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CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge

Sundaram Foods Ltd compares its activity costs with rivals and finds its distribution is costlier, though its operations are cheaper. It plans to retain operations in-house and outsource distribution to a specialist. Which use of value chain analysis does this best illustrate?

This illustrates using value chain analysis to spot activities with a cost disadvantage and reconfigure the chain by outsourcing them. The firm keeps activities where it is strong, operations, and hands over weak ones, distribution, to a specialist for better overall cost position.

  1. AIdentifying activities where it holds cost disadvantage and reconfiguring the chain by outsourcingCorrect
  2. BExpanding the product portfolio through related diversification
  3. CMeasuring market share using the growth-share matrix
  4. DScanning the macro environment for political risks

Explanation

Value chain analysis breaks the firm into activities to find where cost or differentiation advantage lies. Finding distribution weak and outsourcing it is reconfiguring the chain. The BCG matrix and environmental scanning serve different purposes and do not examine activity-level costs.

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