Question

Cost-efficient management of a company's overall value chain activities requires that management:

A. ferret out cost-saving opportunities in every part of the value chain.
B. undertake an operations functionality redesign.
C. establish sales productivity and operating practices guidelines.
D. re-create rivals' assembly plant structuration savings.
E. pursue a differentiation strategy that can be easily copied.

Answer 1

To manage a company's value chain cost-efficiently, management should search for cost-saving opportunities throughout the value chain, leveraging economies of scale and specialization by splitting production stages globally.

Step-by-step explanation:

To achieve cost-efficient management of a company's overall value chain activities, it is essential for management to ferret out cost-saving opportunities in every part of the value chain. Recent trends in international trade show a move towards splitting the value chain, with production stages taking place in various locations around the world to leverage unique advantages and economies of scale. This has resulted from advancements in communication technology and transportation. By focusing on specific parts of the value chain, firms can innovate and specialize, which can lead to lower costs per unit as output increases, known as economies of scale.