Company

CORP. received refinanced approval of its long term debt from Toronto – Dominion Bank (AD Bank) amounting to $200 million based on floating rate. The floating interest rate represents the significant risk that needs to be mitigated through hedging products. There were some hedging products that AD Bank offered to CORP., swaps, caps, or collars, or some combination? There were definite trade-offs between these hedging products In terms of flexibility, interest rate protection, and true cost. Andrew Theatre, Chairman of CORP., had to decide on the amounts and maturities of the various transaction hedging offered.

Issue Business Kraft Market pulp Is a truly global commodity, which prices changing quickly In response to capacity changes, inventory levels, and purchase levels. While market alp is produced in about 25 countries, historically more than two-thirds of world output has come from five northern countries : the united States, Canada, Sweden, Finland, and Norway. One major change in the global pulp market was the mid – sass launch of pulp futures markets . While these markets were not an immediate success, there was enough trading volume to sustain at least market, the Pulped/ Finish Options Exchange.

It was hoped that futures markets, widely used to trade futures in commodity products – such as copper, aluminum, sugar, and coffee – would bring more price stability to the pulp market and even out some of the extreme price fluctuations that have plagued the global market pulp Industry. Price levels for market pulp as shown below : In 1978, CORP. had financed the original cost of the mill from a group of united States insurance companies. The insurance companies was in doubt about the quality of their loans. This was because of the cumulative operating losses over the 1982 – 1986 period which totaling $ 39. 1 million.

CORP. was unable to meet the repayment schedule on the debt. So, in march 1988, CORP. approached Toronto – Dominion Bank (AD Bank) to refinance $200 million of its long term debt. On July 21 , 1988 CORP. received reedit approval from AD Bank Board. CORP. received rationalization financing a $200 million, seven year reducing, revolving term facility and a $25 million operating facility from the syndicate of six international banks. The floating rate borrowing options and bank lending margins were shown below : The use of floating rate debt to finance fixed assets represents significant risks If the interest rates increased.

The risk can be offset through interest rate swaps, caps, and collars. In order to partially engage ten Tolling rills rate on ten mans ten Dank syndicate had included a positive covenant in the credit agreement which effectively arced the company to lock in fixed rates of interest on its debt. This covenant stated the following : within 90 days after closing, the borrower will arrange interest rate swaps or similar hedging arrangements so that a total of $100 million of debt has a term of at least three years and an interest rate not to exceed 12%.

The Coca-Cola Company and its CSR policy There is no doubt that one of the most popular multinationals today is The Coca-Cola Company. It has strong CSR policy where “CSR” is not only about being responsible for customers and fans around the world but also being aware of employees’ needs. Talking about employees – The Roberts Environmental Center at Claremont McKenna College in California publishes annual analyses of corporate environmental and social reports (together called sustainability reports).

In 2009, The Coca-Cola Company received an overall rating of A+, topping the list of companies reviewed in its sector. Among the keys to earning that recognition is maintaining world-class standards for fair and dignified treatment of all the people who work for it. Its Workplace Rights Policy serves to ensure that a consistent approach to workplace rights is applied worldwide – as an integral part of culture, strategy and day-to-day operations. However this is just one side of the coin. Suppliers are another group The Coca-Cola Company proves loyal to.

Having a sound, stable and ethical supply base is important for its growth and the footprint it leaves in local communities around the world. Its suppliers provide its system with materials, including ingredients, packaging and machinery, as well as goods and services. As a company, it has a responsibility to hold its direct suppliers and bottling partners to standards no less than those required by applicable law. It also has an opportunity to support community development by purchasing goods and services from minority- and women-owned business enterprises (MWBEs).

Furthermore in 2009 The Coca-Cola Company is the recipient of the prestigious World Environment Center’s (WEC) Twenty-Fifth Annual Gold Medal for International Corporate Achievement in Sustainable Development (for implementing strategic business initiatives in the high impact areas of water stewardship, sustainable packaging, energy management and climate protection) and is among the 10 recipients of the Natural Health Magazine’s first “Green Choice” awards (selected because of its leadership and commitment to recycling and impressive light-weighting efforts).

Although it is really difficult to point out all the “green” initiatives this multinational is up to daily, monthly, annually or on a long-term basis, here are some of its highlights. Firstly, water efficiency is viewed as a main goal. To be the most efficient water user among peer companies is a distinction the company wants to achieve. In 2008, on average they used 2. 43liters of water to produce a one liter beverage. One liter goes into the beverage itself, and 1. 43liters are used for manufacturing processes such as rinsing, cleaning, and cooling. Still they are nearly half way to their 2012 goal of 2. 7liters per liter which will be a 20 percent improvement. Additionally, since 2005 they have been involved in more than 250 community water partnerships in 70 countries to support locally relevant initiatives, such as watershed protection; expanding community drinking water and sanitation access; agricultural water use efficiency; and education and awareness programs. In 2009, respected experts are asked to work with them to calculate the water benefits of these projects. Secondly, considerable attention is paid to packaging. For an example – more than half of the metal in aluminum cans is recycled.

The Company’s plant in the United States is the world’s largest plastic bottle to bottle recycling plant with capacity to produce approximately 100 million pounds of food grade recycled PET plastic for reuse each year – the equivalent of producing nearly 2 billion 20ounce Coca-Cola bottles. As a conclusion: The Coca-Cola Company is one of those multinationals we can accuse of great marketing strategy and still believe it is not all about making profit or making people turn a blind eye to its “dark” side. Sometimes it does matter to do things with an appeal!

