Value chain analysis and price analysis

Question

Hey,

I know in this case the exhibit has shown us the value chain analysis. I am wondering normally in this operating situation. When we are analysing the profitability, shall we start with the process or the revenue and cost framework. Because in my mind, to get to revenue and cost is easier to find the main problem.

And also, for the price of the bottle, i feel the minimum price is 9.8euros/ bottle. But the actual price should be higher to get a margin. Is it possible that I can say that in the case?

Thanks!

Answer 1

Hello Yaxin,

You can use a "revenues and costs" framework, absolutely. Value chain analysis is an excellent tool to brainstorm potential issues and solution but it's not mandatory to structure your solution like that.

Regarding your second point, that is a consideration that you can make but don't forget that there are cases where you could decide to sell without making profits or even making losses (e.g. to gain market share in a new market).

Best,
Luca