ACCA Strategic Professional · Advanced Performance Management · Strategic management accounting
Marlow Telecom wants to sustain advantage by tracking how its costs and margins compare across each activity from design to after-sales service, and by looking at linkages with suppliers and distributors. Which approach best supports this analysis?
Value chain analysis is the best approach. It breaks the business into primary and support activities, compares cost and margin by activity, and examines linkages with suppliers and distributors, showing where competitive advantage is created. The other options are narrow control or investment appraisal tools, not tools for activity-level advantage.
- AValue chain analysis covering internal activities and external linkagesCorrect
- BVariance analysis of direct material usage only
- CCalculating the payback period of new projects
- DRolling forecasts of cash balances
Explanation
Value chain analysis examines each activity that adds value and the links with supplier and customer chains, identifying where cost or differentiation advantage arises. Variance analysis of materials is too narrow, and payback and cash forecasts do not assess activity-level advantage.
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