Essay Example on Evaluating Costing and Value Chain for Optimal Org Growth

Management is regarded as the backbone of every organization, to ensure that all activities within the firm are structured and guided to help the firm meet its goals. As a result, firms need to evaluate different sections within the organization, to determine the vitality of every section, and its constitution to the growth of the company. Costing and the Value Chain is one of the critical sections, that significantly requires attention to ensure that the organization, evaluates and determines the functionality and importance of different sectors within the firm. This paper will seek to assess the significance of Costing and the Value Chain within the organizational context.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

As Tardi, (s2019) points out, a value chain is a descriptive business model that elaborates on the collective range of activities to help create products or intended services within the firm. For companies significantly involved in the production of products, the value chain and costing comprise of the logical steps followed to bring the product from a conceptual level to distributional. Moreover, this stretches to the procurement department, which helps to procure the required raw materials necessary for manufacturing and marketing activities.

The value chain is achieved by conducting a detailed analysis of procedures employed within the organization to produce products. The essential purpose for the costing and value chain evaluation seeks to determine the way through which the organization can improve the efficiency of production, as a way of ensuring that the company delivers maximumly to the demanding market. More so during this evaluation, processes, with lesser priority are mapped out to determine their value in the organization. On the other hand, sectors which are highly critical within the organization that forms the core existence of the business, are evaluated to increase their productivity or double their output.

The logic behind the profit margin is described by the increased output over the minimal input, that derived by a positive value chain. Through this, companies are forced to restructure their value to the face of their consumers by ensuring that customers enjoy the value of money. As a result, this increases and retains customer loyalty, which in return drives the sales of a company.

A representation of an organizational costing and value chain to maximize profits from minimal inputs (Moutinho, and Phillips, 2018).

As Jurevicius, (2013) points, the logic behind the value chain and costing is simple, where it is arguable that the more value the company creates, the more the profitable it is anticipated. The value is consequently passed down to the end consumers, which helps the company, grow its competitive edge.

In the organization context, the value chain is divided into two distinctive categories, which includes, primary, and support activities. In this concept, both the primary and supportive activities greatly interdepend on each other to ensure that the business is performing at the required level. The primary activities in a company refer to all steps and methods used in the production of goods and services, while support activities help to obtain a competitive advantage among competitors within the organization.

The primary activities include steps such as, inbuild logistics, that handles warehousing and management of inventories, Outbound logistics: activities intended to distribute final products to the consumer. Operations: these are activates employed to convert raw material into finished products. On the other hand, marketing and Sales, are activities responsible for establishing the required market and creating awareness of our products.

Support activities play a critical role in ensuring that the primary activities are well undertaken within the organization context. Tarver, (2015) concludes, the support activities are denoted as the overhead costs on a company's income statement, which drives the entire organization's income. An increase of one support body increases the efficiency of the overall primary activities. The Support activities comprise of different interrelated activities such as Procurement, Technological development, Infrastructure, as well as Human resource management. Human resource plays an essential role in ensuring that the organization is supplied with the skilled and right number of workers to help supply the demanding market. Through this, customers enjoy the acquisition of well-produced products as a result of experienced employees. In return, the company enjoys higher profits as a result of customer loyalty.

Among the large companies such as Starbucks, costing and value chain has been one of the building blocks to enhance performance since the beginning of the twentieth century. The company has significantly invested in internal logistics, by employing workers who help in procuring the desired coffee beams that allow Starbucks to create its unique taste of coffee, that has increased value and competitive advantage.

In this case, costing and value of chain plays a huge role in establishing the foundations of a business, through the cutting of costing, to help maximize production. In many cases, businesses can calculate the changes in production costing, which allows them to set the prices of their products (Moutinho, and Phillips, 2018). Through this, Starbucks can meet its costs of operations, without incurring losses due to underpricing or reducing their sales due to overpricing, which may result in loosing of competitive advantage in the market.

Conclusion

In conclusion, costing and value chain plays a critical element towards the growth of the company through the establishment of a good relationship between business activities and their customers. More so, internal activities within the organization are interlinked with the customers' reaction for maximum benefits as a result of customer loyalty.

References

Tardi, C. (2019). How Value Chains Work. Retrieved from https://www.investopedia.com/terms/v/valuechain.asp

Jurevicius, O. (2013). Looking at your Value Chain will make you Smarter. Retrieved from https://www.strategicmanagementinsight.com/tools/value-chain-analysis.html

Tarver, E. (2015). How does a strong value chain management team help a company?. Retrieved from https://www.investopedia.com/ask/answers/043015/how-does-strong-value-chain-management-team-help-company.asp

Moutinho, L., & Phillips, P. (2018). Strategic analysis. In Contemporary Issues in Strategic Management (pp. 46-79). Routledge.