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Cost of Goods manufactured = Total Manufacturing Cost + Work in progress at beginning - work in
progress at end
Work in Progress at end = Cost of Goods manufactured – Total Manufacturing Cost – Work in
Progress at beginning
end
Part 2
1) With reference to the above statement describe what is meant by value chain?
In order to deliver a product or service to the market, firms usually have to go through certain set
process or a chain of activities. This chain of activities is called Value Chain. Often these activities are
interlinked and inter dependent on each other. Unless one activity is performed the next activity cannot
happen. Hence its Value Chain. This chain of activities adds value to the product or service.
versatile and complex competitive market. This is achieved by various means. Most often its
differentiates itself through price by offering a distinct product or service. Value chain can help
determine or achieve a competitive advantage. A firms internal Value chain is all the technological or
physical activities which adds value to the product. By understanding the value chain, a firm can
determine its cost of the product or service. This is done by identifying the cost incurred in various steps
costs in the various segments of the value chain can be useful to mangers?
According to Porte’s Value chain, activities can be divided into two broader types: primary activities
Primary Activities
Primary include the five main activities. All these activities are directly involved in the production
and selling of the actual product. The primary activities cover the physical creation of the product, the
marketing of the product or service, transfer to the buyer as well as after sale assistance.
INBOUND LOGISTICS
Inbound logistics involves the acquisition and procurement of raw materials and the activities
associated with inbound logistics are receiving, storing and disseminating inputs to the product.
Examples: material handling, warehousing, inventory control, collection and returns to suppliers.
OPERATIONS
The next step is for operations to convert the inputs in the desired product. Examples: machining,
OUTBOUND LOGISTICS
Outbound logistics involves the delivery of finished product as well as the logistics around it. These
activities may include collecting, storing and physically distributing the product to buyers. Examples:
finished goods warehousing, material handling, delivery vehicle operations, order processing and
scheduling.
purchase them. Activities associated with marketing and sales are therefore to provide a means by which
buyers can purchase the product and induce them to do so. Examples: advertising, promotion, sales
SERVICE
In today’s competitive era, after-sales service is just as important as promotional activities.
Complaints from customers are easily spread and shared through the internet and this may affect a
company’s reputation The activities associated with this part of the value chain are providing service to
enhance or maintain the value of the product after it has been sold and delivered. Examples: installation,
Secondary Activities:
PROCUREMENT
Procurement refers to the function of purchasing inputs used in the firm’s value chain, not the
purchased inputs themselves. Each support activity requires purchased inputs Purchased inputs include
raw materials, supplies and other consumable items as well as assets such as machinery, laboratory
equipment, office equipment and buildings. Procurement therefore needed to assist multiple value chain
embodied in process equipment. Technology development activities can be grouped into efforts to
improve the product and the process. Examples are changes in telecommunication, accounting software,
compensation of all types of personnel. HRM affects the competitive advantage in any firm through its
role in determining the skills and motivation of employees and the cost of hiring and training them.
Some companies (especially in the technological and advisory service industry) rely so much on talented
employees, that they have devoted an entire Talent Management department within HRM to recruit and
FIRM INFRASTRUCTURE
Firm infrastructure consists of a number of activities including general (strategic) management,
planning, finance, accounting, legal, government affairs and quality management. In accounting, many
firm infrastructure activities are often collectively indicated as ‘overhead’ costs. However, these
activities shouldn’t be underestimated since they could be one of the most powerful sources of
competitive advantage.
4) Identify and explain the major purposes of value chain using examples from
your selected annual report
supply chain capabilities. The company has earned an excellent level of trust among its customers.
Toyota has managed its value chain very well. The value chain includes the entire stage from product
conception to after sales service. Managing the value chain can help with increasing
productivity. Toyota is known for its excellent production management. The following is an analysis of
PRIMARY ACTIVITIES:
INBOUND LOGISTICS
Toyota has a large supply chain, It receives parts from thousands of suppliers located from around
the globe and has the capabilities to handle the inbound logistics efficiently. Furthermore, it has a
worldwide network of distribution centres and warehouses that receives parts from the suppliers across
the globe.
OUTBOUND LOGISTICS
Toyota group has various parts and logistics centres across the globe. These centres distribute parts
and orders on a daily through its network of warehouses and distribution centres. “The Toyota Parts
Centre Europe is its central distribution centre, at the core of its parts supply chain. The centre is located
in Belgium and ships thousands of parts every day to its regional depots across the entire region”
(Toyota, 2019)
OPERATIONS
Toyota is a global brand, has its headquarters in Japan, with its operations spread throughout the
world. The brand also serves its customers across the globe through a large and global distribution
network. Apart from its several manufacturing and research and developments sites, the brand has
vehicle brands. To retain its market share and customer base, Toyota makes major investments in
marketing and promotions. Toyota uses a mix of traditional and modern advertising mediums for
promoting its brand and products. Apart from its own website and social media, the brand also uses its
sales and distribution channel for marketing. Toyota promotes its brand significantly through its
SUPPORT ACTIVITIES
TECHNOLOGY
Toyota is a well-known brand worldwide, known for its technology, efficiency and engineering.
Apart from great production technology, the brand has increased its investment in technological
innovation for growth. It has its own research centres and continuously invest in better production
methods. In the 2018 financial report, a clear emphasis is on the integration of connected technologies to
INFRASTRUCTURE
Toyota has maintained a large infrastructure globally. From its headquarters in Japan to North and
South Americas as well as Asia and Europe, Toyota has maintained an extensive presence throughout
the globe. Currently led by Shigeki Tomoyama (Executive Vice President) , the brand has an impressive
creation and therefore focuses on the development of its human resources. In the automotive industry,
smart and able human capital can be a major source of competitive advantage.
PROCUREMENT
Toyota procures raw material from thousands of suppliers around the world. In 2009, the brand
formulated a specific ‘Toyota way of purchasing’ that lays down the policies and principles that the
procurement staff must follow. Through its procurement strategy, Toyota has always worked towards
Works Cited
Toyota. (2019, July 15). European Logistics. Retrieved from Toyota Logistics: https://www.toyota-
europe.com/world-of-toyota/feel/operations/made-in-europe/logistics
University of Cambridge. (2019, July 15). IfM. Retrieved from Porter's Value Chain:
https://www.ifm.eng.cam.ac.uk/research/dstools/value-chain-/
Porter, M. (1985). Competitive Advantage: Creating and sustaining superior performance. NY: Free Press.