Question

Q 1. Value Chain/Functional Strategy

Three elements to this question. Choose a business with which you are familiar. First, briefly describe its business level strategy. Then describe the business’ primary value chain? Finally, what are one or two distinct activities at each section of the value chain that support the overarching business-level strategy?

Q 2 .Competitor Analysis

Financial Ratios for 2015	Acme	Big Box	Crab Shack by Joe	Derp	Elijah Wood	Fun Time Bad Times
ROS	10.8%	8.5%	8.1%	7.6%	1.9%	7.8%
ROA	14.1%	12.3%	14.5%	11.6%	3.2%	11.7%
Asset Turnover	1.30	1.46	1.78	1.51	1.72	1.50
Leverage	1.3	1.4	1.4	1.4	1.9	2.1
Contribution Margin	31.6%	27.3%	24.6%	28.1%	26.5%	28.2%

Given these basic ratios, which company is operating most efficiently (how do you know)? Which company is using the least amount of debt to finance its operations? Which company’s products appear to be the most profitable?

Answer 1

Since, question 1 (Value Chain/Functional Strategy) requires use of third party sources, I have answered Question 2 (Competitor Analysis) completely.

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Q 2 .Competitor Analysis

Based on the ratios provided in the table, Crab Shack by Joe appears to be operating most efficiently. It is clearly indicated by the fact that it has the highest ROA (14.5%) asset turnover ratio (1.78). ROA is calculated by dividing net income by average total assets. A high ROA indicates efficient utilization of resources (assets) by the company in the generation of profits. In other words, ROA can be used to evaluate the efficiency with which a company is using its available resources (assets) in order to produce higher profits/earnings for its shareholders. Besides high ROA, the company's asset turnover ratio is the highest, which again indicates the company's ability (efficiency) in using its assets to generate sales. As Crab Shack by Joe enjoys high ratios for both ROA and asset turnover, it can be concluded that it is operating most efficiently.

Based on the information provided in the table, ACME is using the least amount of debt to finance its operations. This is indicated by the fact that it has the lowest leverage ratio of 1.3. A low leverage ratio would mean lesser use of debt in the capital structure of the company.

ACME's products appear to be most profitable as it has the highest contribution ratio of 31.6% which indicates that the company is able to earn high contribution per unit for its products. In other words, either the company is able to command higher selling price for its products or is in a better position to control its variable cost of production as compared to its competitors.