The value chain includes costs from research to product design, to production, to marketing and sales, to distribution, and to customer support after the sale. Which areas of the value chain do you think should be included in calculating product costs and why? Where would the other costs be reported, if at all?Embed course material concepts, principles, and theories (requires supporting citations) along with at least one scholarly, peer-reviewed reference in supporting your answer. Keep in mind that these scholarly references can be found in the Saudi Electronic Library by conducting an advanced search specific to scholarly references.You are required to reply to at least two peer discussion question post answers to this weekly discussion question and/or your instructor’s response to your posting. These post replies need to be substantial and constructive in nature. They should add to the content of the post and evaluate/analyze that post answer. Normal course dialogue doesn’t fulfill these two peer replies but is expected throughout the course. Answering all course questions is also required.
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The value chain includes costs from research to product design, to production, to
marketing and sales, to distribution, and to customer support after the sale.
Which areas of the value chain do you think should be included in calculating
product costs and why? Where would the other costs be reported, if at all?
Embed course material concepts, principles, and theories (requires supporting
citations) along with at least one scholarly, peer-reviewed reference in supporting
your answer. Keep in mind that these scholarly references can be found in the
Saudi Electronic Library by conducting an advanced search specific to scholarly
You are required to reply to at least two peer discussion question post answers
to this weekly discussion question and/or your instructor’s response to your
posting. These post replies need to be substantial and constructive in nature.
They should add to the content of the post and evaluate/analyze that post
answer. Normal course dialogue doesn’t fulfill these two peer replies but is
expected throughout the course. Answering all course questions is also required.
Warren, C. S., & Tayler, W. B. (2020). Managerial accounting (15th ed.). Boston, MA: Cengage
Learning. ISBN: 9781337912020
I need a replay for two of my classmates
The first student is Hadeel Alnafe :
A Value Chain represents the collective effort put in by a company in order to
give a product to the market. It is a sum total of all the work and expenditure put into the
creation of the said product therefore declaring its “value” as per se, by putting a number
on the item stating it is worth that much the least. This number is gained not through a
carefree or halfhearted effort but through a highly technical, precise and measured
approach called the value chain analysis. In this approach, all the factors involved in
making the product from scratch to its finished form are analyzed and rated. In the end,
all theses ratings are added to give the final value. Since this is a “linked” process where
the next step is connected to the previous, thus it is called, value “chain” analysis.
Though on paper it may seem and sound simple enough to evaluate every entity
of the product which helped in making the product successful from start till finish, it can
also become a highly intriguing aspect as to what to add in the value chain and what not.
After all, from a customer point of view, some of the extra efforts being put into making
sure the product has “more reach” may seem excessive and not required, at least not to
them. It is key to note that the value indicated by the value chain is not the final or actual
price of the product as profit margins and other factors like sales tax etc. also contribute
heavily in determining it and some aspects of the value chain are also removed from the
final price, but it is the main centre or starting point determining it. Keeping this in mind
we will now try to understand which aspects of the value chain should or shouldn’t be
added to the final price.
Starting from the basic, while developing a new product the first step is always to
determine whether or not there is a need for that product and if so then what attributes the
product should have, this “research” phase is critical in making sure product is a success
or not, but in most cases is usually a one-time thing. Research is done before the
production starts and after the product reaches the market and is hit, there is no need for
any research to be done on the same product. Research is only required when the product
fails to make an impression in order to determine why it failed, and also when a similar
but new more advanced product is needed to be introduced. Therefore, the number of
finances exhausted on the research should not be added to the overall price of the finished
product, as it may seem like paying the fees for the research long after the toll was
already paid off.
After the research is done production is the next key element is actually producing
the product from scratch. This part of the value chain should obviously be a part of the
final finished price as each finished product always has some expenditure that was spent
on it. No matter if its part of the first batch produced, the last one or anywhere in
Marketing and sales are the next steps in the selling of the product. Just like the
research part of the value chain, it can be argued that the marketing of the product has
nothing to do with adding overall value to the quality of the finished product. Although
this may seem true in reality, marketing is an essential step that sticks from the moment
the project is given a green signal all the way to the point it is discontinued. Marketing
makes sure that the product is familiar with as many people as possible all the while
revealing its salient features. It should definitely be added to the final price.
The final steps towards the selling of the product are the distribution and customer
care after the product is sold. Since distribution is uniform as in that all products are
needed to be distributed from the factory of production, it should most definitely be part
of the final value. But since customer care is not uniform as not everyone who attains the
service will require it, therefore it makes no sense for everyone to evenly pay for it.
