08 May IDENTIFY THE KEY COST DRIVERS AND SUGGESTIONS FOR COMPETITIVE ADVANTAGE FOR WESTERN CABINETS.
Read the case Western Cabinets – Building a Cabinet or Building a Transformation? Complete the following requirements.Required:a) Reformat the value chain for Western Cabinets into Porter’s value chain format described in Lesson 3 Note 1 (See Below). Under each primary and secondary activity list the activities as Western Cabinets and identify value creating processes. (15 marks)b) Identify the key cost drivers and suggestions for competitive advantage for Western Cabinets. This will include areas of advantage they currently hold and areas where they could create competitive advantage. (15 marks)Note:When answering this question you can refer to parts 1 and 3 of the StrongBrit case in Lesson 3 to see how they formatted both the value chain and the key cost drivers/suggestions for competitive advantage. Question 1 (30 marks)Read the case Western Cabinets – Building a Cabinet or Building a Transformation? Complete thefollowing requirements.REQUIRED:a) Reformat the value chain for Western Cabinets into Porter’s value chain format described inLesson 3 Note 1 (See Below). Under each primary and secondary activity list the activities asWestern Cabinets and identify value creating processes. (15 marks)b) Identify the key cost drivers and suggestions for competitive advantage for Western Cabinets.This will include areas of advantage they currently hold and areas where they could createcompetitive advantage. (15 marks)Note: When answering this question you can refer to parts 1 and 3 of the StrongBrit case in Lesson 3 tosee how they formatted both the value chain and the key cost drivers/suggestions for competitiveadvantage. Lesson 3: Environmental Scanning (Internal Analysis of Value Chain)Note 1: Porter’s Value ChainPorter (1985) introduced the concept of a value chain to analyze the firm its competitors and thepotential for competitive advantage. The value chain represents a firm’s collection of activities to design produce market deliver and support a product or service. Michael Porter first discussed the notion ofcompany or internal value chains in his influential 1980 text Competitive Strategy. He envisioned theprocess of producing a product (good or service) as a number of steps (supported by staff activities) thatan organization undertook to add features that the customer valued. Porter argued that as goods movedthrough a sequence of activities those activities added value to the work in process—hence the notionof a value chain and value-adding activities.Figure 3.1: Porter’s Value Chain (1980) Adapted from Porter (2001).Value chain analysis considers each step or activity in the value chain and evaluates the cost of thatactivity as well as the value it adds from the customer’s perspective. The value added by the activity isestimated by the increment in price that the customer is willing to pay because of what the activity addsto the product. For example what is the value added to a vehicle by an enhanced system to eliminatewind noise in relation to the cost of the system?You can see from Figure 3.1 above that Porter has divided the value chain into two broad groups—primary activities that focus on the physical actions required to produce the product and supportactivities that provide organizational support to the primary activities. Note that the value chain must bealigned with and therefore reflect the organization’s chosen strategy.More recently strategists have applied the value chain concept to the activities undertaken across anumber of organizations to deliver the final product (good or service) to a customer—this has come tobe called an industry value chain. As the value chain concept was originally conceived organizationswere to gain a competitive advantage by increasing the value to their target customers through uniquevalue-adding activities in the organization’s internal chain. However Porter argued that competitorscould easily duplicate improvements in individual value chain activities. Therefore the key to creating asustainable competitive advantage is through designing an entire value chain that one’s competitorswould find difficult to copy.
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