1. Running Header: Value Chain Analysis 1
Value Chain Analysis Can Help Little General
Hayley Stringfield
BUSI 601-Business Research Methods-B05
Liberty University
Dr. William Haun
October 6, 2013

2. Value Chain Analysis 2
Value Chain Analysis Can Help Little General
Introduction
In a study performed by Campbell, Datar, Kulp, and Narayanan (2002), an analysis of
Store24’s balanced scorecard was performed using two different strategic methods. One of
which was differentiation as Little General’s main strategy, and the other was the traditional
speed of service and efficiency of the employees. It was determined that the use of a balanced
scorecard could be misleading if the correct parameters were not measured and that there is little
way to completely eliminate the variances between individual stores and managers. This leads to
the need for a different management technique to help with the competitiveness both internally
and externally.
Little General is practicing several of the present management techniques pertinent to its
industry, including benchmarking, total quality management, and sustainability. This company
could make use of one particular management technique it presently is not being fully used,
being that of value chain analysis. With many convenience stores altering their strategies to
focus on customer service, there is a need for inclusion of cost savings that can be found through
value chain analysis. This includes the analysis of the value of its managers, as one of the most
critical individual store differences in financial performance, due to their skills in driving
customer service (Campbell et al., 2002).
Value Chain Analysis
Reasons for use by Little General
According to Blocher, Stout, Juras, and Cokins (2013), “value chain is a tool firms use to
identify the specific steps required to provide a product or service to the customer” (p. 12). These
steps were primarily designed to determine measures for reducing costs to become or remain
competitive. In today’s analysis methods, researchers and management accountants are

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developing new methods to quantify other aspects with a lot of emphasis on supply chain
management, but can even link a manager’s skills and abilities to company performance. These
analysises are designed to determine if internal or external activities are bringing value to the
customer, which makes it a great choice for Little General to add to their arsenal of management
techniques.
As with other convenience stores, there are managers at each store location who perform
actions such as the purchasing of products for sale, raw materials necessary for any on-site
cooking or sandwich making, leadership of the team or crew, and other managerial duties such as
employee scheduling and time keeping. This is a critical part of today’s business success since a
study performed showed that 14% of Chief Executive Officers (CEOs) account for the variances
within a company (Kaiser and Overfield, 2010, July). These activities individually or combined
will be the causes of individual store performance, thus driving company financial performance.
The products sold at most of the Little General Stores are common to all convenience stores and
their emphasis on customer service is becoming more common in this industry, thus leading to
the need for value and cost cutting. This can be accomplished by performing a value chain
analysis on the complete process involved, which is in this case primarily buying products from
manufacturers, distributers, or wholesalers, and directly selling to the customer or preparing a
fresh food product to the customer such as Cluckers Chicken (Little General, 2013).
In the convenience store industry there is a greater advantage to larger companies for the
purchasing of supplies and products since they are more capable of securing more appropriate
purchasing contracts with smaller costs due to the larger volume negotiated. According to
Saranga and Moser (2010), purchasing accounts for 40% - 70% of a firm’s sales revenues
depending on the variables playing into purchasing decisions such as the types of buyers and

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number of suppliers. This would make appropriate sales forecasting and purchasing one of the
most critical success factors to Little General from both a cost and quality position.
Although cost was may not be a major concern to Vinkler-Clay (personal
communication, September, 4, 2013), there should be more concern at the higher levels within
the company around the supplier contracts. All the other critical success factors found during the
interview with Vinkler-Clay, can be measured for value to the customer and the company and
might be better measures used for individual store and its staff’s addition of value. This would
provide for a determination of the store’s performance versus other stores and aid in decisions as
to whether the store adds value to Little General or should be relocated or a personnel change
may be necessary. Critical success factors such as customer service, skilled employees, and
location, have newly developed methods to determine the value of these activities to the
company. Also, actual costs versus sales revenues can be determined on the very detailed level
of every product in the store or on a complete product order from a wholesaler. The level of
value analysis must be determined prior to analyzing the store’s activities and as to even how
much this analysis itself would add value to the company.
Description and implementation
Once a company has determined its competitive strategy, whether a cost leader or
differentiator, a value chain analysis can be used to help determine which activities will add
value to the product, customer, and ultimately the company (Blocher, et al., 2013, p. 40). The
identifying of activities acts as a method of determining which activities will be used in the value
chain analysis, by narrowing down those the company will focus on. Since value chain analysis
is a method that provides analysis of a more detailed level, there could be too many. This would

