A summary of IMA guideline I. Need Value chain analysis is a strategic tool to measure the customer's perceive d value.

The analysis enables companies to determine the strategic advantages an d disadvantages of their value creating processes and activities. II. Value Chain - Definition Customer value accumulates along the chain of activities that a firm performs a nd delivers an end product or service to customers. Activities and processes are performed by the firm to understand market, design, produce, sell (market), deliver and support its product. A firm's value chain structure and the way the individual activities in the val ue chain are performed are a reflection of the firm's history, its current stra tegy, its approach to implementing its strategy and the underlying economics of the activities. The activities in a value chain are categorised as primary and support activitie s. III. Competing in the Market, Customer Value and Competitive Advantage In order to compete in a market as a supplier of a product or service a firm mus t supply what customers want to buy. It has to create customer value so that cus tomer pays a price for the offering. In any market there are competitors. The fi rm has to be provide some unique benefits to a certain section of persons in the target market to survive the competition. The competitive advantage of a firm derives from the difference between the valu e it offers to customers and its cost of creating that customer value. Thus the competitive advantage is obtained from two sources: 1. Differentiation advantage. Customer perceives more value from the firm's prod ucts. 2. Low cost advantage. The firm is able to provide the service or product at a c ost lower than the market average. IV. The Role of Management Accountant Champion the use of value chain analysis. V. Value Chain Analysis - Procedure Internal cost analysis Internal differentiation analysis Vertical linkage analysis VI. Strategic Frameworks for Value Chain Analysis From the strategy theory the following concepts or frameworks are relevant for v alue chain analysis Industry structure analysis Core competencies Segmentation analysisi VII. Limitations of Value Chain Analysis It is not an exact science. It is not easy. Finding costs, revenues and assets f or each activity sometimes presents serious difficulties. Despite such difficulties, experience indicates that value chain analysis yields firm swith invaluable information on their competitive situation, cost structur e, and linkages with suppliers and customers. VIII. Organizational and Managerial Accounting Challenges Value chain analysis offers an opportunity to integrate strategic planning and m anagement accounting. Management accounting department has to champion this to m aintain its critical role as the information profession.