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ACCA Strategic Professional · Strategic Business Leader · The internal resources, capabilities and competences of an organisation

Brindle Pharma makes generic medicines. Analysis shows its operations are cost-leading, but its customers value rapid, reliable delivery to pharmacies, which Brindle outsources to a weak distributor. Rivals own their distribution. Which conclusion from value chain analysis is most appropriate?

Brindle should review its outbound logistics, since the weak distributor erodes value created in operations and customers rank delivery highly. It might bring distribution in-house or change partner. Further cost cutting or ignoring outsourced activities would not address what customers value.

  1. ABrindle should review the outbound logistics link, as weakness there may destroy value created in operations and justify bringing it in-house or switching partnerCorrect
  2. BBrindle should cut operations cost further because cost leadership is already proven
  3. CBrindle should treat distribution as unimportant because it is outsourced
  4. DBrindle should exit the generic medicines market

Explanation

Value is delivered to the customer through the whole chain. Strong operations are undermined if a valued activity, outbound logistics, is weak, so managers should reassess how it is performed or who performs it. Cutting operations cost further ignores what customers value, and outsourcing does not remove responsibility for the outcome.

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