LTK1 was incorporated on 16th October 1986. It is situated at Durian Tunggal District, Malacca. The principal activities of LTK are production of chicken eggs and manufacturing organic fertilizer. LTK is one of the leading eggs producers in Malaysia. The production capacity of LTK is 1 Million eggs per day. Part of the production is for local consumption while the rest of the production is mended for export. Presently, LTK is exporting to Singapore, Hong Kong and Indonesia.

With the collaboration between LTK and MARDI2, LTK become the sole producer and distributor of Omega 3 eggs in Malaysia. The LTK Omega 3 eggs provide up to 5 times more Omega 3 and 4 times more of Vitamin E compare with ordinary eggs. The consumption of Omega 3 will reduce heart disease, hypertension, LDL cholesterol, breast cancer, colon cancer and rheumatoid arthritis. In additional, Omega 3 is vital for the development of brain and retina tissues3.

The daily production capacity of LTK is 1,500,000. In order to maintain the quality of eggs, LTK applies TQM throughout the whole production processes.

Figure 1.0 Production Flow in LTK

Chapter 2.0 An analysis of the market, customers and macro conditions of LTK

Chapter 2.1 Market Analysis

LTK is one of the leading eggs producers in Malaysia since 16th October 1986.

But, Omega eggs are still new in the market. Therefore, in the short term the demand will still be low in the market. Nevertheless if the demand of the omega eggs continues to increase, it will benefit LTK in the future. This can be seen as product development strategy.

The market where LTK operates in is some sort between perfect competition and monopolistic market. This is because the market is full of egg producers who hold commodity rather than product. On the other hand, this market is full of buyers who purchase eggs for different purposes. However in term of Omega eggs, LTK has made a right move to shift egg as commodity towards branded product. Thus I assume LTK Omega egg is operating in a monopolistic market.

Thus, it is the time LTK have the thorough planning and strategic marketing to satisfy customer requirements profitably and sustain competitive edge in a long run

Chapter 2.2: Customer Analysis

Omega eggs actually are the simple product that the consumers can consume everyday. The marketing strategist should keep track of the customers’ behaviour. It is because the switching cost to buy the eggs is very low.

Thus, LTK should conduct research from time to time in order to answer the following research questions and hypothesis.

> Research Question: Why do consumers buy omega eggs?

Hypothesis: Consumers manage to understand the explanations make by LTK through TV, newspaper, magazine and salesperson in the distribution outlets, so they buy Omega egg.

> Research Question: Who participates in the buying process?

Hypothesis: Most of the time, housewife, mother-in-law or husband participate in the buying process.

> Research Question: Where consumers buy omega eggs?

Hypothesis: Consumers buy Omega eggs based on convenient or not.

Through years of experience and fieldwork research, LTK understand the consumers’ behaviour very well. LTK buyers can be divided into 4 categories: the retail market, the business market, the government and non-profit organisation. The retail market refers to the normal consumers while the business market refers to confectionaries and bakery in the southern part of peninsula Malaysia. On top of that, the government market refers to the barracks or army camps in Johor and Pahang. Lastly the non-profit organisations are like school canteens, old-folk home and orphanages. Above and beyond, LTK also concluded that consumers’ decision would be influenced by some external stimuli. Therefore, LTK not only provide quality eggs, but convenient pack size, reasonable price (RM0.399), ordinary eggs same size price (RM0.299) and convenient outlets.

Chapter 2.3 PEST Analysis

Malaysia is a potential market for international marketing because the political and legal environment is mature and stable. Furthermore, the AFTA agreement enable LTK product to flow freely throughout the whole South East Asia region without political barrier. Thus LTK involve very low or no political risk continuing the operation in Malaysia.

Although the overall economic performance in the Malaysia had declined, a thorough study will explain that the decline is mainly due to the poor performance in the global economy. No matter what is said and done, LTK performance will not be badly influenced by the economy because eggs are fast moving household product.

From the social perspective, LTK goods should be acceptable because the Malaysian should be aware that their current main source of protein is badly affected by the JE Disease and polluted environment. Thus the society has phobia towards consumption of pork and poultry, thus egg is the alternative source of protein and it is a very health source of protein too. Besides, the aging population is also very much concerned about their daily eating habit, so LTK product should be acceptable. Besides, I feel that the rate of product diffusion for LTK enriched egg should be faster because the literacy rate for the target market is higher.

Figure2.0 Diffusion Process of LTK goods

In term of technology, there isn’t any disadvantage for LTK since the product doesn’t require any other technological support. However, biological engineering or medical science might assist LTK to increase its production or reduce the rate of defect.

Chapter 2.4 Microenvironment Analysis

As mentioned above, the enriched egg is new in the Malaysia market; hence the level of intense competition is relatively low. Based on Michael Porter 5 forces analysis, there is no bargaining power for supplier because LTK is the supplier.

On the other hand, the bargaining power of buyer is very strong because the retailers in Malaysia are corporate giant like Parkson, Jusco, Top, Makro, Carrefour and Fajar.

The threat from substitute is small because the society is suffering beef and pork phobia. Besides, a lot of doctors advise the public to reduce the consumption of red meat and go for the white meat.

The entry barrier is the solely most worrying factor for LTK as the entry barrier for such industry is very low. Therefore, it is crucial for LTK to establish strong brand equity before the competitors creep into the market.

Figure 2.1 Michael Porter 5 forces

Chapter 3.0 Internal Corporate and Marketing Conditions (SWOT)

The SWOT analysis is one of the most useful marketing planning outfit that aids the analysis of the firm’s overall situation because it provides a clear picture from complex data.

