Value Chain Analysis, the Transport Crisis in Melbourne City - Case Study Example

Running Head: VALUE CHAIN ANALYSIS Value Chain Analysis Name Institution Date Introduction The concept of value chain analysis is a fundamental organizational practice that facilitates the understanding of the systematic conditions and factors under which a firm can attain a higher performance level. Basically the main objective of the value chain analysis is the improvement of performance and competitiveness. The results of this particular analysis should be geared towards assisting all stake holders to eliminate confines that impact sustainable competiveness and end market opportunity. The framework based on value chain analysis is a tool for strategic planning which has expanded beyond individual firms. It can be made applicable to the entire distribution and supply chain networks, production and sale of products. The following presentation is specifically geared towards formulation of a unique value chain proportion that highlights the relationship between people and technology. The interaction between people and technology has to some extent proven to increase various challenges that people encounter in contemporary society. The presentation will feature challenges in the transport industry which can be solved by a workable value chain proportion. The Transport Crisis in Melbourne City Melbourne city just like many cities in the world is faced with transport related challenges which include the problem of pollution, accidents, congestion and road damage. Due to the aspect of high level of car dependency in this particular city, there has been an increased level of pollution in the city. Pollution in this context is more than just emissions from car engines but rather, continuous dust which is sent to the air as a result of the rolling friction between the road and rubber tyres also increases the levels pollution in the city. In addition government spending on renovation of roads due to damage as a result of congestion has also rapidly increase (Sally 2003). The government has not effectively succeeded in encouraging the Melbourne residents to lessen their reliance on personal cars and make more use of the public means of transport (Bob 2005). In despite of the introduction of bus services that can assist in reducing transport problems in this city not much of the population utilizes these services. What is evident is that there is actually a substantial gap that exists between the trends in the travel and transport system and the stated objectives of the government. Reports by the Transport Bureau indicate that transport costs associated to noise and air pollution, accidents and road damage amount to over $30 billion annually which is approximately 6% of the Australian GDP as highlighted by the table below. (Public Transport Users Association Report 2007). Transport Challenge %GDP Cost Government Action Air Pollution 0.25 $1.25 billion Emphasis laid on the management of emissions through using unleaded fuel rather than the reduction of the emissions amounts through reducing the number of vehicles on roads Accidents 3 $15 billion More funds channeled to road construction rather than being invested in improving public transport Noise Pollution 0.1 $500 million Millions channeled to noise barriers as opposed to reduction of traffic Congestion 2.6 $12.75 billion More funds on road construction rather than improving public transport Road damage 0.3 $1.4 billion Build stronger roads Total 6.2 $30.9 billion This kind spending on one sector that has actually been highly developed is actually very much questionable, therefore there is need for reforms in order to cut off such a trend of high spending in a sector that has been highly invested on. It is important to take note of the fact that current action being undertaken by the government in the 21st centaury to deal with the externalities in the transport system seem to have not resolved the transport problem. Melbourne city on the other is not exempted, the transport challenges still persists in this particular region. Value Chain Strategy The Monarch University located in Melbourne can formulate a strategy to tackle the transport problem in the city. The university has one of its Campuses (Parkville Campus) located 2km from the Melbourne CBD, therefore this cite would be strategically suitable for execution of the plan to assist the government reduce expenditure on the transport sector. The environmental department and the Engineering departments in collaboration with the university council can write a proposal to the government on the strategy that would assist solve the problem. The plan would basically entail temporarily relocating the Melbourne Revenue Authority offices on one of the free office facilities on a section of the university grounds. It is evident that every individual has to pay taxes and follow up their tax records in order to avoid being on the wrong side of the law due to tax evasion. The location of the University being 2km away from the CBD is very much appropriate. The action plan entails the fact that each individual visiting the revenue authority department will be awarded with tax reduction if they arrive at the university while cycling or using the public bus services in addition progressive use of the two transport facilities even in the Melbourne CBD area will be detected through lesser tax remits paid on parking charges, for an individual’s vehicle, thus the person will get more tax reductions. However people who do not follow the policy will be forced to pay an additional tax charge of 10% . The benefits accrued from this particular undertaking will be channeled to the University. The other strategy involved in the plan is for the government to mobilize local auto suppliers in the area to make price reductions on bicycle products, this will be done through offering subsidies to the prices of the products. In