Final answer:
Value chain analysis aims to identify how a firm can increase value or reduce costs, focusing on specific activities to improve. It is significant in international trade, as firms specialize in different segments of production, allowing for innovation and efficiency gains. The analysis helps in enhancing profitability and competitiveness in the global market.
Step-by-step explanation:
The main objective of value chain analysis is to identify stages of the value chain where the firm can increase value to the customer or reduce cost in some way (b). It is a strategic tool used to analyze internal firm activities. Its goal is to recognize which activities are the most valuable to the firm and which ones could be improved to provide a competitive advantage.
The concept of the value chain is vital in international trade and economic specialization because it outlines how a product is created and delivered in stages, often involving multiple countries.
With advancements in communication technology and transportation, firms have been able to split up the value chain, focusing on particular products and parts they are most efficient in producing. This so-called intra-industry trade allows for more focused specialization and innovation, thus increasing overall economic gains.
Understanding these stages allows companies to optimize production, outsource various stages if beneficial, and ultimately, enhance profitability by reducing costs and maximizing value delivered to customers.
Each part of the value chain can contribute to improving efficiency and lowering the cost structure, which is crucial from a long-run perspective for any firm aiming to bolster its market position and profitability.