LTK incorporated since 1986, one of the strengths of the company is the organization structure is very lean. Therefore, breakdown in communication rarely happened in LTK. Furthermore, the organisation is able to response effectively because the organisation is flexible. In the company, the CEO practices the product category management. Therefore, each department are doing their task efficiently.

The second strength LTK possesses is the government support. LTK is the only private organisation in Malaysia that is linked with Mardi. Thus there is a lot of technological transfer and LTK manage to save lots of R&D expenditure.

The third strength of LTK is that the organisation has a strong goodwill in the market and a lot of chick food suppliers support the company. On top of that, the distribution network of LTK is relatively widespread throughout Peninsula Malaysia.

The fourth strength of LTK is the quality standard has been maintained very well throughout these years. The defective and crack rate is lesser that 7.94% for every period of six months.

The weakness for LTK is lack of fund in conducting research and development. As we known that if the products do not get improvement sooner or later the competitor will become the leader in the market.

The second weakness for LTK is that the production is inelastic within a short period of time. Even when there is a strong demand for the product, LTK is unable to double or triple the production.

The opportunities in this market is nowadays consumers are more concern about their health. Omega plus can improve the brain functions; can reduce heart disease, hypertension, LDL cholesterol, breast cancer, colon cancer and rheumatoid arthritis. Therefore, the demand will accelerate due to positive word of mouth and publicity over the press.

Besides, the annual population growth in Malaysia is still rising, thus the demand will definitely rise because more mouths to be fed.

There is also an opportunity when the AFTA come into the picture. The Omega egg can flow freely to neighbouring countries and increase sale for the company.

The threat to LTK is the competitors enter into the same market. When most of the consumers accept the product, it is also the time more and more players come into this market. Thus, LTK must do more R&D to enhance the quality of the products.

Chapter 4.0: A Portfolio Analysis of the Competitive Conditions (BCG)

Relative market share

Figure 4.0: BCG Matrix

The Boston Consulting Group (BCG) matrix is a well-known approach to conduct portfolio analysis that provides corporate strategists with an insight of important strategic relationships between internal cash flows, market share, competitive position and growth trajectories.

The characteristic of LTK omega plus eggs in BCG matrix is under STAR. First, it is because LTK is the initial player in the market of omega eggs. Thus LTK haven’t tapped the total market and the percentage of share is very low. Second, omega eggs are now in a fast growing period and haven’t reached the maturity stage yet. A lot of people are curios about these eggs and some people still do not believe whether the egg is so miracle and healthy as they claimed.

On the other hand, the traditional egg produced by LTK is in the Cash Cow stage. This is because the market growth rate has been stagnant for very long time and the PLC is in the maturity stage. Moreover, the relative market share for LTK is very large if weight against the total market in Malaysia.

The profit earned from the traditional eggs can be transferred to develop the star. Although the Omega eggs do not generate substantial profits compare to the ordinary eggs, but LTK believe that the trend is moving towards consumption of such eggs. Strategic planner must follow the trend in order to develop sound long term strategic plan.

Chapter 5.0: Segmentation Strategy

Segmentation is a process of subdividing broad markets into varied and differing smaller groups of buyers. They are consisting exclusive of characteristics.

The benefits of segmentation are strategist able to accumulate sufficient market sector knowledge as well as sustain customer loyalty. LTK also segmented the customers into several clusters. The objective is to avoid confusion and provide strategies with the opportunity to approach available segment with the right marketing strategies.

LTK should segment its market based on income level, attitudes towards health, education level and psychographics. It is because the price of omega egg is slightly higher than ordinary eggs. Thus, only certain segments of the consumers are willing to pay for it. For instances, the business market of LTK will not be interested with this new product but to prefer conventional egg to keep the production cost as low as possible. Therefore, LTK market segment should be those in the middle class and it is practical since Malaysia has a relatively big middle class society.

The consumers’ decision whether or not to choose Omega egg also determined by the health awareness among consumers. It is because in the market there are too many health foods. Therefore, most of the consumers will think that omega egg is just another propaganda made by the producer.

Education level is also the main reason LTK should consider since it can influence consumers DMU. It is because the higher education group of consumers only understand the meaning of Omega 3 and how the eggs can provide up to 5 times more Omega 3 and 4 times more of Vitamin E compare with ordinary eggs. The consumption of Omega 3 will reduce heart disease, hypertension, LDL cholesterol, breast cancer, colon cancer and rheumatoid arthritis. In additional, Omega 3 is vital for the development of brain and retina tissues4.

Psychographics also will be the factors that can influence the customers whether to buy or do not buy omega egg. As we know that nowadays majority of the customers prefer to buy the products that have a brand. Previously it is no way that consumers can accept that even egg should have a brand identity. Those days, branded goods were toys of the rich and famous. However, today people perceive branded goods as quality assurance. Thus LTK should portrait a healthy lifestyle image in the overall promotion campaign. LTK should aim those who cherish healthy lifestyle and always engage in exercise or outdoor activities. In such a way, the company not only able to enhance market share but also building up a strong brand equity.

Chapter 6.0: Positioning Strategy

For all these years, consumers treat all the eggs are the same. The only noticeable different is the size and the hardness of the shell. However, LTK successfully draw the differentiation line between Omega eggs and the ordinary eggs. Therefore, LTK should position omega substances as the distinctive and important element for the growing years. In such a way, general public as well as target market will draw attention on consuming more omega substances and association such need with buying LTK Omega egg. This is known as classical learning in consumer behaviour study.

