Page 12 - CIMA May 18 - MCS Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

TASK 3 – INTERNAL ANALYSIS
Suggested solution

Briefing note:

From: Financial Manager
To: CFO
Date: Today
Subject: Internal analysis

The Value Chain model can be used to understand the internal position of a company and how
the various activities can add value in the customer’s view. It can also be used to develop a
competitive strategy of either cost reduction or differentiation and decide on whether or not to
retain or outsource activities depending in whether they “fit” with an organisation’s distinctive
capabilities.

It should be mentioned however that the value chain was originally designed for application to
the manufacturing industry. Application to the service industry can therefore be more
complicated.

Within the value chain these activities are broken down into primary and support.

Primary Activities ‐ those directly concerned with creating and delivering the product or service,
i.e. sourcing the key aspects of the service and providing that service to the customer.

For MENTA these would be the activities involved in the service delivery process:

Inbound Logistics – involves the receipt and distribution of inputs to the process. This include for
example, receipt of buses, materials, manufactured parts and assemblies for maintenance and
cleaning, securing location for bus depots etc. This is obviously a key area for MENTA It is vital to
always have the buses available in a well presented, safe and fully operational condition. Given
the variety of buses and the differing demands of each routes provided, the use of on‐site stores
in each depot may add to the efficiency of the inventory held.

Operations – would involve the provision of the service itself i.e. the transportation of passengers
to their chosen destination which, as we are aware, is complex given the different capacity buses,
varying routes and so on. New technology is always on the horizon and with, for example, the
advent of “driverless buses” and “environmentally friendly fuel”. We need to be sure that any
new processes do not disrupt this key activity but at the same time be up to date to differentiate
MENTA from the other competitors.

Outbound logistics ‐ would involve getting the goods to the final customer. It is difficult to
distinguish this from the primary activity of operations above. In this respect MENTA has its own
fleet of vehicles for transportation of passengers. Ensuring that we provide a customer‐centred
experience underpins the need to have our own well maintained fleet. It is also a core
competence of the original business. However it may be the case that some of these vehicles and
their drivers may be idle for periods of time and be a drain on profits. This will need further
investigation as, although part of the mission is to exceed customer expectations and provide
quality, it may have an impact on the profitability of MENTA.

KAPLAN PUBLISHING 99