Page 18 - Cost_Competitiveness
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The Institute of Cost Accountants of India
ase study
Value Chain Analsyis For Cost Competive-
ness in the Oil and Gas Industry
CMA (Dr.) Ashish Varma
Assistant Professor (Finance)
IMT Ghazibad, Uttar Pradesh
1. Introduction: Generic may have a low cost, but the activity adds
Value Chain much of the value to the end product,
since a rough diamond is signifcantly less
Michael Porter introduced the value valuable than a cut diamond. Typically,
chain analysis concept in his 1985 book the described value chain and the
‘The Competitive Advantage’. Porter documentation of processes, assessment
suggested that activities within an and auditing of adherence to the process
organisation add value to the service and routines are at the core of the quality
products that the organisation produces, certifcation of the business, e.g. ISO 9001.
and all these activities should be run at
optimum level if the organisation is to 1.1 Primary Activities
gain any real competitive advantage.
If they are run effciently the value Inbound logistics : Refers to goods being
obtained should exceed the costs of obtained from the organisation’s suppliers
running them i.e. customers should return and to be used for producing the end
to the organisation and transact freely product.
and willingly. Michael Porter suggested
that the organisation is split into ‘primary Operations : Raw materials and goods
activities’ and ‘support activities’. are manufactured into the fnal product.
Value is added to the product at this
A diamond cutter, as a profession, can stage as it moves through the production
be used to illustrate the difference of cost line.
and the value chain. The cutting activity
www.icmai.
The Institute of Cost Accountants of India
ase study
Value Chain Analsyis For Cost Competive-
ness in the Oil and Gas Industry
CMA (Dr.) Ashish Varma
Assistant Professor (Finance)
IMT Ghazibad, Uttar Pradesh
1. Introduction: Generic may have a low cost, but the activity adds
Value Chain much of the value to the end product,
since a rough diamond is signifcantly less
Michael Porter introduced the value valuable than a cut diamond. Typically,
chain analysis concept in his 1985 book the described value chain and the
‘The Competitive Advantage’. Porter documentation of processes, assessment
suggested that activities within an and auditing of adherence to the process
organisation add value to the service and routines are at the core of the quality
products that the organisation produces, certifcation of the business, e.g. ISO 9001.
and all these activities should be run at
optimum level if the organisation is to 1.1 Primary Activities
gain any real competitive advantage.
If they are run effciently the value Inbound logistics : Refers to goods being
obtained should exceed the costs of obtained from the organisation’s suppliers
running them i.e. customers should return and to be used for producing the end
to the organisation and transact freely product.
and willingly. Michael Porter suggested
that the organisation is split into ‘primary Operations : Raw materials and goods
activities’ and ‘support activities’. are manufactured into the fnal product.
Value is added to the product at this
A diamond cutter, as a profession, can stage as it moves through the production
be used to illustrate the difference of cost line.
and the value chain. The cutting activity
www.icmai.
