By Janelle M. Lewis, Attorney, Business & Legal Strategic Consultant
When it comes to commercial contracts during this time of economic crisis spurred by the global pandemic, the conversations usually revolve around whether to perform (or continue to perform) under the terms of the contract. Legal terms such as force majeure, doctrine of impossibility, and frustration of purpose – which provide defenses to non-performance – have been thrown around a great deal as businesses comes to terms with their current situation and capabilities.
Commercial Contracts Are More than a Legal Instrument, They Create Value
While contracts are legal instruments, they also serve as the basis of a business’ ability to provide value while turning a profit. Contracts are a tangible, critical source of a business’ capabilities that affect the business’ value chain. They are the basis from which the costs of and the revenues received from producing goods/services are derived. The underlying internal capabilities of any business rests on its contracts. They guide the business relationships needed to carryout value-creating activities.
Contracts are a tangible, critical source of a business’ capabilities that affect the business’ value chain.
The Interplay Between Commercial Contracts and the Value Chain
During this time – and during any disruptive event – business strategies are revisited and/or redrafted to deal with both the external and internal factors that impact a business’ abilities to carryout its activities. The impact of disruptive events on contractual obligations goes beyond the legal into the realm of business strategy, and specifically the value chain. Assessing contractual relationships during a disruptive event provides a more in-depth, comprehensive look at how the event affects a business’ ability to provide value through its goods/services.
The impact of disruptive events on contractual obligations goes beyond the legal into the realm of business strategy…assessing contractual relationships during a disruptive event provides a more in-depth, comprehensive look at how the event affects a business’ ability to provide value through its goods/services.
Contract Based Value Chain Analysis – A Strategic Framework To Analyze the Value Chain During a Disruptive Event
The purpose of a Contract Based Value Chain Analysis (CBVCA) is to provide a strategic framework in which to evaluate the current internal capabilities of a business by analyzing the value chain during the disruptive event. CBVCA provides information on the impact of the disruptive event on the business’ profit margins. This results from a comprehensive assessment of how specific resources and capabilities are used to create value are impacted by the disruptive event due to contractual relationships. The ultimate goal is to see assess how the contracts that support the value chain impact the costs, revenues, and profit-margins derived from the value creating activity. In other words, CBVCA assesses how your current contractual relationships impact your business strategy.
JML Business & Legal Strategic Consulting, Division of the Law Office of Janelle M. Lewis is proud to present the following strategic framework for business decision-makers, strategists, and management consultants entitled: “Value Chain Analysis During a Disruptive Event: A Strategic Framework to Analyze the Value Chain During a Disruptive Event By Using Contract Analysis”
The Framework is currently being sold on Flevy.com. To access the Framework, please click here.