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.
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.