Date post: | 25-Oct-2015 |
Category: |
Documents |
Upload: | wan-ramss-jr |
View: | 2,253 times |
Download: | 28 times |
Group Members :
Liyana Binti Mohd Khair (62288112104)
Faraizuwana Iskandar (62288112103)
Mohd Rahmat Bin Rusli (62288112041)
Mohd Nur Shukri Bin Mohd Nizar (62288112240)
Muhammad Shyazwan Bin Ramli (62288112139)
EXECUTIVE SUMMARYCold Cuts Ltd. that is better known as CC was a
manufacturing concern in Singapore specialising in refrigeration components.
Develops its own brand of refrigeration process technology known as Fuzzy Frost, and their products were exported worldwide.
CC was essentially a subcontractor of components for customers who were original equipment manufacture (OEMs).
Cont.Mr.Dali, the Managing Director of the CC had a
meeting with Mr. Nelly, the Supply Manager from their biggest customer which is main customer in Singapore, Secconz an original equipment manufacturer of refrigeration products.
Mr Nelly informs that they are notice that the price the CC charge to them is over the material cost.
He expected CC to reduce the price since that they have a lot of competition from China who have been able to produce a product like them at much cheaper prices.
Cont.Mr. Rithisak, the Plant Manager in China which is a new
venture that CC had just begun the year before says that a contingent of their trade officials have gave them a surprise visit.
That the United States International Trade Commission has begun investigations on exports from China to US
CC is pricing their products much lower than the fair value.
They say if they find them to be guilty they will either close down this company or at the very least levy a huge anti-dumping tax.
COLD CUTS LTD (CC)
Singapore’s only refrigeration parts manufacturer
-Mr .Dali : The Managing Director
OTHER
- Plant manager in China, a new venture that CC had just begun the year before.
- Mr .Rithisak
SECCONZ
– The biggest customer of CC, an original equipment manufacturer of refrigeration products.
- Mr .Nelly : The Supply Manager
ISSUE
1st Issue
Mr .Nelly expected COLD CUTS LTD (CC) to reduce the price since that they have a lot of competition from China who have been able to produce a product like them at much cheaper prices.
SOLUTION
1) Cutting overhead cost in manufacturing and revise the pricing strategy
To help decrease your overhead costs when it comes to manufacturing is to reduce the amount of products that you have in inventory. The reason that this will lower your inventory costs is because you will only be making the products as your customers want to purchase them.
Cont.To implement some kind of a manufacturing process,
such as lean manufacturing or six sigma. These programs are designed to reduce the amount of waste that is created when you are manufacturing your products. These programs increase your productivity because they get rid of waste and poor quality, which means you are producing more quality products and you are not wasting time or energy on production costs.
Cont.Decreasing the cost of your manufacturing is the
quality of the final product. Many companies lose money on warranty items. But ensuring that you are manufacturing the highest quality products
2) Review Standard Operating Procedures
It is important to re-evaluate operational processes from the bottom to the top, and make changes like trimming unnecessary steps that were needed before but are not anymore, or making new changes to labour functions.
3) Use Technology
A proper adoption of the right technology products for your business can save you money in the long run. It is important for business owners and managers to stay informed on the latest technology products in their industry.
4) Convince the client
• The Cold Cuts Ltd needs to convince Secconz and tell them that product is far better quality than nearest competitor that is why Cold Cuts sell the product with high price. If you want to be the "low-cost leader", you must be priced lower than your competition.
RECOMMENDATION
After review all the option of the solution, we strongly to recommend choosing solution for first problem which is:
Cutting overhead manufacturing cost and revise the
pricing strategy. In our opinion, this is the more suitable recommendation for problem of the price for component is over material cost as said by Mr. Nelly from Secconz. We choose this solution because this step is being able to save costs and also be able to save in terms of time such as no need to waste time to run the business
ISSUES OPTIONS RECOMMENDATION
United States International Trade Commission saying that CC is pricing their products much lower than the fair value (dumping).
• Seek for legal advices, World Trade Organization (WTO).
• Paying the huge anti-dumping tax.
Seek for legal advices about the anti-dumping tax and revise the product price and refer with the “Anti-Dumping Agreement”.
Reference: www.wto.org
ISSUES OPTIONS RECOMMENDATION
Staff of United States International Trade Commission want some bribes.
