Holmes Institute HA2011: Challenger Limited Accounting Report

This report provides a comprehensive analysis of Challenger Limited's management accounting, focusing on the application of the value chain concept. It begins with an executive summary and table of contents, followed by an in-depth explanation of the value chain concept, including primary and support activities, and its importance to a firm. The report then applies this concept to Challenger Limited, an investment company, examining its competitive advantages, specifically cost and differentiation. The report includes a value chain model for Challenger Limited and discusses value addition processes, particularly in marketing and sales, to enhance the company's competitive position. The chosen value addition processes are explained, along with supporting departments such as the human resource and procurement departments. The report also includes the company vision and objectives. The report concludes by referencing the sources used in the analysis.

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Management Accounting
By [Name]
Course
Professor’s Name
Institution
Location of Institution
Date

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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.

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The objectives of the company are:
 To promote sustainability, promoting sustainability is very critical to them for building
long-run value for shareholders, customers, employees as well as the overall community.
 To have a corporate governance, the company believes that having a corporate
government which is good would offer extra-ordinary outcomes for the customers and
stakeholders.
 To build career, the company ought to provide a better working environment which helps
individuals from diverse or various backgrounds having various skills can succeed and
contribute.
Question. 1bii: Competitive Advantage
A description of competitive advantage strategy for the company.
Competitive advantage explains a phenomenon where a firm within the industry gains profits
that a far beyond the average within the industry it’s operating. The two basic types of
competitive advantage as elaborated by Michael Porter are cost advantage and differentiation
advantage. Cost advantage exists when the firm within the industry delivers equal benefits as its
rivals but at a cheaper cost. Differentiation benefits explains a phenomenon where a firm within
the industry produces benefits which are exceeding those of rival firms (Baldwin & Evenett,
2015). Therefore when describing about competitive advantage, the firm creates superior values
for the customers and itself profits.
While describing the competitive strategy for the company, the cost leadership would
considered.

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For Challenger Limited in Australia to enjoy competitive advantages, it has to sustain profits
which are exceeding those in the Investment management industry (Fearne et al, 2012).
Therefore, for challenger Limited has to maintain ways which it’s providing services at a lower
cost. The company is providing services at a very lower cost through perfecting the production
process and methods or through effective utilization of available resources than the existing
competitors in the industry (Kirchhoff et al, 2016). The company currently is managing assets
which are worth $78 billion perfectly, more individuals are signing up with it. Challenger
limited in Australia is the strongest provider of annuities. That means that the company
understands how to apply its resources and capabilities to undertake competitive advantage
(Angel, 2012). The different resources that the company utilizes effectively are a large base for
customers, Brand equity, trademarks and Patents. The firm has the ability to utilize these
resources effectively. Effective utilization of resources within the Investment management
industry has made the company to be the largest firm within the industry because the company is
always faster than the competitors (Dibb, 2010). The firm or company is enjoying a competitive
advantage because it has distinctive competencies within the industry. Because of these
distinctive competencies within the industry (Kim et al, 2012), Challengers Limited is very
efficient, innovative, and respondent to the needs of customers as well as emphasizes quality
production.
Question 1biii: Value Chain model
The Value Chain model for Challenger Limited
The diagram illustrating the Value Chain model for Challenger limited is illustrated below;

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Figure 1: Illustration of the Value Chain model for Challenger limited
Source: (Jaworski, 2018)
The value adding processes for the company are related to the primary activities within the
company. The different departments are also related to the supportive activities of the company
(Wensley, 2016). Using the value chain model, the different value adding processes are:
Referring to the inbound logistics, the company need to acquire skilled manpower who can
definitely provide better services that would lead to the development of the enterprise.
Challenger Limited is not a manufacturing industry (Dekker, 2010), therefore, there are no
processes undertaken in acquiring raw materials. For the company to enjoy competitive
advantage, it has to focus so much on its service, operations, and marketing/sales activities. The
different value addition processes which are undertaken in the operations activity category are:
Training the available labor and equip them with better skills, the managers of the organization
should research and look for better investment techniques so as to generate profit generating
techniques (Chatterjee, 2017). Focusing on the Sales and Marketing primary activities, the value
addition processes would include introducing better communication facilities that would educate
the people on the different services offered by the company. The company should acquire new
advertising techniques as well as improve on the existing ones (Lee & Carter, 2011).