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make a full value chain analysis of every activity loose its intrinsic value as so much time and
money would be spent on it, making it not feasible.
One reason for this selection can be seen as an example of analyzing the value of each
and every product within a convenience store. Sometimes suppliers push products found to be of
little value for in order to rid themselves of the product. While performing an interview with
Deann Vinkler-Clay on September 4, 2013, one of the employees approached her and asked her
where to put some lighters that had arrived. Vinkler-Clay told her to try and find somewhere to
place the products, which was hard to find due to shelf space requirements within convenience
stores. Due to the limited space in some stores, extra products used to promote a brand or
company can be shelf/space consuming thus making the idea of value chain analysis even more
important (Taylor & Fearne, 2009). The questions as to whether this promotion will add value to
Little General sales or customer service needs to be asked. If products are not helping the
supplier or selling at the store, there would be little value to using precious shelf space for this
promotion. This example can show a use for product valuation in a convenience store by
determining shelf space and layout, but to do this for each and every product in even a small
store would be too time and money consuming.
The activities selected will fall into one of three stages for accounting and many business
purposes. These are the supply, operations, and interactions with customers (Blocher, et al.,
2013, p. 40). Although, these three stages are specific for many businesses, the same principle of
inputs and outputs can be used for analyzing other activities that are non-tangible, such as that of
a manager’s skills and even has been used for safety analysis as well. In safety, according to a
training video (personal conversation, A. Smith, September 30), there are these three same ideas,
including start-up, operations, and shut-down, during the process of manufacturing a product.

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Since these three concepts and stages are similar they can be adapted through new methods
developed by researchers.
Even in the study of one stage such as supply, there could be a narrowing down and
valuing of both tangible and non-tangible activities. During a study by Saranga and Moser
(2010), it was found that most purchasing and supply managers outlined specifically the
performance drivers for the supply, upstream phase, as being the number of strategic buyers,
number of transactional buyers, and the number of suppliers. These were then evaluated as
performance outputs and measured. These performance outputs were cost savings, cross-
sectional collaboration, and supplier performance, thus transforming these measures into a single
corporate financial output. The use of input drivers, along with a focusing on the intermediate
transitioning using the dependencies of performance outputs on the final single output can be
converted for almost any industry or business (Baig & Akhtar, 2011). This same principle can be
used with manager or leadership performance by the manager in the form of team performance,
with the manager as the driver, team’s performance, and then transformed into individual store
financial performance (Kaiser and Overfield, 2010, July).
Once the value activities are selected, there are three possible determinations that can be
made from the value chain analysis. These are whether the activity can aid in the competitive
strategy, whether value can be added, and whether costs can be reduced (Blocher, et al., 2013, p.
40-41). Each of these determinations can prompt a management decision to be made using the
five steps of decision making as outlined in Cost Management: A Strategic Emphasis (Blocher,
et al., 2013, p. 42). These five steps are not only used for analyzing decisions in accounting and
costing, but again were found in analyzing safety hazards (personal conversation, A. Smith,

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September 30). These decisions can involve one or more of the determinations, such as reducing
supply costs which convenience stores may choose to do in order to remain competitive.
Application for Little General
The critical success factors for Little General were found to be great employees, great
customer service, foodservices, and location (personal communication, September, 4, 2013). In
order to determine the value of great employees, a leadership value chain can be performed on
each individual store’s crew, with the driver being a manager’s motivational skills (Kaiser and
Overfield, 2010, July). This evaluation needs to be performed on each store so that steps can be
taken to makes strategic decisions such as whether a new manager or crew members might be
needed or whether additional training might be of value to that individual store. With this
evaluation, the manager’s skills for motivation will be seen in the team’s views and abilities for
accuracy in ordering products, maintaining the store’s shelf and limited extra inventory,
housekeeping and cleanliness, and the continuance and growth of customers due to good
customer service. According to Kaiser and Overfield, (2010, July), there are three types of
human capital that a leader will provide, being psychological, intellectual, and social. Each of
these has specific good and bad drivers such as the personality type, the education and training,
and the manager’s ability to be social with the crew. All of these can be used to show the true
value of a manager through their leadership and motivational skills in the financial results each
store and then specific decisions regarding each store can be made.
A leadership value chain analysis performed for Little General would include the
manager’s skills, such as schedule planning, flexibility in scheduling, purchasing of products or
materials, and individual crew member training. The performance measures would be the wait
time of customer, employee absenteeism, and the presence or absence of products desired by the