this particular plan technological development is based on upgrading the quality of bicycles and the public buses ordered from the manufactures, which will definitely enhance customer satisfaction. Role of stakeholders Suppliers Melbourne dealers or suppliers dealing with bicycles should be urged by the government to reduce the prices of their products due to the fact that their will be a shift in demand as a result of the newly formulated regulation. In addition the suppliers should also increase their quantity of supply in order to effectively cater for the increased demand for the bicycles or the manual autos. The public bus management should also lower prices in order to cater for the increase in demand. Monarch University Offer the office facility to the government to undertake the plan temporarily. The university can also carry out surveillance of the plan while it’s still on progress. In addition the institution can also carry out further research concerning the practicability of the plan and how improvements can be made in order to develop more efficiency. The Government One of the roles of the government is to offer subsidies to the manual autos; this will enable suppliers get lower prices for obtaining the bicycles, therefore leading to reduction of prices for the customers. The other role of the government is to facilitate the tax reduction policy, although the implication of the strategy is that the government will receive less amount of tax from members of public, however the over expenditure on the transport sector will be reduced and therefore balancing the equation especially in future spending after the strategy solves the crisis in the transport sector. Value Chain Frequently a single work process can entail several value chain units which operate concurrently; this is referred to as value chain coalitions. The model basically highlights the simultaneous interaction that occurs between several units, as indicated by the diagram below; Supplier In the above illustration the supplier, the university, the government and customers are all perceived to be working in collaboration in order to add value to the chain . In order to tackle the transport problem in Melbourne city the various stakeholders are required to participate simultaneously in order to find an effective solution. Customers in the highlighted focus group may communicate to suppliers on the types of products that would add value to their transport requirements. For instance some would propose that they need motor cycles as opposed to bicycles. The suppliers would communicate these requirements to the government who would intern increase subsidies on motor cycles as they did for the bicycle products. The university may also be involved in the communication process through providing an analysis of the reactions of the consumers towards the products they are receiving from suppliers. For instance the university can undertake a Survey to evaluate if the customers have experienced tax reduction due to the new change of product that is from the dependency on vehicles to the use of public bus services and cheap bicycle products provided by the local automotive suppliers. The stakeholders in this case are supposed to work together either logically or simultaneously in order to increase value chain benefits of each of the organizations. Each stakeholder must be involved in the cross functional communication process and all pressure that may arise should be effectively considered and dealt with. Linkages between Activities in the Value Chain The activities within the value chain should not be separated from each other. One activity within the value chain often affects the other in terms of performance and cost ( Mitchell 2004). For instance in the context of the new intervention to cut costs on government spending on the transport sector and also the reduction of environmental pollution, if the customers arrive at the university using cars or by defiling the new regulation, the university is likely to attain more benefits due to the fact that the agreement with the government was that all the earnings attained from such individuals would be handed over to the University. On the other hand if the customers follow the regulation as stated, t he local auto suppliers and the public bus service that perform the primary activity, will actually increase their profits. The government will eventually experience a reduction of spending on the transport sector. The strategy should basically produce a win win outcome for all the stakeholders involved in the process. The entire process has to bring about linkage between the support activities and the primary product which in this context is the bicycles from the local Melbourne suppliers. Supply and Demand Chain The main objective of suppliers is to fulfill the demands of customers through the most useful distribution capacity, labor and inventory. In the practical sense supply basically seeks to match up demand through utilizing minimum inventory. In the proposed intervention the aspect of optimizing the supply chain has been undertaken by the government through offering subsidies to the local suppliers of bicycles in Melbourne city, the suppliers were able to strategically strike a balance between purchasing the products at subsidized prices and later selling the bicycles to customers at lower prices and still managing to make a considerable amount of profit (Cooper 1997). In terms of demand, due to the government regulation on decreasing tax deductions for people who use bicycles, the quantity demand for the product will increase. In addition the reduction of prices of the product also increases the quantity demanded at a particular time. In the highlighted value chain the most logical occurrence is that equilibrium will be formed . This is attributed to the fact that at this particular point the demand function and the supply function basically intersect. The