Assessment item 2
Case Study
Value: 30%
Due date: 20-Sep-2015
Return date: 14-Oct-2015
Submission method options
Alternative submission method
Task
The following case study has been developed to provide you with a realistic business scenario from which you can develop the necessary strategic management accounting skills to answer the 6 questions provided below. Please take note of the heading next to each question, which will help guide you through the key accounting practices and principles.
Overview of the task
Ivory Delights is part of a privately owned multinational organisation, Pluto Pinnacle which manufactures a range of products including: frozen food, animal pharmaceuticals and confectionery.
Ivory Delights was established in 1977 and is Australia’s third largest confectionery company and solely focuses on manufacturing small candied confectionery. Head office and the manufacturing plant is located in the Albury/Wodonga region. The plant has the capacity to produce over 1,000,000 tonnes of confectionery items per year which are consumed domestically and exported overseas.
In 2014 Ivory Delights employed over 1100 staff, with major distribution centres located in Melbourne and Sydney. Major customers include supermarkets, supermarket branded stores and large department stores.
Quality is something that Ivory Delights is very particular about and in 2001 was accredited with ISO 9002. ISO 9002 was also accredited for administration processes of purchasing, training product control, product traceability and process improvement. The Hazard Analysis Critical Control Points (HACCP) food safety system was also adopted, further highlighting Ivory Delights commitment to quality control and safety.
Ivory Delights’ strategic goals are as follows:
• To be recognised as the leading confectionery brand in the Australian food industry;
• To provide customers with high quality products and excellent service; and
• To be the leading company in the industry, continuing to grow at rates higher than the industry average.
It plans to achieve these objectives by:
• Being an accredited supplier to the major supermarket chain and speciality outlets;
• Expanding by acquisition, where appropriate;
• Sustaining superior performance; understanding and satisfying customer needs; and
• Investing in state-of-the-art equipment to enable product innovation and efficiencies.
Ivory Delights is already recognised as having a differentiated offering compared with its major rivals—Sweet Nothing and Wiggles—due to its value product range, well established relationships with key retails outlets and the achievement of quality accreditation across a wide range of its operations. In planning to be the supplier of choice, Ivory Delights is focused on its direct customer (i.e. the retailers) and the end customer (i.e. the customer).. The company recognises that they need to sustain their growth rate and profitability to prevent takeovers from one of the two major companies, Wiggles and Sweet Nothing.
The acquisition of Smickers in 2001 was undertaken to achieve production and processing economies of scale and gain access to additional markets through Smickers’ accreditation and speciality store relationships, as well their export focus and AQIS (Australian Quarantine and Inspection Service) export approval status. Further acquisitions are possible; however they would need to be a good strategic fit from operational and cultural perspectives.
The company has strong family values, and the ongoing sustainability of the business is more important than short-term profitability. In 1999, Wiggles unsuccessfully approached Darrell Lea, the General Manager at Pluto Pinnacle about the prospect of buying Ivory Delights’ operation for $250 million. Lea was offered a seat on the board; however, under the terms of the deal he would lose control over the Ivory Delights operations. In addition, a large proportion of the purchase synergies would arise from the removal of duplicate functions across the combined business group. This would have resulted in the retrenchment of many of Ivory Delights loyal employee base, some of whom had been with the company since Darrell Lea’s grandfather established the business over 50 years ago.
Question 1 – Strategic Management (15 marks)
As part of your role you have been asked to prepare a discussion paper on the strategic position Ivory Delights should pursue. The company want to increase its market share in the confectionery area. Considering the following issues, prepare a response to be presented at the next board meeting.
Issues you might like to address include:
a) What type of organisation and industry does Ivory Delights want to compete in?
b) What business strategies will Ivory Delights need to follow and how will these be in line with Pluto Pinnacle’s overall strategy?
c) Who are Ivory Delights competitors? What are their strengths and weaknesses?
d) What are the key issues that will affect future industry growth including any impacts?
e) What are the key issues that will affect future industry profitability including any impacts?
f) Who are Ivory Delights’ key stakeholders?