Chapter 7.0: Marketing Objectives

Marketing objectives may divide into quantitative and qualitative. In LTK case, the quantitative objective is to enlarge the market. The CEO of LTK plans to exploit the South East Asia countries as well as western countries. LTK also wishes to increase the market share by 35% within the next 5 years. It is because LTK plans to spend 20% of the revenue in advertisement to promote the new product and healthy lifestyle. LTK also wishes to increase profitability by 7.6% in the coming year. In order to improve profitability LTK will empower and delegate more authority for the marketing department and sales force to carry out necessary tasks.

The qualitative objectives set by LTK are to build up the company image and product’s brand equity. Besides, the company also wishes to train more middle managers in line with the strategic expansion. In conjunction with the expansion, LTK also wish to increase the marketing department employee welfare to boost up organisation spirits and morale. Besides, LTK wishes to have stronger affiliation with large-scale retail chains.

Chapter 8.0: Marketing Strategy (Strategic Direction)

LTK is the market leader; a leader must be at a state of constant alertness and maintain watchfulness because other firms will attacks its weaknesses and try to offset LTK strength. The competitors also can do R&D and become more innovate than LTK.

Thus, if LTK wish to sustain their positions as a leader, LTK should be more proactive. First, LTK must pursuit the strategy of expanding the total market. LTK should “welcome” new users including the low-income earner. LTK can categorise the size of the eggs. It is because now omega egg only has one size. If LTK sells the smaller size egg cheaper than the other, lower income consumers will try to buy it. Besides, LTK could develop new market such as South East Asia and EU continent. Thus, LTK not only concentrate the Malaysia market but the overseas market too.

As the market leader, LTK not only must expand the market, but to protect its current market share. Pre-emptive defence is crucial to undermine the competitors before they do. Furthermore, counter-offensive defence is also necessary to cut off the challenger’s operational base.

Chapter 9.0 Developing the Marketing Programs for LTK

In order to achieve the preset objective, LTK must balance off the attention for domestic and foreign market. Until now, the main focus for LTK should be domestic thus LTK should establish an overseas subsidiary in Asia and other state in Malaysia. However, LTK must always conduct research pertaining the consumer behaviour to segment the market. LTK must bear in mind that consumer insight will differ base on geographical differences. In addition to segmentation, LTK should aim for the most profitable target market. In my humble point of view, I will consider the segment which earning per year is above 30,000 with a family size of 2-5 members. This segment will be the single largest segment in Malaysia and Asia countries. Thus the segment is sustainable, measurable, profitable as well as accessible.

This subsidiary is also responsible to gather market information in Malaysia market and distribute the company product to neighbouring countries such as Thai, Singapore, Indonesia and Brunei. The subsidiary is responsible to keep close contact with the retailers in these countries.

After establishing the distribution network, it is more important to ensure the product is acceptable by the consumers. The marketing department must understand that the company long-term objective is to move from core value to augmented value. Therefore, the media department must develop the advertising message that suits the taste of the target audience as well as meeting the company long-term objective. Furthermore, the message must be informative, educate and entertain.

In this point of time, I think the advertising theme must focus on introducing the public to the benefit of LTK Omega 3 enriched egg. The choice of media is also important when developing brand equity. It is a prudent move to place some advertisements in the health magazine in these countries. Besides, the company can place some advertisements in selected local newspapers and radios stations. If the budget allocation allows, the company can consider placing advertisement on television. Whatever said and done, I think it is more appropriate to employ local agencies to handle the advertising activities since they are more familiar as well as more efficient. Below is sample of advertisements that LTK has applied in the local context.

The marketing department must monitor the performance of the advertising agencies from time to time or apply the payment based on performance scheme to motivate the agencies to put in more effort or pull up their socks.

Promotion campaign is equally important to stimulate trial for this product. The trial is very important because it will enable the company to portrait the superior quality of the egg and relate it to the brand name. The planned promotion campaign that I intend to carry out is the demo session in major supermarket and hypermarket.

In this demo, I will show the audience how different is the LTK Omega egg from ordinary eggs. It is totally different in term of colour and elasticity of the yolk5. You can pick up the yolk of LTK Omega egg from the albumen and the yolk will not break or burst. This demo can be recorded and broadcast in the TV as part of the advertising campaign too. On the other hand, the company can also visit school and give away free bookmark and sample to the students when they are having cooking classes. In the supermarket, the company can employ sandwich man dress up like Humpty -Dumpy. Besides during Easter day, LTK can do promotion like buy 12 eggs and get an Easter egg for free.

Publicity is the most convincing tool for LTK Omega egg to persuade the consumers to purchase the product. The company should invite nutritionist to do scientific research and tell the public that whether LTK Omega eggs is really as good as the company claim. The consumer movement groups and the public watchdogs are also invited to examine the quality of the product. If their comments are positive, then LTK Omega egg will easily penetrate into the Asia market.

Packaging serve two purposes for LTK Omega egg. First of all, it will protect the egg and maintain its freshness. Secondly, the packaging can reflect the augmented feeling if it is nice decorated. However the company must bear in mind that the packaging must be environmental friendly and recyclable too. The target consumers in these countries are very much concerned with environmental issues like plastic container and too much paper wrappers.

On top of that, the company should establish global web site, regional web site as well as country web site to provide health concern consumers about health facts pertaining to LTK Omega eggs. Suggestion box must be prepared to keep in touch with consumers. Furthermore, the company can do on-line delivery to enlarge the distribution coverage.

