ACCA Strategic Professional · Advanced Performance Management · Strategic management accounting
Calder Retail uses a balanced scorecard and a value chain analysis. Management finds that its logistics activity costs 14% of sales versus 9% for the best competitor, but customers rate its delivery speed as no better than average. Which conclusion is best supported by applying value chain thinking to this information?
Logistics is a cost disadvantage that creates no offsetting differentiation, since it costs 14% of sales against 9% for the best rival while customers see delivery as merely average. Value chain analysis therefore points to redesigning, improving or outsourcing the activity.
- ALogistics is a source of cost disadvantage without matching differentiation, so its activities should be re-examined, for example through redesign or outsourcingCorrect
- BLogistics should be expanded because higher cost shows greater value creation
- CLogistics should be ignored because support activities do not affect competitive advantage
- DThe balanced scorecard should drop its customer perspective
Explanation
Value chain analysis assesses whether each activity adds value relative to its cost. Logistics costs 5 percentage points more than the best rival without delivering superior customer perception, so it is a disadvantage. Cost does not equal value, and activities can be redesigned or outsourced.
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