allocation of goods is actually sufficient due to the fact that the amount of good being supplied to the market is exactly similar to the amount demand . At this point suppliers sell their products and the consumers get the goods they require due government intervention through subsidies which gives the suppliers more opportunity to offer products to consumers at lower prices. The graph below indicates that the intersection between the demand and supply curve will provide the market price of the bicycles (Webber 1982). Table of Supply and Demand Price Number of People Want to Buy Number of Widgets Sellers Want to Sell $1.00 100 10 $2.00 90 40 $3.00 70 70 $4.00 40 140 The graph indicates the reduction of prices will result to an increase in the quantity demanded .In addition due to the provision of government subsidies of product , in despite of reduction prices due to the government regulations to suppliers to reduce their prices , the quantity supplied will still be high . The supply demand curve will actually take the normal supply and demand trend, through formation of the equilibrium. Performance Management Performance management involves standards set by the organizations in order to measure the technical and tactical outcomes and behaviors that are used to support the overall strategy. This is basically performed through the setting of quantitative and behavioral standards. The analysis is useful because managing organizations without using well defined standards, communication skills and interpersonal relationships may hinder effective performance of the outlined functions. The aspect of capturing the value that can be generated along with the chain is basically an approach that should be undertaken using management strategies. For instance the suppliers may require that the government increase the subsidies offered in case the cost of transportation of the products from manufactures rises. Through the exploitation of the downstream and the upstream of the information that flows within the value chain the various stakeholders involved may develop new models of business and further improve on the value system. Options for upgrading the value Chain The stakeholders in the value chain strategy to reduction of government spending on transportation and environmental pollution can capture or retain their earnings through evaluation of the gaps in performance and identifying areas that need to be upgraded. For instance the local Melbourne suppliers can concentration on aspects such as introducing a new type of bicycle with interesting feature to the market, they can also add value through changing the various activities they conduct in their firms for instance outsourcing and logistic processes. On the other hand the government can relocate back the Revenue department to the CBD and continue using the tax reduction strategy for those who will still follow the regulation. The Strategy initiator which is the Monarch University should formulate other value chain research strategies and make proposal to the government in order to assist not just Melbourne city but also other cities in order to increase efficiency of the value chain to other regions. The proposal can also be useful within a global framework and thus increasing the research capabilities of the University at a global level. Lessons from strategy . The main essence of the strategy is to highlight the linkage between people and technology through solving challenges that exist within the transport sector specifically for the government and the community in terms of environmental conservation. However it is vital that the plan should account for the entire transport system by not only upgrading individual firms but also it should have a big impact on the well being of people in contemporary society. Conclusion The application of the value chain approach assists strategy makers to attain better understanding of how various sectors can solve the problems that exist in society. The strategy stakeholders or strategy team should design an appropriate process that can review the existing problem in a manner that will be of benefit to the entire chain. It is essential for the value chain to be extended beyond being applied on only one particular organization. The local industry within a particular region should aim at extending the value chain to various levels such as nationally and even globally. In this case if the strategy of reduction of government spending on the transport sector through the tax reduction strategy can actually work effectively in Melbourne city the plan can also be implemented on other cities such as Sydney in order to solve the transport crisis . References Bob, S. (2005). Melbourne Transport Crisis. The Sydney Morning Herald, Retrieved18/4/2010 From Blackman, D.(1999), 'New incentives for cleaner transport' . 1999 Budget Planning. Retrieved18/4/2010 From Cooper, M .etal. (1997) Supply Chain Management: More Than a New Name for Logistics. The International Journal of Logistics Management, pp 1–14 . Retrieved18/4/2010From The Horizontal Corporation".(1993). Business Week Retrieved18/4/2010From Martin, James (1995). The Great Transition: Using the Seven Disciplines of Enterprise Engineering. New York:  . Retrieved18/4/2010From< http://www.jamesmartin.com/about/books_written.cfm>  Mitchell, J.etal. (2004). Upgrading along value chains. London: Overseas Development Institute Retrieved18/4/1020From Porter, M. (1996). What is strategy? Harvard Business Review on the value chain Retrieved from Public Transport Users Association Report (2007).Victoria, Australia. Retrieved18/4/2010from Sally, C. (2003), 'Tackling traffic emissions', Town and Country Planning. Melbourne. Retrieved18/4/1020 From Webber, M. (1982), “Supply- Demand chain management. Logistics catches up with strategy. London: Oxford University pg 59-67. Retrieved18/4/1020 From< http://www.springerlink.com/index/r318k4x3n184p871.pdf> Read More