• Take action towards the person that making bribe.
• Ignore the person.
Take action towards the person such as, report to their top management of United States International Trade Commission and report to local authorities.
Selling price to SecconzPer Unit ($)
Direct materials 40
Direct labour 10
Direct costs 50
Factory Overheads 8
Manufacturing cost 58
Margin before machinery depreciation and administration costs
82
Selling price 140
Annual sales = 25,000 units X $140 = $3,500,000
Margin = 25,000 units X $82 = $2,050,000
Selling price to European customersPer Unit ($)
Direct materials 40
Direct labour 10
Direct costs 50
Factory Overheads 8
Manufacturing cost 58
Margin before machinery depreciation and administration costs
42
Selling price 100
Annual sales = 50,000 units X $100 = $5,000,000
Margin = 50,000 units X $42 = $2,100,000
STRENGTH
• Have specializing in refrigeration components.
• Develops own brand – Fuzzy Frost.
• Product were exported worldwide.
WEAKNESSES
• Higher price.• Don’t have proper price
strategy.• The cost of manufacturing is
higher.• No proper knowledge on anti-
dumping.
OPPORTUNITY
• Expansion to China• Invest in new market
THREAT
• The competitor produce same product with cheaper price – China.
• Bribery.• Will loss the biggest customer –
Secconz.
SWOT ANALYSIS
RECOMMENDATION
OVERHEAD MANUFACTURING COST Cutting overhead manufacturing cost and revise the pricing strategy.
PRODUCT PRICE They need to seek for legal advices about the anti-dumping tax and revise the
product price by refer with the “Anti-Dumping Agreement”.
BRIBERY Take an action towards the person who proposes the bribes such as, report to
their top management of United States International Trade Commission and also report to local authorities.
THE COMPANY The company should implement a strategy for combating possible the practices
of bribery includes organizational measures, measures concerning corporate management and staff and, very importantly, monitoring measures adapted to the size of the company and the markets and / or sectors in which it is operating.
QUESTION
1) Explain to the board how the problem with Secconz can be damaging financially.
As we know Secconz is a major customer of CC, losing of Secconz will give a big impact to the financial of the company especially in their revenue. The revenue of CC will drop about one third of the existing revenue stream. If this happens it will affect the company profit as well.
2) What are the strategic options for the CC Board?
• The strategic options for the CC Board are cutting overhead cost in manufacturing and revise the pricing strategy, review their company Standard of Procedures (SOP), used new technology and convince the client.
3) What are CC’s reporting obligations?
Section 45 of the Companies (Auditing and Accounting) Act 2003 will, when commenced impose an obligation on directors of certain companies to prepare statements on their company's compliance with its relevant obligations. Relevant obligations consist of all obligations under the Companies Acts and under tax law, together with obligations under certain other enactments.
In addition to the obligations specified, a company is obliged under a number of provisions to do certain things when so required by notice from the Revenue Commissioners or one of their officers.
4) What are the implications on the financial statements? What accounting standards are relevant to present a better picture of the CC’s performance and valuation of its assets?
The financial statement show that the sales will drop if
Secconz going to reduce the price lower than the price they
pay. Although they reduce the price but the quality of the
products they use are still in a high quality. So, to overcome
this problem, the CC must deduct the cost of the operation
department such as reducing employees. Thus, they are still
able to maintain their profitability.
5) How should the request for a bribe be handled and what are the potential consequences of the various options open to them?
By take action towards the person such as, report to their top
management of United States International Trade Commission and
report to local authorities. For example, report to SPRM in Malaysia. In
international stage, we also can refer to INTERPOL, FBI, and IAACA
or known as International Associate of Anti-Corruption Authorities).
The consequences of a conviction for bribery can be very severe. Even
as a first time offender, bribery can lead to felony charges being
brought against you, meaning large fines and imprisonment. The
government will pursue cases involving bribery with the sole purpose
of proving your guilt, regardless of your true intent.
Reference
http://www.fbi.gov/birmingham/about-us/priorities/priorities
http://www.interpol.int/Crime-areas/Corruption/Corruptionhttp://www.sprm.gov.my/bidang-kuasa.htmlhttp://www.iaaca.org/AntiCorruptionAuthorities/html