Question

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

A. Creating a direct sales force and bypassing activities and costs of distributors and dealers
B. Conducting sales operations at the company's website
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

The correct option is C, as increasing production capacity to achieve full capacity is typically not a strategy for a non-capital-intensive company to revamp its value chain for cost advantage, while other options align with methods to enhance efficiency and cost savings.

Step-by-step explanation:

The question pertains to the methods through which a non-capital-intensive company can gain a cost advantage by altering its value chain. The value chain refers to the series of activities that a company employs to deliver a valuable product or service to the market. Options A, B, D, and E involve measures like cutting out middlemen, using online sales, relocating facilities to reduce costs, and streamlining operations to improve efficiency.

These actions are in line with revamping the value chain for cost advantages. However, option C suggests increasing production capacity and operating at full capacity, which might not be suitable for a non-capital-intensive business.

Such a move is more aligned with capital-intensive industries that benefit from economies of scale where increasing output can reduce the cost per unit. Hence, the correct option is C, as it is not typically one of the ways a non-capital-intensive company would restructure its value chain to gain cost advantage.