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customer. The final single measure would be of the store’s financial performance. This financial
performance could then be compared to other stores for valuation of the individual stores.
Along with the management and crew analysis of general convenience store retailing,
there can be a value chain analysis performed on the foodservice portion of management. This
will also show the store manager’s skills using the leadership value chain analysis, but the
individual department at Little General can be analyzed as well from the leadership and
motivational skills of its deli manager and the cooking crew. According to Taylor and Fearne
(2009), another way foodservice can be analyzed is by determining the value of the food made
since the deli makes the food fresh and other vendors such as Krispy Kreme doughnuts (of which
Little General has a franchise with purchase of fresh doughnuts delivered daily). The drivers of
the foodservices would be managers, the quality of the food items, quality of the cooking, and
the freshness rotation period. The performance outputs would be sales from the deli, how much
waste is thrown away from the freshness rotation (indicating a lack of need for the food item or a
problem with the food or service), and the number of times a particular food item is requested
and not available.
The drivers for valuing location would be size of the urban or rural area, closeness to
major highways or interstates, amount of residents within an appropriate distance, and whether
or not there are industries to support it (Bainbridge, 2012, winter). The performance indicators
would be the population of the city or rural area, number of vehicles entering the parking lot,
number of residents within a specific radius of the store, and number of businesses or large
industries within a specific radius. These performance indicators would again be seen in the
financial performance of each store. Although there would be several other drivers that could
affect such portions as the number of vehicles entering the parking lot being driven by ease of

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access, proper corner location, whether or not there are stoplights, and the cost of fuel, it would
be too time consuming to value each of these drivers (Bainbridge, 2012, winter). This would be
one example of a value chain analysis that might not be necessary as different customers have
different reasons for stopping in a specific store and it has been found that traffic and location
studies may not be as accurate as the once were due to it being a large competitive industry. The
idea that traffic flow and store location, although critical, drives a customer choice in large urban
areas where there are convenience stores on every corner at stop lights and several in close
distances on the same street is now being dropped by many convenience store chains. This may
still be of value to Little General as they are much more rural areas and do not have the same
vastness of competition that an urban area may have (Convenience Stores, 2011).
Other Industries and Value Chain Analysis
According to Brookshire (2002), the use of steps in making anything of value has been
around forever. Examples are of historical artifacts found that show different qualities in how
these were made in the same societies. There are differences in the quality of items made, thus
giving to the idea that there was a value placed on them. One person would take more care in
making their item thus making it more valuable, while others would strive to make better items
to make their item more easily used or the work done by it (take a tool for example), thus leading
causing a drive for more value. All products today have been developed out of this drive to make
them more valuable by cost or differentiation.
One of the most common forms of value chain analysis today is for the supply side of
many businesses, but especially manufacturers, wholesalers, and retailers are using value chain
analysis for improving the supply chain function of their companies (Saranga and Moser, 2010).
Researchers have performed some value chain analysis on other specific industries, such as the

