Question

Which of the following is NOT one of the ways that a company can achieve a cost advantage by revamping its value chain?

A) Bypassing the activities and costs of distributors and dealers by selling direct to customers B) Replacing certain value chain activities with faster and cheaper online systems C) Increasing production capacity and then striving hard to operate at full capacity D) Relocating facilities so as to curb the cost for shipping and handling activities E) Streamlining operations by eliminating low value-added or unnecessary work steps and activities

Answer 1

Increasing production capacity and striving to operate at full capacity is NOT a guaranteed way to achieve a cost advantage in value chain revamping, as this can lead to increased fixed costs and potential overproduction.

Step-by-step explanation:

The company that can NOT achieve a cost advantage by revamping its value chain with the approach listed is C) Increasing production capacity and then striving hard to operate at full capacity. This option typically involves higher fixed costs and does not inherently ensure lower unit costs unless demand is also sufficient to absorb the higher production volumes without incurring additional costs.

Achieving cost advantage through value chain adjustments often involves streamlining operations, optimizing logistics, and integrating technology to increase efficiency and reduce overhead. Working to operate at full capacity without considering the implications on costs and demand may lead to overproduction, increased inventory costs, and potential waste, thereby not necessarily resulting in a cost advantage.

Other options such as A) Bypassing distributors by selling direct, B) Implementing faster online systems, D) Relocating facilities for lower shipping costs, and E) Eliminating unnecessary work steps are all viable methods to reduce costs along the value chain.