Question

Problem 10-32 Value Chain Analysis Vernon Company invented a new process for manufacturing ice cream. The ingredients are mixed in high-tech machinery that forms the product into small round beads. Like a bag of balls, the ice cream beads are surrounded by air pockets in packages. This design has numerous advantages. First, each bite of ice cream melts rapidly when placed in a person's mouth, creating a more flavorful sensation when compared to ordinary ice cream. Also, the air pockets mean that a typical serving includes a smaller amount of ice cream. This not only reduces materials cost but also provides the consumer with a low-calorie snack. A cup appears full of ice cream, but it is really half full of air. The consumer eats only half the ingredients that are contained in a typical cup of blended ice cream. Finally, the texture of the ice cream makes scooping it out of a large container a very easy task. The frustration of trying to get a spoon into a rock-solid package of blended ice cream has been eliminated. Vernon Company named the new product Sonic Cream. Like many other ice cream producers, Vernon Company purchases its raw materials from a food wholesaler. The ingredients are mixed in Vernon's manufacturing plant. The packages of finished product are distributed to privately owned franchise ice cream shops that sell Sonic Cream directly to the public. Vernon provides national advertising and is responsible for all research and development costs associated with making new flavors of Sonic Cream. Required a. Based on the information provided, draw a comprehensive value chain for Vernon Company that includes its suppliers and customers. b. Identify the place in the chain where Vernon Company is exercising its opportunity to create added value beyond that currently being provided by its competitors.

Answer 1

Solution Value chain a business refers to the functional activities of that adds value to its customer. Requirements a compre- that (a) Based henstre includes on the information provided draw value chain for vernon company Hi Suppliers and customers. value chain Answers Research and Development. (Note (as purchase materials from a wholesale Supplies [ Note (b)] to malce le- Vernon process the material [Noteles cream to Distribute ice [Note (d) cream shops advertises ice cream Vernon the [Note les Ice crearn shops selle the product to [Note (f] the public.

16 Identify the place in the chain where Vernon company is exercing its opportunity to creali added valece beyond that currently being provided by its competitors. Antuer Vernon's Competitors engage in activities Similar to vernon's for materials aequisition, product manfacturing, product distribution. The valle - added activity that vernon bas. created as its research and development efforts, for consumers. product resulted in a new colich Notes (a) new process for vernon invented a com manufacturing ice cream. (6) Vernon company pwchases its raw materials from a tood wholesaler. (0) The ingredients are mixed en vemon's manufacturing plant . to (d) the packages of privately owned finished franchise products au distributed ice cream shops.

provides national advertising and is responsib (e) Vernon for all research and development costs associated Sonic cream. with making new favors of (f) privately owned franchise ice cream Shops sells the product to the public.
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