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Can you please explain me the line below in easy words. This is mention in notes of acca f1 under heading of PORTER’S VALUE CHAIN.
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It could bring convenience to the buyer, allowing the buyer to keep everything bought from the organization as a variable cost rather than taking on board many of the fixed costs.If you are a manufacturer and supplier of components, then your customers see you as a variable cost. If they need nothing and buy nothing they will incur zero costs on those (zero) supplies.
If the customer decides to make the components in house then they have to take on all the fixed costs of running that manufacturing process. Even if nothing is made there will be costs.
So, perhaps you are adding value by allowing the customer to have variable component costs rather than a substantial element of fixed costs.
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