Lastly, LTK should enlarge the distribution channel to make this product easily available to the target market. There should be more state division wholesalers to support the distribution effort of LTK.

Chapter 10 Implementation, Evaluation and Control

Although all the strategic plan has been laid down in detail, the implementation is equally important to enable the plan to be carried out smoothly. All the tasks must be delegated accordingly. On top of that, there must be coordinating mechanism to facilitate decision-making process. Above and beyond, there must not be any breakdown in communication within each level and within departments as well. There should be weekly report and meeting to exchange ideas on improving the organisation activities. The Kaizen Methodology is very good in turning LTK into a learning organisation.

Since there is a preset quantitative objective, it is possible to evaluate the actual performance against the preset standard. If the difference is too wide, corrective measurement must be taken.

Other than comparing the actual result with the preset standard, LTK can measure the performance based on other sources such as customers’ feedback, retail audit, distributors’ feedback, survey and toll free calls.

In conclusion, the strategic plan must be review from time to time because the business environment is always dynamic and volatile in nature. The holistic audit of various aspects will definitely benefit the company with coming out a more complete strategic plan.

It is proven that Quality is everyone’s job. In order to make sure that this will be followed, QA framework must be designed. That will guarantee a systematic process of performing each one’s job. Quality was proven to be the key thing that assures the proliferation of a company. It ranges from the quality of its products to the quality of service. For that, the process must also be of quality. Also, quality people must then be key consideration. Quality Assurance is the key for any business to last long in their respective industry.

Taking a look at North America’s businesses, there are some companies who really made grasp and foothold in their respective market. Some are as old as a century or more. One thing is the same among them – they assured the quality of their output in the same way that they assured their revenue. Hershey Company is one of them. It is the largest manufacturer of quality chocolate in North America and was known for its range of confectionary products not just in America. The company had been exporting their products to 90 countries or more around the globe.

They have averaged revenue of over US$4 Billion. Some of their well-known products are Reese’s, Twizzlers, Kit Kat, Almond Joy, Mauna Loa, Ice Breakers, and Hershey’s Cookies. For some years now since its foundation in 1893, Hershey had shown its drive for innovation with their products and also with their system (SAP. 2007). Hershey Company offers variety of products therefore one of the gauge to be used to measure their quality depends on the satisfaction of the consumers. This must be the top priority then.

The QA process must be divided on five separate portions:

1) Control system for Raw Materials;

2) Process Control System and Practices;

3) System for Sampling, Testing, Analysis and Product Acceptance;

4) System for delivering products or Shipment;

5) Disposition of Nonconforming Materials.

The first part deals with selection process of vendors. Hershey Company requires quality material as a prerequisite for its quality products. After that, lot sampling, acceptance practices, test methods, and certification procedures will follow.

The second part of QA process deals with the ability to sustain the procedure currently or traditionally produced. This will allow the company to stay consistent with the quality of their product. The third part provides assurance of the quality of the methods applied in manufacturing. This required analysis on good laboratory practices and documentation of test methods. Sampling procedures are also required and a system for maintenance of references must be made. It then followed standardization and calibration of the products and lot acceptance with product control system.

In order to satisfy the chocolate fans, there must be high regards on the shipment which managed the shelf life of the product. Here comes the fourth part of the process. This includes packaging and labeling of the chocolate products. There must also be high considerations on the quality of the shipment container. If anything went wrong, for the security of the company’s desire of achieving the approval of the market, there must be the fifth and last part of the QA process which deals with the disposition of nonconforming material.

The company should be prepared to recall or retrieve raw materials and products that are nonconforming if ever necessary. Plus, this must be done with proper caution (American Society for Quality. 1994. p. 4). That is the QA process to be applied for Hershey Company. It is apparent that it is devoted for the assurance that the chocolate products are of high quality and passed a highly defined standard. In line to the process outlined above, the company should have documentations designed to satisfy the requirement of Hershey’s policy, system, and planning.

The analysis of progress must be checked periodically. Day by day, there must be a push to meet quality objectives. There remained the challenge of innovation to constantly satisfy the craving and appetite of the chocolate consumers. Also, there are some internal and external measures that need to be met to guarantee the function of QA. Let us bring the categories for designing measures down to four categories:

1) financial;

2) customer;

3) Internal Business Process;

4) Learning and Growth. The key thing here is Auditing.

If all of these were taken into consideration, Hershey Company as an organization will be more than dynamic as an organization of people and as a market provider at the same time. The first category pertains to the long term profitability. The measures for financial consideration must include highly defined strategies. Second consideration pertains to customers which are the direct source of company’s profitability. The measure to secure this includes superior customer service that assures excellence of business to client relationship.

This is to track their satisfaction. Part of the set of measures is customer retention which aims to avoid loss of clients as competition increases. The internal business, third consideration, required the management team of Hershey to learn which process required improvement and which process must be the prime strength of the company. This way, the company can benchmark on the market of chocolate producers. The fourth consideration, learn and growth, supplied fulfillment on the attempt to innovate.

This measure pertains to the responsibility of the company to make auditing of the requirements and periodical improvement and use them in making sure that they will never be left behind in the industry (Picket, S. K. H. 2010. p. 733). These measures covered both internal and external factors in the whereabouts of the business. Moreover, Hershey, while staying as one great competitor in the business industry of chocolate manufacturing must either sustain their position or improve. The only way for the company is upward. Bounded by competition, Hershey Company also required making necessary action to stand out.

