aspect of viewing a service or
manufacturing organization as a system, which made of subsystems with transformation

processes, inputs and outputs, and involve the consumption and acquisition of resources such as
materials, labor, money, management, building, and administration (Agrawal et al., 2014). Value
chain has significant effect on the business strategy as it affects the operations and logistics
involved in the success of a business. As such, the business strategy of the firm should be
developed in a manner that matches its value chain.
Technology impacts significantly on the value chain of a company. High technological
research and development process activities contribute positively to the value chain of a
company. Some of the aspects of technology such as automation of processes and other
monitoring activities offer a great support to the value chain, which lead to enhanced efficiency
and effectiveness of a company’s operations (Schloetzer, 2012). On the other hand, low
technology affects the efficiency of firm’s value chain in a negative way.
Analysis of the company’s value chain takes into consideration the various processes that
are involved in milk processing. This goal can be accomplished by focusing on the activities
involved in conversion of milk into finished products (Agrawal et al, 2014). In relation to this,
the company’s weakness exists in the inbound logistics involving warehousing of the raw milk
that has been received from the suppliers. This problem results from inadequate cooling centers
to cater for excess milk from suppliers. Moreover, the company’s cooling centers are located far
from the factory due to lack of space near the organization. Thus, what are the ways through
which the company can address the problem of handling extra milk from suppliers and far
location of cooling centers? However, the company has strength in terms of outbound logistics
and operations. The company has a well-coordinated system of converting milk into a high
quality end product or products. In addition, the company’s outbound logistics takes into
consideration a proper distribution channel that entails wholesalers and retailers.

Milk processing involves a series of interconnected stages. Once milk is received at the
factory, it is analyzed for freshness using various tests and then transferred to cooling tanks.
From the cooling tanks, the milk is taken for pasteurization and then analyzed for quality prior to
packaging (Kakoi et al, 2013). The milk from the cooling tanks can also be processed into
various products that are analyzed prior to their packaging. These processes are conducted
through a well-coordinated task force that operates in various departments within Brookside.
The company’s value chain has a strategic significance to the larger value chain as it
ensures a constant supply of milk and milk product into the market. Taking into consideration the
fact that the firm has an advantage in terms of outbound logistics, the organization has various
warehouses and centers where processed milk and milk products are taken prior to their
distribution (Kavoi et al, 2013). From these centers, the products are taken to wholesalers who
sell them to retailers, who in turn sell them to the final consumers. Moreover, the company has
retailers who purchase products directly from the firm then sell them to final consumers.



Agrawal et al. (2014). Managing Value in Supply Chains: Case Studies on the Sourcing Hub
Concept. California Management Review, 2(56) 23-54
Kavoi et al. (2013). Influence of Institutional and Socio-Economic Factors on the Supply
Response of Smallholder Farms in the Marginal Zones of Kenya. Journal of
International Development, 25(3) 393-411
Schloetzer, D. (2012). Process Integration and Information Sharing in Supply Chains.
Accounting Review, 3(87) 1005-1032.

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