In conclusion, while all areas of the value chain are important in making sure the
product has the maximum reach and success some aspects like customer care and
research do not need to be a part of the process for determining the final price of the
product, whereas aspects like production, marketing and distribution should definitely be
considered while determining the overall final price.
Springer-Heinze, A. (2007). ValueLinks Manual: The methodology of value chain
The second student is Atheer
The competitive environment for firms of all shapes and sizes is more challenging
than ever before. Technological enhancements have allowed businesses to design and
construct more rapidly, sell across many paths, react instantly to changing demands, and
cut costs simply by outsourcing an activity. To reach competitive advantage, an
organization ultimately delivers more value at an equal or decreased cost. Value chain
analysis is the approach for determining the critical way to improve customer value while
cutting costs (Smartsheet, 2020).
Value chain analysis (VCA) is a chain of steps, like product design, procurement
and distribution, to be utilized for analyzing how business organizations identify their
dominant valuable elements and activities for related product or services. The basic factor
of value chain analysis is an individual value chain, which reflects the internal business
engagements throughout the development of products. Generally, the main purpose of
VCA is to be cost-effective, elevate differentiation and enhance competitive advantage.
For instance, if a firm competes through cost advantage, it will run at a decreased internal
cost than its competitor would do. so, the firm can be capable to gain considerable
benefits based on such competitive advantage. Additionally, a great value chain analysis
would deliver successful marketing methods and improve customer loyalty in the longterm (L. Allison, 2019).
Porter’s Concept of Value Chain Analysis, value chain analysis concentrates on
analyzing the internal activities of a business in an effort to comprehend costs, locate the
activities that add the most value, and differentiate from the competition. To improve an
analysis, Porter’s model points out the primary business functions as the basic areas and
activities of inbound logistics, operations, outbound logistics, marketing and sales, and
service. The model also outlines the discrete tasks found in the important support
activities of firm infrastructure, human resources management, technology, and
procurement. The overall aim of value chain analysis it to outline areas and activities that
will profit from change in order to enhance profitability and efficiency (Smartsheet,
The aim of a value chain strategy is to sustain or reach a competitive advantage.
This can be done through a purposefully structured process; however, it is the
development of effective cross-functional relationships within the enterprise that permit
for growth and innovation. These areas of differentiation, reached through optimization
and coordination, can be the catalysts that bring realistic results in cost cutting, elevated
customer value, and market power (Smartsheet, 2020).
The two dominant sub-factors of VCA are: Primary Activities and the Supportive
Activities. Primary Activities, are mainly about functions utilized for the alteration and
distribution of input and output. moreover, such activities usually include these areas: the
inbound logistics; the operations; the outbound logistics; the marketing and sales; the
service part. Supportive Activities, are utilized for supporting the primary ones to reach
the goals. Typical supportive activities include the purchasing; the technology
development; the human resources management; the infrastructure system (L. Allison,
Product cost is related to all those costs which are incurred by the company in
order to create the product of the firm or deliver the services to the customers and the
same is there in the financial statement of the company for the period in which they
become the part of the cost of the products that are sold by the company
Calculating Costs: Producers & Cost basis. In most cases, production costs are
clear to calculate. The producer of a good or service normally utilizes the actual
costs/actual output method of accounting. If producers have been extremely inefficient
with material resources or production is significantly less than capacity, other
calculations are necessary when preparing an income statement. Cost Basis shows the
taxable amount paid for assets or investments and is specifically significant for
determining capital gains. The Internal Revenue Service permits three separate methods
of calculating costs for tax purposes: average cost, first in first out and specific
identification. Cost basis accounting varies counting on if the items in question are
stocks, bonds, mutual funds, capital equipment or other assets (Investopedia, 2019).
Personally speaking, Calculating the product cost in the value chain, it has to
consider each area incurred in the good production. However, the areas should be shown
in multiple financial statements. For example, the cost of good reporting in
manufacturing businesses are complex enough to influence the balance sheet and the
income statement. Therefore, the good cost would be there in all these statements.
SmartSheet, 2020. The Art of Value Chain Analysis – From Defining Activities to
Identifying Areas for Improvement. Retrieved from https://www.smartsheet.com/art-valuechain-analysis-defining-activities-identifying-areas-improvement
L. Allison, 2019. Value Chain Analysis – Definition and Examples. Retrieved
SmartSheet, 2020. Comprehensive Guide to Value Chain Analysis with Examples by
Industry. Retrieved from https://www.smartsheet.com/everything-you-need-to-know-aboutvalue-chain-analysis
WallStreetMojo, 2020. Product Cost. Retrieved
Investopedia, 2019. What Are the Main Methods for Calculating Business Costs?
Retrieved from https://www.investopedia.com/ask/answers/101314/what-are-main-methodscalculating-business-costs.asp
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