Date post: | 02-Dec-2014 |
Category: |
Education |
Upload: | chandan-pahelwani |
View: | 2,432 times |
Download: | 13 times |
MCS PRESENTATION
Leena Chellani 11015
Nikunj Gajara 11046
Chandan Pahelwani 11047
Rinku Salat 11068
Presented by:
Strategic Planning Process
Meaning of Strategic PlanningIt is the process of deciding on the programs
that the organization will undertake on the appropriate amount of resources that
will be allocated to each program over the next several years.
The document that describes how the strategic decision is to be implemented is the strategic plan.
Reviewing & Updating from
last year
Deciding on assumptions &
guidelines
First Iteration of the new
Strategic PlanAnalysis
Second Iteration of the new Strategic
Plan
Final review and approval
Reviewing and Updating the Strategic Plan
During the year, whenever there is a need management takes decisions that change the strategic plan.
Actual experience is reflected in accounting reports for first few months of current year, and these are extrapolated further for current year as a whole.
If computer program is sufficiently flexible, it can extend the impact beyond the current year and if not, rough estimates are made manually.
Cont… The implication of new program decisions on
revenues, expenses, capital expenditure & cash flow are incorporated.
Planning staff usually makes this update and management may be involved if there are uncertainties or ambiguities.
Deciding on Assumptions and Guidelines
The updated strategic plan incorporates broad assumptions such as growth in Gross Domestic Product, cyclical movements, labor rates, prices of important raw materials, interest rates, selling prices.
Market conditions such as competitors and impact of government legislation.
These assumptions are reexamined and if necessary, are changed to incorporate the latest information.
Updated strategic plan contains financial information for new plants, existing plants and closing plants.
Cont… A rough approximation is adequate as a basis for
senior management decisions about objectives and key guidelines are to be observed in planning to attain these objectives.
Objectives are stated separately for each product line expressed as sales revenue, profit percentage and return on capital employed.
Guidelines are assumptions about wage and salary increases, new or discounted product lines and selling prices.
First Iteration of the Strategic Plan
Using the assumptions, objectives and guidelines, business units and other operating units prepare their “first cut” of the strategic plan which includes changes made compared to current plan, these are supported by reasons.
Business unit staffs do much of the analytical work, but managers make the final judgments.
The completed strategic plan consists of income statements and quantitative information about sales and production in detail.
Analysis
When headquarters receives the business unit plans, they aggregate them into an overall corporate strategic plan.
Headquarters examine the business unit plans for consistency also.
Sometimes individual plans does not add up to attainment of the corporate objectives, which is known as planning gap.
Cont...
There are three ways to close a planning gap: find opportunities for improvements in the
business unit plans make acquisitions review the corporate objectives.
Second Iteration of the Strategic Plan
Analysis of first submission may require a revision plans of only certain business units, but it may lead to changes that affect all business units.
Technically, revision is simpler to prepare than the original submission but organizationally, it is difficult because it requires difficult decisions.
Some companies do not require a formal revision, they negotiate changes informally and enter the results into plan at headquarters.
Final Review and Approval
A meeting of senior corporate officials usually discusses the revised plan at length.
The plan also may be presented at meeting of board of directors.
The chief executive officer gives final approval.
The approval should come prior to the beginning of the budget preparation process, because strategic plan is an important input to that process.
DAIRY
PAK
Case
Objectives of case
To construct Value Chain Analysis
To use value chain as a power tool
To implement strategic plans in accordance with the value chain
GIST OF CASEDairy Pak is Ohio based international company.
Dairy Pak began their operations in 1947 as one of the original license of the Pure-Pak Technology.
They focused on producing polyethylene coated paper carton for milk and orange juice.
Due to growing demand, it expanded its operations and built converting plants in different states.
During the early 1960's through 1988 Champion steadily produced 2,50,000 tons of polyethylene coated boards annually.
During this period, the paper board industry was threatened by the intrusion of plastic containers but Champion did not falter and continued with its existing operations without changes in strategy or equipment.
At this point, the company decided to have the harvest strategy.
Incidentally, the paper carton did not die, and since there were no major changes in Champion its infrastructure got old and technologically outdated.
In the early 1980's the sudden increase of the juice market created opportunities which Champion did not expect.
In 1988 however, Champion successfully managed to retain its share in the declining market while losing almost half of its share in the fastest-growing segment, the branded juices.
Champion strategy was to be the low cost producer in commodity dairy segment.
In 1988, the Vice President of the Dairy-Pak Division of Champion International has to make some tough choices. He is facing: Declining market share in the growing “Branded
Juice” segment of domestic paperboard carton segment
Their manufacturing system is old Limited output capability which had not grown in
10 years.Rapidly expanding international market which the
corporation had seen as fraught with some problems than competitors.