As we can notice with the way Kraft is doing business and with quality of the products, they are apparently similar with the “Hershey ways”. There is not much difference with the way they are competing. A product of Hershey has a similar or a counterpart product as of Kraft and vice versa. Thus the ability to stand out is tough. It is highly recommended to make the measures for customer retention become of higher significance. If it is no longer a question of which product is better, it will bring us to the qualification of which product is served better. Kraft and Hershey are similar thus getting stronger foothold in the market is crucial.

There is a crucial battle between the two recently which is for the takeover of Cadbury. This would be the first time that Hershey will acquire an international giant and has larger amount to continue the battle for its ownership. Kraft Foods is a bigger company but Hershey has a huge potential as the higher management will show the real worth of the company (Cox, R. et. al. 2009). Moreover it is up to them. Cause and effect relationship provides the criteria for making the QA process. What determines the success the process design is the workability and clarity of the procedures.

There remained an interdependent link between quality, standards, and control. They defined the nature of the procedures being applied by a company. These three categories direct the management style and design thus required auditing to make sure that everything is in its proper place.

References

American Society for Quality (1994).

Quality assurance for the chemical and process Cox, R. et. al. (2009).

The Emotions of Hershey’s Bid. New York Times. NY: New York industries. WI: ASQ Press. Picket, S. K. H. (2010).

The Internal Auditing Handbook. West Sussex: Wiley Publishers SAP. (2007).

The Hershey Company. PA: SAP AG Times Company

Case Study: Coca-Cola Bottling Company United cuts operational costs with SAP and IBM

Coca-Cola Bottling Company has chosen Lotus Notes and Lotus Domino to manage the data generated in their bottling plants. By placing it all on one IBM server, the necessary data on inventory and production costs are entered one time into the program by a production employee and it can then be accessed by other departments as necessary. The use of Lotus Notes has helped improve scheduling for production and keeping their inventory levels under tight control.

With Lotus software, the company is able to input information from their manufacturing operation and use that data to create reports. The Lotus software is also capable of creating the reports the company requires. Without this software, inventory control would have to be accomplished in part through a manual process and then input into other software and finally extracted and analyzed using additional software and key strokes. The company is saving money through the ability to forecast and consequently keep inventory levels to a minimum.

In Coca-Cola’s case, the production numbers being input into Lotus Notes is information. When this information is translated into numbers that can be used for reporting, scheduling and inventory control purposes it then becomes data. Data resulting from information can be manipulated, examined and graphed.

Retrieved from the IBM Software website: http://www-306.ibm.com/software/success/cssdb.nsf/cs/STRD-77PLSL?OpenDocument&Site=lotus&cty=en_us

Abstract

The company 3M is a diverse company that was incorporated on June 25, 1929 with presence in more than 10 industries alone. “3M products are sold through a number of distribution channels, including directly to users and through wholesalers, retailers, jobbers, distributors and dealers in a range of trades in a number of countries worldwide” (“3M Co,” n.d., para. 1).

The company headquarters is located in St. Paul Minnesota, however, 3M has locations all over the United States. 3M is best known within the consumer industry with brands such as Post-it, Scotch, Scotch-Brite, Filtrete, O-Cel-O, Nexcare, and Command. “3M is one of 30 companies in the Dow Jones Industrial Average and also is a component of the Standard & Poor’s 500 Index.” (“3M Company Information,” n.d., para. 2). As of 2013, 3M has more than 35 business units, managed under five business groups which are consumer, electronics; energy, health care, industrial, and safety; graphics (“3M Co,” n.d., p. 1). 3M has over 87,000 employees worldwide and continues to increase sales and net income.

Business Summary – 3M

“3M was founded in 1902 at the Lake Superior town of Two Harbors, Minnesota by five businessmen set out to mine a mineral deposit for grinding-wheel abrasives. But the deposits proved to be of little value, and the new Minnesota Mining and Manufacturing Co. quickly moved to nearby Duluth to focus on sandpaper products” (“3M Company Information,” n.d., para. 1). After years of struggling, new investors came in and moved the company to its current headquarters of St. Paul Minnesota.

“Early technical and marketing innovations began to produce successes and, in 1916, the company paid its first dividend of 6 cents a share” (“3M Company Information,” n.d., para. 3).

“The Industrial and Transportation segment serves a range of markets, such as automotive original equipment manufacturer (OEM) and automotive aftermarket (auto body shops and retail), renewable energy, electronics, paper and packaging, food and beverage, and appliance” (“3M Co,” n.d., para. 3).

The products within this segment includes tapes, adhesives, filtration products, and adhesives as well as “Scotch Masking Tape, Scotch Filament Tape and Scotch Packaging Tape; packaging equipment; 3M VHB Bonding Tapes; conductive, low surface energy, hot melt, spray and structural adhesives; re-closable fasteners; label materials for durable goods; and coated, nonwoven and micro-structured surface finishing and grinding abrasives for the industrial market” (“3M Co,” n.d., para. 3).

The healthcare segment includes units such as medical tapes, dressings, a range of surgical tape. “Dental and orthodontic products include restoratives, adhesives, finishing and polishing products, crowns, impression materials, preventive sealants, professional tooth whiteners, prophylaxis and orthodontic appliances. In health information systems, 3M develops and markets computer software for hospital coding and data classification, and provides related consulting services. 3M provides food safety products for food processors to test the microbiological quality of food” (“3M Co,” n.d., para. 3).

