Z Ltd. is manufacturer of clothing fabrics to be made up into dresses and suits. Z established long ago back and presently enjoys the reputation as produces of quality fabric. Z producing fabrics from high quality yarns with all standard features which other fabric manufacturer offers. Designs of fabric are old fashioned (traditional in nature) as Z was established long ago. Management team at Z shown believe in integration (vertical and horizontal) and diversification (product range or market reach) as tool of risk reduction and value enhancement (profit too). Z opts for un-organic forward integration to gain control over value chain by acquiring ‘AB Ltd.’. AB is operating in designing and weaving of fabric into fashion wears. AB is targeting the customers who are in the age group from 40 to 60 years and belongs to price sensitive income group. Z Ltd. in this way is able to reach end consumer through retailers by manufacturing cloth themselves. Acquisition of AB Ltd. by Z Ltd. remains largely successful as a result in relative high increase in sales and profits, both. Problem Point: But the sale and profit are not growing at same old rate now, top and bottom line witness the slowdown, which may be due to exhaust of synergy benefits. Retail stores through which Z sold its material also find it difficult to make reasonable amount of sale. Z starts exploring new retailers. But due to presence of large number of supplier (of manufactured cloth), buying power of retailers is high; resultantly Z has to rest at unacceptable low margins. Down the Line: Z is considering of acquisition of one of cloth retail chain, named ‘Paridhaan’ in order to deliver fabrics to the customers directly and eliminate retailers in order to boost its profit margins. Answer the following:

A. Illustrate value chain and explain briefly.

B. What do you mean by competitive advantage and how it can be attained? Explain.

C. Identify strategy Z Ltd. opted to gain competitive advantage.

D. Discuss ‘value chain effect’ of forward integration (acquisition of Z) on Z’s ‘competitive ability and cost competency’.

E. Evaluate possible acquisition of cloth retail chain ‘Paridhaan’ by Z.

Answer rating: 100% (QA)

A The value chain was first developed as an accounting analysis to throw light on the value added of individual steps in complicated manufacturing pro... View the full answer