Value chain risk management is beneficial to organizations since it prevents possible losses. Wood home furniture businesses can be at risk of running bankrupt if mismanaged. The business value chain faces political, environmental, social, economic, and ethical risks. The supply chain is crucial since it ensures that the business has sufficient raw materials and end products reach the clients. Basic supply chain mapping, intensive market research, and brand awareness campaigns can help mitigate the risks. A value chain risk analysis help businesses avoid losses when expanding to a new country.
Value Chain Risks
The furniture business is susceptible to various value chain risks. The business is dependable on wood supply for the making of home items. Additionally, good infrastructural development such as passable roads is significant for the transport of finished items to clients (Lin, 2020). Furthermore, the availability of sufficient labor can help the business maximize its production (Caridi, Lamberti and Pero, 2019). When expanding to a new country the business is likely to face five main risks. Natural disasters, civil unrest in a new country, high tax rates, supplier bankruptcy, and bad attitude from the residents of the new country of operation are risks faced. Natural disasters including floods and diseases such as COVID-19 can be detrimental to the business (Chang et al., 2022). The disaster can harm the business since the potential clients will prioritize their lives over-furnishing their homes. Civil unrest can hinder business operations in the new country since it can result in the vandalization of the company’s property.
Countries have different tax policies that affect the profitability of companies. The new country of operation may have high tax rates, making the business less profitable and sustainable (Lin, 2020). The high taxes may force the company to sell products at expensive prices encumbering more sales. Expanding the business may require the suppliers to improve the quality of raw materials. Moreover, business expansion calls for extra costs for suppliers in the transportation of raw materials and products. Therefore, the suppliers can easily go bankrupt if they lack sufficient finances. Meanwhile, the business can run short of supplies and raw materials making it difficult to thrive in the new country of operation. The business may fail to receive a warm reception from potential clients in the new country. The increased negative attitude towards the business can hinder its brand image. Mitigating the potential risks can help the business remain competitive in the new market.
Mitigation Approaches
The company can adopt various approaches to mitigate the risks discussed above. Basic supply chain mapping can encumber the risks since it helps understand the location and capacity of the suppliers. Through mapping, the organization will understand the deficiencies of the suppliers in the new country, and effectively respond to that (Lin, 2020). Additionally, prior market research about the new country can help understand its political, environmental, and economical status. Consequently, the business will adopt an effective expansion strategy that will avoid the negatives of natural disasters and civil unrest. Furthermore, a brand awareness campaign will involve inviting new potential clients to the business. Therefore, the business will adopt a plan that will involve prior market research, supplier mapping, and brand awareness campaigns before investing in the new country.
Conclusion
Value chain risk analysis help avoids business mishaps during a business expansion. The wood home furnishing business can be at risk of natural disasters, supplier bankruptcy, high taxes, civil unrest, and negative attitude from potential customers. The risks, if not mitigated, can make the business less profitable. Therefore, the business should adopt intensive market research, supplier mapping, and brand awareness campaign as a risk mitigative plan when expanding to a new country.
Reference List
Caridi, M., Lamberti, L., and Pero, M. (2019) Managing the supply chain management-marketing interface. Bradford, West Yorkshire: Emerald Publishing.
Chang, S.E., Brown, C., Handmer, J., Helgeson, J., Kajitani, Y., Keating, A., Noy, I., Watson, M., Derakhshan, S., Kim, J. and Roa-Henriquez, A. (2022) ‘Business recovery from disasters: Lessons from natural hazards and the COVID-19 pandemic’, International Journal of Disaster Risk Reduction, 80, 103191.
Lin, J. (2020) ‘Fiji’s participation in the global coconut value chain: oportunities and challenges’, Journal of Agribusiness in Developing and Emerging Economies,11(4,) 345-365. Web.