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pharmaceutical, electronic semiconductor industry and natural gas industries. With this diversity
of industries performing value chain analysis in some format or another, there is a re-emergence
of this management technique as having value in itself, not just for cost but also other activities
that can add value to the product.
According to Brookshire (2002), Dr. Joseph E. Stiglitz describe value added as simply
the difference between the total costs of a product and its selling price, with value being added at
each stage of the production of drugs. This production begins with raw materials (inputs), sends
these to manufacturers who put the raw materials together (operations), and then provides a final
drug which is then shipped and sold in various countries (final output). Again this is the simple
premise of value chain analysis with input costs driving output costs. Since this industry is very
heavily watched by countries taxation systems for proper income reporting, there is a need to
determine the value in all three stages of the production of drugs by pharmaceutical companies,
just from the standpoint of production, while others items could have value chain analysis such
as the research and development of these drugs. There needs to be determinations as to how
much research and what drugs need to be developed to provide value to the customer, thus
adding value since the customer is the ultimate buyer and user of these drugs. According to
Brookshire (2002), this industry has been heavily watched due to the high costs of medicines
which are leaving those least able to pay, paying the most. This is a result of the understated
transfer prices from the supplier to the distributor and the customer and the final actual price.
The electronic and semiconductor industry is another industry that utilizes value chain
analysis. These industries are constantly changing looking for the next added value, due to the
large demand of new technologies by customers. In order to provide for these technologies, there
must be a correct addition of value, which according to Li, Huang, and Chen (2011), includes a

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study of the patents on new technologies being added. Where many suppliers originally just
made semiconductor chips for electronics, they are now looking for ways to add value to their
chips and not just manufacturing them for downstream usage in products. As with many
industries there was complacency about just making a product to the customer’s specifications
and little concern for adding value. With the large competitiveness globally in the electronics and
semiconductor industry specifically, the supplier who is innovative with respect to their products
will win the competition race (Kess, Law, Kanchana, & Phusavat, 2010). Electronics is a highly
evolving industry with customer demand for new improved technologies, including faster,
smaller, and or more aesthetic designs, thus leaving this industry greatly in need of value chain
analysis to determine things like whether or not a company has already beat you to an idea and
patented it. If too much time and money is invested in a technology that has already been
developed, it could be wasted due to the timing of the entrance into the market, so these
manufacturers must look as supply chains, innovations within internal operations, and the value a
customer is looking for.
A third industry example that is using value chain analysis is that of the natural gas
industry. According to Weijermars (2010), the overall value chain of natural gas is from the
ground (the wellhead) to the transmission lines, to the distribution lines, and finally to the
customer who uses the gas as an energy source to end users. The natural gas industry is also
highly regulated on the supply side with restrictions placed to help the end users provide for their
ultimate customers such as the generation of electricity (power plants). In his study he compares
the physical value chain of the provision of liquefied natural gas (LNG) to the financial values in
its own value chain system. Again this simple idea of supply or input, production or operations,

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and the output physically to the customer is used as a base for his financial value chain analysis
which uses the same approach.
Conclusion
These are just some examples of how a value chain analysis has helped various
businesses with the three simple stages being evaluated for value at each one. Also within these
stages there can be more breakdowns to determine value of a smaller chain of activities with
each. Each overall activity in the value chain from supplier to middle activities to the final
activity can be evaluated independently for ways to add value, reduce costs, and improve
competitive advantages. These activities involve determining specific value chain analyses in
supply management, production or service management, distribution management, and customer
management.
In the case of Little General, it may be using parts of an overall analysis, but should begin
to look at using it for a deeper value understanding of each individual store. Many convenience
stores are now using some value chain analysis, with those that should be benchmarked using it
the most as they are using the newer breakdowns of an overall value chain to determine the
service side of their retail business, which relies heavily on customer service (Convenience
Stores, 2011). Working backward from this, in a reverse value analysis, leads back to the crew
members and ultimately the management of them. The other critical success factors many of
which are performed by these managers, such as dealing with suppliers for ordering of store
products can be further evaluated as well in attempts to lower costs of the products they are
selling. With the value of convenience added into every product in the store there is a higher
price, thus hindering competition with convenience stores competitions with large retail
superstores, such as Wal-Mart and Kroger (Wood & Browne, 2007).

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The need for cost cutting is becoming more critical every day to a convenience store as
these one-stop stores continue to become more competitive by providing more services, such as
banking, pharmacy, vision and other health services, and the new convenience store additions of
laundry services, movie rentals, and other services to draw more customers (Convenience Stores,
2011). With this cost cutting principle added, there is a great need to determine what is of value
at present and what can be discontinued both in products and services as well as keeping stores
open that are not as productive financially.

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