Explanation of Michael Porter’s Value Chain Analysis with reference to Operations, Outbound Logistics, Human Resource Management, and Firm Infrastructure by highlighting two key weaknesses respectively.

Operations – these activities transform these various inputs into the final product or service through performance of the activities such as machining, assembly, packaging, equipment maintenance, testing (quality control and assurance) and process control (monitoring and optimizing production process). The main weaknesses in the company’s operations are:

1. Dependence on foreign technical expertise. EWL faces a significant operational risk due to the lack of local expertise for the maintenance and repair of its critical machinery. The company currently relies on foreign engineer, which incurs high costs and poses a vulnerability, particularly in scenarios where international travel is restricted, as experienced during the recent COVID- 19 pandemic. This dependency could disrupt operations and affect service delivery.

2. High operating gearing/leverage. The company operates with a high level of fixed operating costs, including expenses related to consumables, spare parts and depreciation. In contrast, many competitors maintain leaner operations with lower cost structures. The high operating gearing increases sensitivity of EWL’s operating profit to fluctuations in sales, making the company high risk. If sales rise, profits will grow rapidly. But if sales fall, those fixed costs remain, and profitability could decline sharply.

Outbound Logistics – these are activities associated with collecting, storing, and physically distributing the product or service to buyers/customers. Example of activities include finished goods warehousing, order processing – managing customers’ orders, order picking and processing, delivery vehicle operations, and scheduling deliveries. The following are the weaknesses of EWL in outbound logistics:

1. Rising cost from aging delivery trucks. Aging delivery trucks result in rising maintenance costs, frequent repairs, and declining reliability.

2. Challenges with online customer ordering system. The introduction of online ordering system intended to give the company a modern image has not been successful because it is not reliable, customers consider it as complex and the cloning of the company’s website by internet scammers and fraudsters.

3. Poor change management with online system. The online system has also faced resistance from workers because they were not sufficiently involved in the change process and workers remained comfortable with the manual system. (Note: The answer includes three points, but the question required two.)

Human Resource Management – activities involved in recruiting, hiring, training, developing, compensating, and (if necessary) dismissing or laying off personnel. The following are weaknesses in these activities:

1. High labor turnover among non- core factory workers – the company has to always train new staff and does not promote stability in the company.

2. Low levels of or poor remuneration – this situation is essentially responsible for the high staff turnover among non- core factory workers.

3. Discriminatory treatment of workers – the MD is said to pay special attention to core staff who operate the machines in the factory thereby making those core staff special. This discrimination may affect teamwork and spirit in the company, which may affect productivity. (Note: The answer includes three points, but the question required two.)

4. Labor compliance and legal risk exposure. EWL currently does not provide formal employment contracts to most of its factory workers, based on the perception that these employees are primarily focused on remuneration. However, this practice constitutes a breach of labor laws, which mandate that employment relationships be governed by formal contracts. The absence of such agreements exposes the company to potential legal liabilities and reputational risks, underscoring the need for improved compliance with employment regulations. (Note: The answer includes four points, but the question required two.)

Firm Infrastructure – Activities, costs, and assets relating to general management, planning, finance, accounting, legal, government affairs, and quality management that support the entire value chain.

1. Uncompromising management style of COO – the COO is less approachable and places strong emphasis on strict compliance with company hierarchies, policies and procedures. This management approach is one of the factors accounting for high labor turnover in the company. Perhaps, this approach needs to be changed.

2. Conflicting management styles of the two top executives, the MD and COO – the MD’s management style is one of teamwork, collaboration, approachable, accommodating, and open to dialogue while the COO’s approach involves strict compliance with company hierarchies, policies and procedures. This conflicting approach can create confusion as to the direction of the company.

3. Adoption of generous credit terms at the inception of the company – this situation created bad debts which negatively affected the liquidity and cash flow position of the company prompting a change in the policy. (Note: The answer includes three points, but the question required two.)