The paper 'Value Chain Analysis of Williams Instruments Inc" is a good example of a finance and accounting case study. It is universally acknowledged that, before deciding on a new business idea, an individual must determine the most profitable business activity for them to venture in (Hofmann & Belin, 12). Additionally, this is of utmost importance especially for those individuals who possess limited resources and therefore cannot risk venturing into the wrong business or market sector. In this case, the costs, revenues as well as the value margins should be compared including the investigation of the potential for expanding and the required investments so that each and every value chain factor is included (Baker & English, 50).
By so saying, it means that the analysis of margins, revenues, and costs ensures that an individual is able to determine how viable its business activity is or rather the value of its channels (Hofmann & Belin, 15). Therefore, in order for any business to succeed, it must ensure that its value chain analysis is as effective as possible in order increase the productivity margin which in the end will increase the company’ s revenue. A value chain framework for Williams Instruments Inc.
to help in decision making Value Chain Analysis by definition is a tool that is employed in analyzing the internal firm Activities of a company. In this case, Williams Instruments Inc. needs to recognize the most valuable venture of its operation since its primary goal of the operation is to engage in the most profitable venture by identifying those areas that are underperforming in order to look for ways to improve on their performance.
Owing to this fact, conducting a value chain analysis will be of utmost importance to Williams Instruments Inc. since it will help it identify where its competitive disadvantages and advantages lie by evaluating its internal activities. However, when evaluating its value chain analysis, it must be noted that Williams Instrument Inc. has realized its competitive advantage through differentiation, excellent customer service and the reliability of its products. Calculations, The cost of operations process is $ 600 multiplied by the number of units (400) which will be equal to 240,000. Additionally, since the purchased parts amount to 800 dollars and the total operations cost is 240000, the total cost of production by purchasing parts from outside is (240000 + 800) which will total to 240,800 excluding labor costs.
If Williams Inc. chooses to manufacture the materials, then the cost will be 240000 plus (400 multiplied by 100) plus 500 (since out of the $ 800 material cost, $ 300 includes the cost of that material that can be manufactured at Williams Instrument Inc. ) which will amount to 280,500 excluding the cost of labor.
By outsourcing the materials from Matrix Concepts Inc. to help in servicing, distributing and marketing of the product, it would help Williams save $ 75, 000 in labor costs and monthly materials. However, the cost required to service, market and deliver the product will be equal to (125 multiplied by 400 units) which will amount to 50,000. From the above calculations, it can be noted that buying the material parts is a more viable venture since it will help Williams Inc. save, $ 39,700 (280,500-240,800) excluding the monthly labor costs. Although major activities of the company may add a constant value to the organization’ s production process, they are not basically more significant than the company’ s support activities since, in the modern times, a firm’ s competitive advantage revolves around its innovative activities and technological improvements.
Therefore, since outsourcing will help Williams save $ 75, 000 in monthly labor costs and materials when it comes to marketing, distribution and product servicing, Williams Instrument Inc. Should, therefore, offer the contract to Matrix Inc. as explained in the table below.
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