Value Chain Concept and Competitive Advantage: A Case Study of Challenger Limited

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Management Accounting
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Executive summary
The paper gives full description of Value chain concept. The paper describes how the value chain
concept is useful to organization so as to enjoy competitive advantage. The two competitive
advantage forms described in the paper are cost advantage and differentiation advantage. The
case study company which is used in the paper is Challenger Limited, the value chain concept
was used to describe the standing of the company.

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Table of Contents
Executive summary.........................................................................................................................2
1a: Value Chain Concept.................................................................................................................4
The Importance of value chain to the firm is explained in the following manner:.........................5
Question 1bi.: Chosen company......................................................................................................5
Question. 1bii: Competitive Advantage..........................................................................................6
Question 1biii: Value Chain model.................................................................................................6
Question 1biv: Value addition.........................................................................................................7
Question 1bv: Relevancy.................................................................................................................8
References........................................................................................................................................9

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1a: Value Chain Concept
Value chain refers to group of activities undertaken by the firm in a given industry so as to
produce a service or good which is valuable in the market. The concept of value chain in
business management was first explained by Michael Porter in the year of 1985.So as to
effectively manage the value chain process, Porter divided the different business activities into
two categories. These categories are primary activities and support activities. The primary
category consists of five activities while the support category comprises of four activities
(Ramaswamy & Ozcan, 2016). All the described primary activities by Michael porter are very
important in adding value to the company as well as creating competitive advantage. The support
activities are also as essential as the primary activities. They help in making primary activities
very effective. Adding value to any of the support activities would be helpful in making at least
one of the primary activities operate more efficiently (West & Ibrahim, 2015). The different
primary activities as explained by porter are: Inbound logistics, marketing and sales, outbound
logistics, operations, and service. The four supportive activities are: Procurement, Technological
development, Infrastructure, and human resource management (Shaw, 2012). The primary
activities are explained in the following manner; The Inbound logistics activity consists of
arrangement of materials, semi or finished inventories form there sources who are mainly
suppliers to the assembly or manufacturing plants, retail stores, and warehouses (UNIDO, 2009).
The operations activity comprises of the process of turning or converting the existing inputs
(labor, raw materials, and energy) to acceptable form supply known as output (Jonathan et al,
2009). The output logistic activity consist of processes which are undertaken to store or move the
processed or final products from the point of production or production line to final user point.

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The sales and marketing activity consists of selling the services or product (Rieple & Singh,
2010). Sales and marketing also consists of communicating, creating, as well as delivering the
existing products to the final clients, partners or customers. These products and services offered
to the clients and partners should be having value (Zablocki et al, 2017). The service activity
consists of maintaining the products or services offered to the customers in a proper working
state.
The four support activities are also explained in the following manner: The Infrastructure of firm
comprises of different departments and activities. The different activities in the firm’s
infrastructure are legal, activity, finance activity, public relations, general management, quality
assurance, etcetera. The technological development activities are related to different tools which
are used in the transformation of the different of inputs to outputs with in the primary activities.
Technological development consists of hardware, equipment, technical knowledge and
procedures, software, etcetera. The Human resource management consists of different activities
which are used in the hiring, developing, recruiting, compensation, as well as dismissing
personnel (Tan & Sousa, 2015). The procurement activities consists of works, goods or services
to a firm from an external source (Keller & Brexendorf, 2017). The company in the field or
process of procurement makes orders or decisions for purchasing the different resources to be
used within the enterprise (Schlegelmilch, 2016). The support activities are very crucial because
they promote smooth running of the primary activities.
The Importance of value chain to the firm is explained in the following manner:
The main importance or advantage of value chain analysis is strengthening or creating a
competitive advantage. Creating a competitive advantage through use of value chain analysis
helps in boosting profits of the company. Through using value chain analysis, companies always

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ensure that the value created in exceeding the costs. Value chain analysis is also important to
companies, analyzing at least one of the five primary activities within the company helps the
company gain or create efficiencies in its production , supply or in all its business procedures;
creating efficiency by the company would be very helpful in making it to acquire competitive
edge as well as boosting the overall profits.
On the other side, Value chain also has a negative impact. The main negative importance of
value chain analysis is that the overall strategy and vision for the company may disappear when
the different activities and operations which are undertaken by the company are divided into
segments (Riasi, 2015). Therefore, when undertaking the different activities and procedures of
value chain analysis, there is need to critically analyze the relationship between the mission,
vision and strategies of the company with the different activities carried out.
Question 1bi. Chosen company
The chosen company is Challenger Limited. This company is an Investment company, the
company in Australia has a focus of providing its customers or consumers with retirement
financial securities. The company offers different Investment strategies exhibiting consistent
strong performance, this helps their customers within retirement to obtain reliable and safe
streams of income (Jaworski, 2018). The company is the largest provider of annuity within
Australia offering guaranteed payments to more than sixty thousand retirees. Challenger
Limited is an investment management company listed by ASX. Currently the company manages
assets which are worth $78 billion.
Challenger Limited an Australian company has a vision of providing customers with a reliable
financial security during their retirement.