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Value Chain Analysis for a Mexican Yoghurt Business
Value Chain Analysis for a Mexican Yoghurt Business
Step 1: Activity Analysis
Once a team responsible for starting the business has been formed, they need to find ways of contributing towards the experience of their customer. This means that there will be many business processes that will be used to serve and attract the customer. Therefore, the products which in this case are the Mexican yoghurt will have to be effectively advertised to the customers.
Step 2: Value Analysis
The Mexican yoghurt shop is quite unique and mostly because it serves a low fat and natural product. Once customers start buying the yoghurts they will be rewarded based upon the number of purchases that they make. In this case, a customer can get extra yoghurt depending on the yoghurts they have bought. The shops will be located in various key locations in the country, such as near universities, colleges and gyms. This will assist in ensuring that major competitors such as Starbucks and McDonalds do not over shadow the Mexican yoghurt as well as other products. Furthermore, the chosen locations are quite desirable because they have a diverse range of customers who will be willing to try to out the Mexican yoghurt.
The food served at the Mexican yoghurt shop is extremely nutritious and this is the reason why it will attract a different type of customer when compared to that of its competitors. People interested in healthy eating can be sure to benefit from the products being offered. The prices for the products on offer are quite affordable unlike the other yoghurts being sold in mainstream restaurants and fast foods. For example, the price of yoghurt at Starbucks is pricier than the one at the Mexican yoghurt shop.
Michael Porter came up with the value chain, which should be used by a business that wants to achieve competitive advantage. The Mexican shops face threats of entrance from other yoghurt businesses because the barrier entry is quite low. It is easy for any individual to start a yoghurt business and this increases the existing competition. Also, it should be known that there are few suppliers of Mexican yoghurt products and thus the many suppliers would be suitable for the Mexican yoghurt. The suppliers contribute quite a lot to the success of a business and have to be kept happy at all times. Since there are not many shops that sell Mexican yoghurt, it is likely that the buyers will not have a say in the price of the products. Porter also suggested that there is usually a threat by substitutes and this refers to other types of yoghurt available in the market. Lastly, since the market is always improving, the Mexican yoghurt shops need to find ways of improving their products so that effectively compete with other products.
Step 3: Evaluating changes and the plan for action
Once the value chain analysis is done, it is time for action to take place. This means that there will be many ideas that can be used to increase the value customers receive when delivering to them the Mexican yoghurts. If everything is delivered to the customers in the right way, the business is sure to succeed. Ensure that a strong relationship exists with the customers in order to obtain feedback about how they think about the Mexican yoghurt, as well as other products. This is a perfect way of confirming if you know what the customer wants because they are responsible for promoting the success of the business.
Value Based Management Incentive Program.
Value Based Management Incentive Program
Institution:
Name of Student:
Value Based Management Incentive Program
In the recent years, organizations have put emphasis on high quality of management by investing in a vast number of new management approaches such as total quality management, empowerment, flat organizations and value based management incentive programs among others. These plethora of management approaches have given good results so far. The value based management believes that performance measurement, integration of the strategic plans and compensation is the key to increasing the shareholder value. It is due to the importance the program places on the compensation that the incentives awarded to the management are cohesively vital in ensuring the success of an organization. The name of the company which needs to implement the value based management incentive program is Avec Auditors. The company is involved in auditing other firms, fund management, investment and has a team of financial experts that give financial advice to customers that need it.
The first step that needs to be taken is to designing a balance scorecard for the staff to be awarded incentives. The balance scorecard is a structured report that can be used by the human resource department or the supervisors of an employee to monitor the staff’s activities and keep track of their action’s consequences. The balance scorecard should focus on the organization’s strategic agenda. Performance contracts should also be signed to establish an agreement between the employer and the employee on the targets that employee is supposed to achieve. These two activities would help in the value based management incentive in that the incentives awarded will be based on the effects of their actions and how much their targets were surpassed. The balance scorecard would outline the value of the business that the employee brought to the organization while the performance contract would be used to see how much the employee surpassed his targets.
