Value chain concept and model helps in understanding the effectiveness with which each and every activities help in adding value to the final product offered by an organisation. The study has analysed the value chain concept in the context of ANZ banking group limited. In this study, overhead allocation costs as well as rates for different jobs of Prime Personal Trainers have been determined. On the other hand the activity based costing in regards to Malekula council has been undertaken. The problem statement of the study is to provide an understanding of value chain concept and activity based costing.
Value chain concept helps in understanding the different activities and its effectiveness with which it helps in adding value to the product. It has been defined by Brewer, Garrison and Noreen (2015), as a strategic tool used by an organisation to identify the most value adding activities as well as the least valuable activities undertaken within an organisation. It helps in eliminating the least valuable activities so that the costs can be controlled effectively. It has been seen that it also helps in adoption of differentiation (Laguna and Marklund, 2018).
The two ways in which the value chain concepts have proved to be advantageous for the organisations on an overall basis are found to be as follows;
Value chain analysis helps in the processes to become more cost effective this is due to the fact that cost consuming activities are identified with the help of value chain analysis. Since an organisation has to undertake different forms of activities such as inbound, outbound, marketing and sales as well as post sales service hence it has to evaluate their value (Donovan et al. 2015). Evaluation of value that these activities create to make the final product of the firm is able to achieve the needs of the customers. Therefore value chain analysis recognises the loss making activities and thus removes them so that the cost can be reduced in relation to the activities.
Value chain analysis also helps in differentiation of the products or services. In the opinion of Simatupang, Piboonrungroj and Williams (2017), it has been seen that value chain analysis helps in identifying those activities that help in creating or procuring unique form of material. With the help of this, a company can achieve competitive advantage on a long term basis. It has been seen that value chain analysis offers the firm an opportunity to recognise uniqueness in the activities. On the other hand these unique activities might be found to be inimitable by the large numbers of competitors. Thus it offers wide range of benefits to the companies to be able to achieve long term profitability.
The chosen organisation is ANZ banking group limited that is listed on the Australian stock exchange. The mission of the firm has been found out to be creating value led transformation in the sector of banking and financial services (anz.com.au, 2019).
The objectives of the company has been outlined to be various and as follows;
· It aims to achieve a customer centred approach while delivering services.
· It also aims to learn on a constant basis so that it is able to meet their needs as per the dynamic business environment (anz.com.au, 2019).
· It aims to achieve the advantage of being able to create simple and less time consuming services as well as facilities.
· It also aims to instil within the organisational; culture sense of winning behaviours and always be driven by the sense to achieve high growth rate (anz.com.au, 2019).
The competitive strategy of ANZ Banking Group Limited has been found out to be differentiation. As per the opinion of Donovan et al. (2015), it has been seen that differentiation helps in achieving innovation in its products. It also helps in creating value and making its products or services highly competent in the industry wide market. In case of ANZ banking group limited it has been observed that differentiation in various financial products as well as its services have been undertaken. As its mission is to adopt a customer centred approach while offering services to large base of customers, hence it becomes necessary to innovate new products. Innovating products helps in meeting the new requirements of the customers as well as it also helps in staying upgraded as per the market. In the recent years ANZ banking group has taken research and development programmes and thus has become capable of offering financial products both on online as well as offline mode. This has helped the bank to satisfy customers effectively. This has also been possible because of the fact that time has been reduced to avail services of the bank as well as customers are exposed to wide varieties of financial schemes.
The two value adding services that have been identified for the firm ANZ banking group limited have been described below;
Fund raising activity
It has been seen that the fund raising activity of ANZ banking group has been found to be valuable. On the other hand it is mostly related to collection of donations from its large number of customers to be able to contribute towards community development activities. It has been seen that ANZ banking group as a part of this activity collects donations from its staffs, customers and large number of shareholders. These funds that are collected as part of the community development programme are then distributed to the community development organisations or other voluntary form of organisations. For example ANZ banking group limited collects an amount of $5000 from each of its employees in every financial year (anz.com.au, 2019). This process of fund raising activities has been able to make the company achieve high level of reputation in the market as well as in the society. This is because it has helped the firm to undertake corporate social responsibility efficiently (anz.com.au, 2019). On the other hand due to its sensitive approach to address the issues of community and other societal issues, it has achieved the confidence of its shareholders.
Financial products and services
Financial products and services are other activities that have been observed to be valuable in the context of value chain analysis. It is the main activity of the organisation as it is concentrated around the financial services and products offered to its customers. It has been seen that ANZ banking group limited has been able to offer large number of financial services such as transaction services, risk management and foreign exchange facilities. On the other hand in regards to the products its offers insurance and superannuation as well as different schemes of financial services to its customers. It has been seen that innovation and improvement in these activities have helped it to attract new customers. In relation to innovation it has been found out that the company offers high rates of interest or fixed deposit as well as other savings facilities to the customers (anz.com.au, 2019). This activity of offering financial products and services by the ANZ group limited has helped it achieve competitive advantage in the market of Australia. On the other hand, it has also increased the profitability of the firm as well as earnings per share in the recent years to $2.72 (anz.com.au, 2019). Innovation and improvements have been found to be core element of the financial services provided the bank.
Value chain analysis has been observed to be relevant as well as useful. It has helped in understanding the importance of each and every activity undertaken in an organisation. The information related to the ANZ banking group limited has ben found out to be useful as it has helped in understanding the real life scenario and importance of value chain analysis. On the other hand it has also offered a detailed knowledge of the way an activity is recognised to be valuable or invaluable. The large number of benefits it provides as well as its use to achieve mission and objectives of an organisation.
It has been found out that the variable overhead is allocated on the base of direct labour costs. In the context of Prime Personal Trainers it has been seen that the total labour costs have been found out to be $75000. On the other hand, variable overhead cost has been calculated by considering only Variable overhead which is merely fringe benefits. The total variable overhead cost has been observed to be $150000. Therefore the estimate for variable overhead allocation rate in terms of the current period has been determined to be 2 or 200% of the direct labour costs.
In case of fixed overhead allocation rate it has been seen that the total costs have been found out to be $120000. It has been calculated by Prime Personal Trainers on the basis of direct labour hours. Therefore the allocation rate has been determined by dividing the total fixed overhead with that of the direct labour hours as the base rate (Rojko, 2017). Hence the fixed overhead allocation rate has been calculated to be $40 per direct labour hours.
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