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MsE Masters of Entrepreneurship Summer Projects: Supply & Value Chain Analysis

What is the Value Chain?

Idea: The Value Chain - The Economist series outlines the concept

Porter's Value Chain - Understanding How Value is Created in Organization

Competitive strategy : techniques for analyzing industries and competitors - Porter's later edition explores industry analysis using the Value Chain in greater detail, with some emphasis on technology firms

"Why Porter's model no longer works" - Harvard Business Review article on the applicability the model, and winning in the "social era"

Using Mergent Horizon to construct and analyze a value chain

For this project, you'll be asked to construct and analyze a company's value chain, including profitability per tier.  Here's an example, using the Mergent Horizon database.

Go to the Mergent Online database and click on the Horizon tab (in the upper right)

Type a company name in the upper left search box; for this example, we'll be using Ford.  Select Ford Motor Company from the dropdown suggestions

From the Ford company record, click on Suppliers from the left side menu to get a list of key suppliers.  Use the View dropdown menu in the top right corner of the listing to adjust the view; for your project, you might want to start by viewing Key Sector Path.  Click on the Group By button in the same corner for additional sorting options.

Ford's list includes:

ALV (Autolive Inc): Interior and electronics
BASF: Specialty chemicals
BP: Performance chemicals
Continental AG: Auto parts
TRW: Chassis and body
Dana Corporation: Power train
Borg Warner: Power train
Cummins: Diesels
Delphi: Interior and electronics
Dover: Industrial machinery
Dupont: Specialty and performance chemicals
Henkel: Personal care and cleaning products
Johnson Controls: Interiors and electronics
Magna: Safety and electronics
Visteon: Thermal management

For this excercise, we'll be looking at Tier 1 (direct to Ford) suppliers.  You can sort by any of the columns, including Hierarchy Focused Sector Path; for Ford interiors or electronics suppliers these are Autolive Inc., Delphi, Johnson Controls and Visteon.

Click on any of the suppliers to bring up its supply chain; for example, Visteon's suppliers include:

Aleris: Fabricated aluminum
Atmel microcontrollers
NXP semiconductors
ON semiconductors
SAIC Motor Corp

For this example, we'll look at the semicondutor suppliers Amtel, NXP and ON.  You can get financials from most of these companies, by clicking on Detailed Reports and then clicking the box "Key Financials"

Here are the results for this excercise:

Automotive
   Interiors and Controls - Tier 1
         Semiconductors

Semi-conductors

Gross marg

%

Oper marg

%

Interiors and electronics

Gross marg

%

Oper marg

%

Automotive

Gross marg

%

Oper marg

%

Atmel

44.29

6.54

Visteon

11.29

18.24

Ford

15.63

5.8

NXP

42.16

7.5

 

Johnson Controls

15.22

4.4

Honda

27.3

6.38

ON

41.32

16.15

Delphi

14.83

6.68

Toyota

12.52

2.47

 

 

 

 

 

 

GM

12.3

3.91

 

Average

42.59

10.06

 

13.78

9.77

 

18.48

4.64

 

Operating margins by tier:

Semiconductors: 10.06%

Tier 1 Interiors and Electronics: 9.77%

OEM: 4.64%