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The different existing departments that would be very helpful in supporting the organization
include the human resource department, this would support value addition processes like training
labor to acquire better communication and managerial skills; the other department is the
procurement department, this department would be very helpful in supporting different value
addition processes for example financing the different seminars undertaken to improve the
different skills of labor.
Question 1biv: Value addition
The different chosen Value addition processes which should be undertaken by the company in
the different department from the diagram above are explained below:
1. Improvement of marketing and sales activities within the company.
The different activities undertaken to improve sales and marketing are educating and equipping
the marketing team with better communication and advertisement skills which would draw the
public attention to the different services which are carried out within the organization (Bustinza
et al, 2015). When different individuals are aware of the different activities that are carried out in
the company, they would probably rush for these services. Advertisement would be conducted
through using billboards; using social media platforms for example Gmail, Facebook, Whatsapp,
and many others; using banners and sponsoring different programs on televisions.
In addition to the above, there is need to for the company to create and be able to maintain an
attention that is favorable. The above can be done through applying strong skills in terms of
sales, doing effective marketing, and formulating strategic question, which are vital in the
creation of attention, which is favorable. Moreover, the company needs to formulate activities
which are appealing. The above must be done by ensuring that the formulated strategies are

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focused, appealing to the customers and sustainable. These ensure that they attract customers and
in the end maintain through the effective advertising and sales promotion activities.
Besides, to have a formidable marketing and sales planned activities, it is vital that the company
makes an update of its SWOT conditions in the market along with the target audience. It is clear
that the needs and targets of customers change over time. Therefore, there is need for such
dynamics to be reorganized, and be able to identify the company threats, opportunities, strengths
and weaknesses. On top of that, making reflections into the sales and marketing activities and
being able to effectively listen to the customers is another basis for creating clear sales and
marketing activities for the company.
2. Improving the operations of the company.
Improving operations of the company calls for better procurement procedures, advancement in
technology, and recruitment of skilled manpower. When the operations of the company are
improved, there is provision of better services by the company. Provision of better services by
the company is very useful in improving sales (Hansard, 2011). It is evident that the company's
value chain has a direct impact on the processes of production. However, the need for support
activities is one aspects must be incorporated in the course of operations. Competitive advantage
often results from innovations in the different processes or business models. Activities like
general management and information systems need to be taken into consideration for better and
smooth company operations.
There is need to identify the company's support and primary activities. In order to do that,
sufficient knowledge regarding the operations of the company must be obtained. Moreover, each
of the above activities identified, its importance in the organization must be established relative

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to the cost of producing each product. The general cost incurred in producing a specific product
must be ascertained after being assigned to a specific activity. Therefore, it is on the basis of the
above that costs incurred in the company and by other competitors in producing a specific
product through given processes can be established. More so, there is a need for cost driver for
each company activity to be established. The above will help the company to understand the
factors that drive costs and formulate means to ensure that they are improved. Moreover, links
between company activities and measures to ensure that the costs are reduced must be
formulated by the company management. The above ensures that the company is aware of its
efficient activities and the different cost drivers.
Question 1bv: Relevancy
Relevancy of knowledge obtained from the concept of Value chain
The knowledge is very relevant because it could help the different managers of the company to
identify different activities they can possibly undertake to achieve competitive advantages
(Chang, 2016). Understanding and applying knowledge acquired from value chain would help
companies improve on the information, materials, and finances (Khan, 2014). New opportunities
could possibly be exploited through using the knowledge of value chain. The company would
understand it weakness and take action so as to reduce on its risks.
In addition to the above, the value chain is the basis on which the customer service is boosted. In
most cases, customers often expected product assortments, which are correct, and in the right
quantities. Also, products are expected to be always available in the needed locations and the
right time of delivery and the correct after sale support. Therefore, the value chain must be able
to take into consideration in order to boost the service of customers.