example, training may be the key to improving customer service, or
improved process development may depend on more resources allo-
cated to R&D.
Value chain competition example
Over the past 30 years the textiles industry in the UK has been in rapid
decline, with a stream of bankruptcies and plant closures. A significant
feature of the world market has been the proliferation of competitors in
countries with low labour costs, such as Indonesia and Bangladesh, mak-
ing cheap and often shoddy clothing. In textiles and clothing, labour can
account for up to 30 per cent of total costs. The senior management of
companies in the UK has therefore been faced with the task of exploiting
areas within the value chain to achieve competitive advantage.
Companies have invested heavily in new technical developments, inte-
grating CAD, laser engraving equipment and electronic colour dispensing.
As a result, design and manufacture are linked to reduce development
time and help make short runs economically viable. Clothing retailers
do most of their ordering in advance, but sophisticated computer
systems let manufacturers know how much of a particular garment
Cash Flow Forecasting
48
Support
activities
Firm infrastructure
Margin
Margin
Inbound
logistics
Outbound
logistics
Operations
Marketing
and sales
Service
Primary activities
Human resource management
Technology development
Procurement
Figure 3.4 Value chain analysis (adapted from M.E. Porter, Competitive
Strategy)
H6136-Ch03.qxd 9/8/05 10:39 AM Page 48

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