Since people are always skeptical about new programs, the company should begin with a pilot study. The pilot study will involve a few of the employees and it is meant to see the effectiveness of the value based management incentive program. The pilot study should start at the corporate level then later on push down to the business units in the organization. The pilot study, if successful, will help overcome objections. The company will be careful in choosing the business units it will use for the pilot study. The study needs quick results hence the business units chosen should relate. The implementation will only work better if the stakeholders are contented with the results. The sufficient implementation and education should not take too long as the longer it takes the more likely it is for people to lose enthusiasm in the project. It should take about a year.
The step action should be a company-wide rollout. Once the results of the pilot study have been discussed and they prove to be viable and the entire team is on board, the rollout of the value based management incentive program should take place. This program is very attractive to the capital intensive companies as opposed to service intensive companies. Since Avec Auditors is a capital intensive firm, the projects seems to be very lucrative. The program is also more lucrative to newer firms than old firms and thus more likely to succeed in this firm as the firm is only two years old. The employee’s compensation will be tied to their metrics. The last step would be to observe the success of this new program. See how it has benefited the firm since its inception and if its continued use would help the firm or we are better off without it.
Wallmart has grown to be the world’s largest retailer. The retail firm recently employed the use of value based management incentive program. You would know if a program has hit mainstream if Wallmart is spotted trying to use it.
Southeast Airlines is another example of an organization that uses value based management program. The organization compensates their staff based on their merit. This organization together with Wallmart is an example of those that have successfully employed the use of value based management incentive.
In summary, in order to implement a value based management program the company will design balance scorecards and performance contracts, conduct a pilot study then a company-wide rollout followed by a follow up on the implications of the value based management incentive program.
References:
Young, S. D., & O&Byrne, S. F. (2001). EVA® and value-based management. New York: McGraw-Hill.
Ittner, C. D., & Larcker, D. F. (2001). Assessing empirical research in managerial accounting: a value-based management perspective. Journal of accounting and economics, 32(1), 349-410.
Martin, J. D., & Petty, J. W. (2001). Value based management: The corporate response to the shareholder revolution. Oxford University Press.
Valuation Approaches
Valuation Approaches
Student’s Name
Institution Affiliation
Valuation Approaches
Net Present Value (NPV) and Free Cash Flows (FCF) are similar in the sense that they are both used to determine the value of the business activity. The value of the business is linked to how much revenue a business generates and all the accumulated liabilities (Benamraou, Jory, Boojihawon, & Madichie, 2017). Revenues realized are used to pay back the stakeholders inform of dividends invested by introducing cash flows in the business.
However, NPV, FCF, and Dividends are different, in that they are applied to address a piece of other financial information about the business. NPV is a component of the cash flow (the difference between cash inflow and cash outflow) that has been discounted at certain rates to represent the firm’s future cash flows on the present terms by considering the time value of money or (Leyman et al., 2019). FCF, on the other hand, is simply a periodic difference between the revenues relished and the total expenses incurred. The net revenue from FCF is used by Discounted Dividend Models to pay back the shareholders from the assets invested for a specified period. Conversely, these models relate to each but serve different purposes.
NPV is applied by many investors and managers during the decision-making process to decide on the right and best project to pursue. NPV positive rule gives a direction to the investors that the proposed project will add value to the invested economic resources. FCF models are applied by companies that do not pay dividends, and maybe or not, whose earnings growth rate does not correspond to the dividend growth rate FCF is usually determined to asses and worth of business at an agreed period (Yeh & Lien, 2017). Dividend models are, however, the best used by large, stable, and mature public companies that promptly pay dividends. Dividend Models are applied when there is a need to pay a dividend to shareholders upon request at the end financial period or during the dissolution of a firm, and even the profits are in excess and not required to be used back into the business.
References
Benamraoui, A., Jory, S. R., Boojihawon, D. R., & Madichie, N. O. (2017). Net Present Value Analysis and the Wealth Creation Process: A Case Illustration. The Accounting Educators’ Journal, 26.
Leyman, P., Van Driessche, N., Vanhoucke, M., & De Causmaecker, P. (2019). The impact of solution representations on heuristic net present value optimization in discrete time/cost trade-off project scheduling with multiple cash flow and payment models. Computers & Operations Research, 103, 184-197.
Yeh, I. C., & Lien, C. H. (2017). Growth and value hybrid valuation model based on mean reversion. Applied Economics, 49(50), 5092-5116.