The Competitors International Paper
It was the industry leader & considered to be low cost producer.
It is also the most technologically advanced company.
Champion was currently a strong number 2, with more domestic volume.
Potlatch, Westvaco, and Weyerhaeuser all ranked in a third tier of competition facing difficulties related to quality and inefficient scale.
The Pure-Pak Customers
Domestic Dairies- The diary’s product was usually a commodity that achieve price premium for brand name.
Differentiated Juicers- This was the fastest growing segment in liquid packing in 1988.
Special Uses- This market had grown slowly, volume per customer was very low it was 4% of Champion’s volume.
Export Market- The fourth group of customers for the Pure-Pak carton was the export market.
Pulp
Paper Mill
Extruder
Conversion
Regional Diary
Minute Maid
Orange Juice
Processor Processor Processor
Super Markets & Distributors
Customer
Process Flow
Champion’s Market position
Domestic Consumption of Pure-Pak Cartons (000)
1980 (tons) 1987 (tons) % change
Dairy 506 374 -26%
Non Dairy 66 120 +82%
Total 572 494 -14%
Champion’s Domestic Pure-Pak Cartons
1980 (tons) % share 1987 (tons) % share
200 39% 150 40%
30 46% 30 25%
230 40% 180 36%
For the purpose of competition and to invest, Earle Bensing’s first proposal was to renovate paperboard machine.
Second proposal was to add a third extruder at the Waynesville, North Carolina plant.
Third was to add roll wrapping equipment at the Waynesville location.
Fourth potential area for investment was adding rotogravure printing.
Q & A
A process flow value chainRegional Dairy Branded OJ
MILK OJ MM/CH TROPICANA
Consumer Pays 1.16 1.50 1.89 2.26
Store pays 1.04 1.20 1.42 1.79
Store Margin 0.12 0.30 0.47 0.47
Dairy pays 0.75 0.80 0.64
Shrinkage 0.06 0.06 0.11
Pasteurising/advertising
0.06 0.06 0.36
0.87 0.92 1.11
Carton cost 0.08 0.08 0.06
Cost to dairy 0.95 1.00 1.17
Dairy/juice margin 0.09 0.20 0.25
Computing the margin in value chain milk orange
Manufacture’s margin 0.08 0.06
For 14400 tons 1152 864
Processing cost
Cost of transport 10 10
Printing 231 231
Cost of buying roller 663 663
Total processing cost 904 904
Margin processing 248 -40
Extrusion cost
Price of roll 663 663
Transport cost 35 35
Cover roll 94 94
Cost of buying rolls 530 530
Total cost of roll 659 659
Margin extrusion plant 4 4
Mill SP to customer 530
Cost
Pulp 319
Machining 105
Freight to customer 47 471
Mill margin 59
Extruder cost
Transfer cost :
Mill cost
Pulp 319
Machining 105
Freight to extruder 3
Mill margin 59 486
Other costs 94
Freight to converter 35
615
Extruder margin -22
Q-2 & Q-3
Margins Assets ROA
$ $ %
Super Market 1728 1800 96
Dairy/ Juices 1296 5400 24
Converter 318 830 38.3
Extruder (22) 190 (11.6)
Paper Mill 59 2800 2.1
Total 3379 11020 30.7
Milk
Margins Assets ROA
$ $ %
Super Market 4320 1800 240
Dairy/ Juices 2880 2890 99.7
Converter 318 830 38.3
Extruder (22) 190 (11.6)
Paper Mill 59 2800 2.1
Total 7555 8510 88.8
Orange Juice
Margins Assets ROA
$ $ %
Super Market 6768 1800 376
Dairy/ Juices 3600 2890 124.6
Converter 30 830 3.6
Extruder (22) 190 (11.6)
Paper Mill 59 2800 2.1
Total 10435 8510 122.6
Branded OJ
Base Commodity Dairies
Branded OJ Products
Buyer Concentration (No of buyer)
1000 3
Size of Buyer as a corporation
Relatively small Same size as paper board manufactures
Buyer Switching Cost Low, but commodity board
High, but differentiated board
Ability to backward integrate into paperboard
Nil Nil
Substitutes (Products) Plastic, other? Plastic, glass, other?
Cost of Carton/ Total Cost 0.08/0.95 =8.42% 0.06/1.17 = 5.13%
Buyers Margin 0.09/1.04 = 8.65% 0.25/1.42= 17.6%
Champion’s ROI 9.3% 1.75%
Buyer Power Analysis