VALUE CHAIN AND VRIO ANALYSIS
Value chain analysis
The value chain analysis determines all the elements of value chain significantly add or subtract value for Brinker International, Inc. (EAT). The competitor is Darden Restaurant, Inc. (DRI) in this value chain analysis. The time frame is March, 2016 and the preceding three to five year strategic horizon. The data resources used from 10-K 2015 of EAT and DRI. The two elements of the value chain most significantly add or subtract value for EAT are marketing and sales, and firm infrastructure.
Marketing and sales: (-)
The revenue of EAT and DRI are $3 billion and $6.76 billion respectively in 2015. The advertising expense of EAT and DRI are $94.3 million and $243.3 million respectively in 2015 (EAT, 2015; DRI, 2015). The advertising productivity of EAT and DRI are $31.84 and $27.8 respectively in 2015. The percentage difference of advertising productivity between EAT and DRI is 12.68%. The advertising productivity adds value to value chain.
The changing revenue of EAT and DRI are $178 million and $1,436.9 million respectively from 2012 to 2015. The changing advertising expense of EAT and DRI are $13.9 million and $27.7 million respectively from 2012 to 2015 (EAT, 2012; EAT, 2015; DRI, 2012; DRI, 2015). The margin advertising productivity of EAT and DRI are $12.82 and $51.87 respectively. The percentage difference of margin advertising productivity between EAT and DRI is 304.6%. The margin advertising productivity
This proves that the marketing strategy increased mid-week sales from 20% to 30%. This sales mix caused variances in the actual operating income and the budgeted operating income. The flexible budget, flexible-budget variances and sales volume variances provide further analysis into the profitability of the operations.
Total profit show a positive increase from 18% in 2013 to 31% in 2015, far reaching the brothers’ preference of $1.1 M in 2015, Appendix 3 showed $1.4 M net profit
Conducting a value chain analysis provides a snapshot for identifying a firm’s relative competitive performance, core competencies, and for focusing on customer centric activities. Costco’s customer driven focus allows primary and support business activities to work in unity creating a stronger competitive advantage and thereby increasing profitability. Profitability and shareholder value rely on coordination of both sets of business activities to create a firm’s competitive advantage.
Airbus is a French company manufacturing civil aircrafts. The company produces and markets Airbus A320 and the world’s largest passenger airliner, A380 apart from several other models. My individual report discusses about the Radio Frequency Identification(RFID) implementation at Airbus and how much this improved the supply chain efficiency. The main intension was to continuously improve its supply chain by mastering the supplier’s approval and the surveillances of their manufacturing capabilities. To achieve this goal, Airbus developed a strategy based upon assessment of suppliers Quality Management Systems and their special processes by external bodies along with the use of international standards. The strategy needs to be deployed throughout the entire supply chain.
VA’s strengths and weaknesses are built based on the value chain assessment and SWOT analysis from the VA’s internal and external environment and the previous strategies. The environmental scanning was conducted and discussed relative to VA’s competition, as well as its strengths and weaknesses. In doing so, this analysis starts with the identified the strengths and weaknesses in the following graphs. VA strengths:
A value chain analysis is a strategic analysis of an organization that uses value creating activities (Dess, McNamara, & Eisner, 2016, p. 76). The value chain analysis describes a company’s activities and relates them to an analysis of the competitive strength of the company
The value chain is one of the critical elements of a company’s strategy in today’s competitive world, because company’s profit depends on how the successful and efficient it runs its operations and how the end product appeals to the customers at a price that covers all the expenses of the company.
[Appendix B shows Pro Forma for Option 1 and Appendix C shows a Pro Forma for Option 2] A1 can also take a reactive approach by increase its advertising while Lawry is running its two-for-$5 promotion. A1 Steak Sauce can pay for more efficient shelf spacing in the retail outlet. This will include end caps, more facings in the stores, larger and increase signage (bigger and better than what they have done in years past). A1 can also use their brand recognition to their advantage by ensuring more restaurants that publically use A1 display their products, rather it’s on the menu or tables. Currently A1 spends roughly 15% of total revenue on advertising. Option 3: A1 could simply increase their percentage of revenue to marketing and adverting from 15% to 20%. This approach will decrease A1’s net profit by roughly 7.5million (with the worst case scenario that A1 will not increase sales at all) but it will allow A1 to increase its brand awareness and make it substantially harder for Lawry to penetrate the market with its new steak sauce. [Appendix D displays A1’s pro forma with the original 15% of revenue funding its marketing while Appendix E displays an increase to 20% of revenue funding marketing initiatives]Recommendation: Based on the financial analysis of each option, Option 2 would be the best approach for A1. Although each scenario is profitable, Option 2 has more
* Advertising budget is set in Wholesale Marketing screen and is applicable to both Wholesale as well as Internet marketing.
In the light of the information I found, I conclude that total gain from promotion is $1,791,744 and the promotion is profitable.
Promotion: A big chunk of income is dedicated to advertisement. An estimated of $401million has been
Companies strive to choose not only the best marketing channels, but also the best profitable channel. A profitable channel can promote and successfully sell out of a product that might not otherwise turn a profit for their producers (New Charter University 2015). “The calculations from the cost accountant for the retail segment accounts were 60 percent of sales, and for the foodservice segment accounts were 40 percent. The cost accountant believes that both channels are profitable. The accountant also believes that the company achieves an overall average gross margin of 60 percent on its sales (Bowersox, D. J., Closs, D. J., Cooper, M. B.,
Value chain analysis looks at every step a business goes through, from raw materials to the eventual end-user. The goal is to deliver maximum value for the least possible total cost. It is a systematic approach to examining the development of competitive advantage. The most basic breakdown of primary functions includes inbound logistics, operations, outbound logistics, sales and marketing and service. People should use the other models and frameworks within this software to further differentiate between, and add to, these domains. Product Innovation is one area that is not normally included in the de jure model but is often included in the de facto model. Value Chain Analysis describes the activities that take place in
The value chain analysis (shown in appendix) was also generated by Michael Porter. This model is referred to “identifying ways to increase the efficiency of the chain” (Investopedia, n.d.). Furthermore, the overall objective is to produce maximum value with minimum total cost and establish a competitive advantage.
The marketing department of B&L has analyzed all the above data and arrived at the