“The Consumer and Office segment serves markets that include consumer retail, office retail, home improvement, building maintenance and other markets. Products in this segment include office supply products, stationery products, construction and home improvement products (do-it-yourself), home care products, protective material products, certain consumer retail personal safety products, and consumer health care products. Consumer and office products include Scotch brand products, such as Scotch Magic Tape, Scotch Glue Stick and Scotch Cushioned Mailer; Post-it Products, such as Post-it Flags, Post-it Note Pads, Post-it Labeling; Cover-up Tape, and Post-it Pop-up Notes and Dispensers; construction and home improvement products, including surface-preparation and wood-finishing materials, command adhesive products and filtrete filters for furnaces and air conditioners; home care products, including scotch-brite scour pads, scotch-brite scrub sponges, scotch-brite microfiber cloth products, O-Cel-O Sponges and scotchgard fabric protectors; protective material products; certain maintenance-free respirators; certain consumer retail personal safety products, including safety glasses and hearing protectors; and nexcare adhesive bandages” (“3M Co,” n.d., para. 4).

“The safety, security and protection services segment serves a range of markets for the safety, security and productivity of workers, facilities and systems. The product offerings include personal protection products, cleaning and protection products for commercial establishments, safety and security products (including border and civil security solutions), and roofing granules for asphalt shingles, corrosion protection products used in the oil and gas pipeline markets, and track and trace solutions” (“3M Co,” n.d., para. 4).

“The display and graphics segment serves markets that include electronic display, traffic safety and commercial graphics. This segment includes optical film solutions for liquid crystal display (LCD) electronic displays; computer screen filters; reflective sheeting for transportation safety; commercial graphics sheeting and systems; architectural surface and lighting solutions; and mobile interactive solutions, including mobile display technology, visual systems products, and computer privacy filters. The optical film business provides films that serve numerous market segments of the electronic display industry. 3M provides products for five market segments, including products for LCD computer monitors, LCD televisions, hand-held devices, such as cellular phones and tablets, notebook personal computers (PCs) and automotive displays. In traffic safety systems, 3M provides reflective sheeting’s used on highway signs, vehicle license plates, construction work-zone devices, trucks and other vehicles, and also provides pavement marking systems” (“3M Co,” n.d., para. 5).

“The electro and communications segment serves the electrical, electronics and communications industries, including electrical utilities; electrical construction, maintenance and repair; original equipment manufacturer (OEM) electrical and electronics; computers and peripherals; consumer electronics; telecommunications central office, outside plant and enterprise; as well as aerospace, military, automotive and medical markets; with products that enable the efficient transmission of electrical power and speed the delivery of information. Products include electronic and interconnect solutions, micro-interconnect systems, high-performance fluids, high-temperature and display tapes, telecommunications products, electrical products, and touch screens and touch monitors” (“3M Co,” n.d., para. 6).

“Its electronic and electrical products include packaging and interconnection devices; high-performance fluids used in the manufacture of computer chips, and for cooling electronics and lubricating computer hard disk drives; high-temperature and display tapes; insulating materials, including pressure-sensitive tapes and resins; and related items” (“3M Co,” n.d., para. 7)

3M is a great company and sustains a competitive advantage due to the number of products offered to a diverse industry. 3M’s core competency is based on the fact of its invention and manufacturing capabilities that deliver unique solutions for both industrial and commercial customers. They have the ability to target both types of consumers. The company’s technology platforms hold together its diverse business activities. Its competitive advantage derives from the company’s practice of cooperatively sharing technology across operations, brands, market segments, and regions. 3M uses a unique business model called the 3M Lattice. “This competitive advantage offers a steady stream of groundbreaking product opportunities in adjacent businesses where less obvious applications are discovered. This competitive advantage is a sustainable advantage in that it meets the qualifications for sustainability, possessing capabilities which are valuable, rare, costly-to-imitate, and non-substitutable” (NCSU, n.d., p. 4).

3M’s worldwide sales totaled $29.9 billion dollars at the end of 2012, with international sales totaling $19.4 billion. International sales make up 65% of total sales (3M Performance, 2012). Operating income in 2012 was 21.7 percent of sales, compared to 20.9 percent of sales in 2011, an improvement of 0.8 percentage points (3M Performance, 2012). Net income totals at 2012’s yearend were $4.4 billion dollars, which was 4.9 percent of sales. The diluted earnings per share equaled $6.32 (3M Performance, 2012). According to filings reported with the Securities Exchange Commission, four of the 3M’s six business segments showed growth in sales, led by Industrial and Transportation at 14.3 percent, Safety, Security and Protection Services at 9.4 percent, Consumer and Office at 6.1 percent, and Health Care at 5.4 percent.

The filings further explain that a slowdown in electronics-related businesses negatively impacted both the Electro and Communications and Display and Graphics business segments and that as a result Electro and Communications sales decreased 2.7 percent and Display and Graphics sales declined 8.8 percent. Sales declined 17 percent in optical systems (part of the Display and Graphics segment) impacted by end-market weakness and lower attachment rates in LCD TVs (SEC, 2012). The company operates globally and has over 88,000 employees. 3M has received numerous awards over the years. In 2013, “3M has received 13 awards from international institutions for design excellence in areas ranging from consumer products and packaging, to health care and workspace” (“3M Company Information,” n.d., para. 12).

“3M was also named among “The Top 20 Best Companies for Leadership” in a study conducted by global consulting firm The Hays Group. The list ranks companies for leadership around the world and examines how those companies nurture talent and foster innovation in their organizations. According to the study, the best companies for leadership are purposeful and strategic in developing, enabling and motivating leaders throughout the organization to do their best” (“3M Company Information,” n.d., para. 1).

