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ACCA Applied Knowledge · Business and Technology · Competitive factors

Dovan plc is a retailer that wants to reduce costs by negotiating better prices and terms across all of its suppliers for stock, equipment and services. It has decided to centralise this function. Which statement about the value chain is correct?

Procurement is a support activity because it covers the purchase of all inputs, including equipment and services, and so serves every primary activity. It is distinct from inbound logistics, which concerns receiving and storing materials. Centralising it can therefore reduce costs across the whole of the value chain.

  1. AProcurement is a primary activity because it relates directly to stock bought for resale
  2. BProcurement is a support activity because it supports all primary activities and so can affect the entire chainCorrect
  3. CProcurement is part of inbound logistics and is therefore a primary activity only
  4. DProcurement is not part of the value chain because it takes place outside the organisation

Explanation

Porter classes procurement as a support activity. It covers acquiring all resources the organisation uses, not just stock, so it affects every primary activity. Treating it as inbound logistics ignores that procurement also covers equipment and services; inbound logistics concerns handling and storing inputs.

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