References

1. 3M Co. (n.d.). Retrieved from http://www.reuters.com/finance/stocks/companyProfile?symbol=MMM.N
2. 3M Company Information. (n.d.). Retrieved from http://solutions.3m.com/wps/portal/3M/en_US/3M-Company/Information/Profile/Performance/
3. Http://www.sec.gov/Archives/edgar/data/66740/000110465913010881/a13-1203_110k.htm#Item1_Business__122819.
4. North Carolina State University. (n.d.). www4.ncsu.edu/…/8-Case%20notes–3M.doc

“It is meaningless to financially analyse a company without understanding the context and environment in which it operates”. Discuss to what extent you agree with this statement. Introduction Financial analysis is the use of financial statements to analyze a company’s financial position and performance, and to assess future financial performance. 1 Therefore, it is a subjective and complex task.

To effectively accomplish this task we should adopt interdisciplinary perspective. This includes understanding the context and environment in which a company operates. So, this essay is tending to discuss the understanding of context and environment in which to interpret the financial statement, and examine it is an important and essential part of financial analysis.

To examine this discussion, this essay is divided into four main parts: the first part illustrates the important role of the context and environment in which a company operates through a discussion of MicroStrategy case ; the second part examines some interpretation problems arising from ratio analysis, and consequently argues the acontextual financial analysis is inherently limited; the third part specifically considers the foreign environment; finally, the fourth part draws a conclusion about this discussion.

In March 2000, MicroStrategy (MSTR), a worldwide software company, announced that it was revising its financial results. Sales would be lowered by roughly 25 percent, from $205 million to about $150 million; and profits would be adjusted from 15 cent a share gain to a 43 cent a share loss. The reaction was swift. MSTR’s stock plunged $63. But just two weeks before, its common stock touched $333, up nearly 46-fold in a year. Huge sums of money were lost by investors who based their investment decisions on misleading reported numbers.

While many in the business press blamed the problems on aggressive accounting practice, we should question where those investors who bought MSTR shares at $333 went wrong. In 12 months, the stock had multiplied nearly 46 times. Was it conceivable that this business could be worth 46 times more in one year? Undoubtedly, the answer was “no”. However, the investors were willing to pay airy sums based on tools like price-to-sale, or price-to-earnings, which could not determine values.

Ultimately, the analyst community should exercise increased care in its assessment of a firm’s prospects. This suggests an analysis fully incorporates all explicit projections and uncovers any implicit assumptions. A better analysis may be accompanied by outside scrutiny and attestation of the processes used by analysts in developing their reports and forecasts, i. e. a successful of financial analysis comes from the combination of the context and environment in which a company operates and its accounting figures. As what Stickney states:

” effective analysis of a set of financial statement requires an understanding of (1) the economic characteristics and current conditions of a firm’s business; (2 ) the particular strategies the firm selects to compete in each of these businesses; and (3)the accounting principles and procedures underlying the firm’s financial statements. “3 Part 2. 1: Ratio analysis There are different principle tools of financial analysis. One of them is ratio analysis, which is based on the externally available financial data from corporations,4 and used to assess how various line items in a firm’s financial statement related to one another.

In ratio analysis, the analyst can compare ratios for a firm over several years (a time-series comparison) examining the effectives of a firm’s strategy over time, compare ratios for the firm and other firms in the industry (cross-sectional comparison) to some absolute benchmark. Because of simple and convenient, it is one of the most popular and widely used tools.  Interpretation problems in ratio analysis While computation of a ratio is a simple operation, its interpretation is more complex.

The usefulness of ratios depends on our skilful application and interpretation of them, and consequently there are some problems arising from the using of ratio analysis. Firstly, Ratio might be interpreted in isolation, and might not be considered in the context of the company’s other ratios. Example (1), company A maintains a current ratio (current assets divided y current liabilities) well below 1. 00, which if viewed by itself could signify a solvency problem. However, the company’s strong earning power and cash flows provide adequate cash to meet the company’s need.

Therefore, to more meaningful, a ratio must refer to an economically important relation. Secondly, the analysts could ignore the factors can affect the effectiveness of ratios. It must be recognized that a substantial amount of important information is not included in a company’s financial statements. These events involving such things as industry changes, management changes, competitors’ actions, technological developments, government actions, and union activities are often critical to a company’s successful operation, and so on.

Without considering these events, the accounting data is unreliable. Consequently, the ratios based on those unreliable data will lack insight. This point is illustrated in MicroStrategy case study in Part 1. So, to successfully predict of corporate performance we must assess the unrecorded events potentially influencing future ratios. Thirdly, the analysts might choose misleading ratios caused by the difficult problem of achieving comparability among firms in a given industry.

Achieving comparability among firms requires that the analyst (1) identifies basic differences existing in their accounting principles and procedures, and (2) adjusts the balances to achieve comparability. 7 Basic differences in accounting usually involve a variety of areas, which include some such as (1) Inventory valuation (FIFO, LIFO, average cost); (2) Depreciation methods, particularly the use of straight-line versus accelerated depreciation. (3)Capitalization versus expense of certain costs, particularly costs involved in developing natural resources, etc.. 8

The use of these different alternatives can make a significant difference in the ratios computed. For example, in the brewing industry, company B noted that if it had used average cost for inventory valuation instead of LIFO, inventories would have increased. Such an increase would have a substantive impact on the current ratio. Several studies have analyzed the impact of different accounting methods on financial statement analysis. The average investor may find it difficult to grasp all these differences, but investors must be aware of the potential pitfalls if they are to be able to make the proper adjustments.