财务管理案例LAURENTIANBAKERIESWord文件下载.docx

财务管理案例LAURENTIANBAKERIESWord文件下载.docx

《财务管理案例LAURENTIANBAKERIESWord文件下载.docx》由会员分享，可在线阅读，更多相关《财务管理案例LAURENTIANBAKERIESWord文件下载.docx（10页珍藏版）》请在冰豆网上搜索。

InlateMay,1995,DanielleKnowles,vice-presidentofoperationsforLaurentianBakeriesInc.,waspreparingacapitalexpenditureproposaltoexpandthepany’sfrozenpizzaplantinWinnipegManitoba.IftheopportunitytoexpandintotheU.S.frozenpizzamarketwastaken,thepanywouldneedextracapacity.Adetailedanalysis,includinganetpresentvaluecalculation,wasrequiredbythepany’sCapitalAllocationPolicyforallcapitalexpendituresinordertoensurethatprojectswerebothprofitableandconsistentwithcorporatestrategies.

PANYBACKGROUHD

Establishedin1984,LaurentianBakeriesInc.（Laurentian）manufacturedavarietyoffrozenbakedfoodproductsatplantsinWinnipeg（pizzas）,Toronto（cakes）andMontreal（pies）.Whileeachplantoperatedasaprofitcenter,theysharedamonsalesforcelocatedatthepany’headofficeinMontreal.AlthoughtheTorontoplantwasresponsibleforover40%ofcorporaterevenuesinfiscal1994,andtheotherplantswasaccountedforabout30%each,allthreedivisionscontributedequallytoprofits.Thepanyenjoyedstrongpetitivepositionsinallthreemarketsanditwasthelowcostproducerinthepizzamarket.IneStatementsandBalanceSheetsforthe1993to1995fiscalyearsareinExhibits1and2,respectively.

Laurentiansoldmostofitsproductstolargegrocerychains,andinfact,supplyingseveralCanadianchainswithprivatelabelbrandpizzasgeneratedmuchofthesalesgrowth.Othersalesweremadetoinstitutionalfoodservices.

Thepany’ssuccesswas,inpart,theproductofitsmanagement’sphilosophies.ThecornerstoneofLaurentian’soperationswasitsincludingamitmenttoabusinessstrategypromotingcontinuousimprovement;

forexampleallemployeeswereempoweredtothinkaboutandmakesuggestionsforwaysofreducingwaste.AsDanielleKnowlessawit:

“ContinuousimprovementisawayoflifeatLauremtian.”Also,thepanywasknownforitsabove–averageconsiderationforthehumanresourceandenvironmentalimpactofitsbusinessdecisions.Thesephilosophiesdroveallpolicy-making,includingthosepoliciesgoverningcapitalallocation.

DanielleKnowles

DanielleKnowles’scareer,whichspanned13yearsinthefoodindustry,hadincludedpositionsinotherfunctionalareassuchasmarketingandfinance.ShehadreceivedanundergraduatedegreeinmechanicalengineeringfromQueen’sUniversityinKingston,Ontario,andamasterofbusinessadministrationfromtheWesternBusinessSchool.

THEPIZZAINDUSTRY

Majorsegmentsinthepizzamarketwerefrozenpizza,deli-freshchilledpizza,restaurantpizzaandtake-outpizza.Ofthesefour,restaurantandtake-outwerethelargest.Whilethesesegmentsconsistedofthousandsofsmall-ownedestablishments,afewlargeNorthAmericanchains,whichincludedDomino’s,PizzaHutandLittleCaesar’s,dominated.

Although12firmsmanufacturedfrozenpizzasinCanada,thefivelargestfirms,includingLaurentian,accountedfor95%ofproduction.McCainFoodswasthemarketleaderwith44%marketshare,whileLaurentianhad21%.PercapitaconsumptionoffrozenproductsinCanadawasone-thirdofthelevelinU.S.whereretailpriceswerelower.

ECONOMICCONDITIONS

TheNorthAmericaneconomyhadenjoyedstronggrowthsince1993,afterhavingsufferedasevererecessionforthetwopreviousyears.Interestratesbottomed-outinmid-1994,afterwhichtheU.S.FederalReserveslowlyincreasedratesuntilearly1995inanattempttofightinflationarypressures.Nevertheless,NorthAmericaninflationwasexpectedtoaverage3%to5%annuallyfortheforeseeablefuture.TheBankofCanadafollowedtheU.S.FederalReserve’sleadandincreasedinterestrates,inparttoprotecttheCanadiandollar’svaluerelativetothevalueoftheU.S.dollar.TheresultwasaNorthAmericangrowthrateofgrossdomesticproductthatwasshowingsignsofslowingdown.

LAURRENTIAN’SPROJECTREVIEWPROCESS

AllcapitalprojectsatLaurentianweresubjecttoreviewbasedonthepany’sCapitalAllocationPolicy.Thelatestpolicy,whichhadbeendevelopedin1989whenthepanybeganconsideringfactorsotherthansimplythecalculatednetpresentvalueforprojectevaluation,wasstrictlyenforcedandmanagersevaluatedeachyearpartiallybytheirdivision’sreturnoninvestment.Thepurposeofthepolicywastoreinforcethemanagementphilosophiesbyachievingcertainobjectives:

thatallprojectsbeconsistentwithbusinessstrategies,supportcontinuousimprovement,considerthehumanresourceandenvironmentalimpact,andprovideasufficientreturnoninvestment.

Priortotheapprovalofanycapitalallocation,eachoperatingdivisionwasrequiredtodevelopbothaStrategicandanOperatingPlan.TheStrategicPlanhadtoidentifyandquantifyeitherinefficienciesorlostopportunitiesandestablishtargetsfortheirelimination,includeathree-yearplanofcapitalrequirements,linkcapitalspendingtobusinessstrategiesandcontinuousimprovementeffort,andachievethepany-widehurdlerates.

ThefirstyearoftheStrategicPlanbecametheAnnualOperatingPlan.Thiswassupportedbyadetailedlistofproposedcapitalprojectswhichbecamethebasisforcapitalallocation.InadditiontomeetingallStrategicPlancriteria,theOperatingPlanhadtoidentifymajorcontinuousimprovementinitiativesandbudgetfortheassociatedbenefits,aswellasdevelopatrainingplanidentifyingspecifictrainingobjectivesfortheyear.

Thesecriteriawereusedbyheadofficetokeepthebehaviorofdivisionalmanagersconsistentwithcorporateobjectives.Forexample,therequirementtodevelopatrainingplanaspartoftheoperationalplanforcedmanagerstobeefficientwithemployeetrainingandtokeepcontinuousimprovementastheultimateobjective.

AllproposedprojectsweresubmittedonanAuthorizationforExpenditure（AFE）Formforreviewandapproval（seeExhibit3）.TheAFEhadtopresenttheproject’slinkagetothebusinessstrategies.Inaddition,ithadtoincludespecificdetailsofeconomicsandengineering,involvementandempowerment,humanresource,andtheenvironment.Thisrequirementensuredthatprojectshadbeencarefullythoughtthroughbyforcingmanagerstolisttheitemspurchased,theemployeesinvolvedintheproject,theemployeesadverselyaffectedbytheproject,andtheeffectoftheprojectontheenvironment.

ApprovalofacapitalexpenditureproposalwascontingentonthreerequirementswhichareillustratedinExhibit4.Thefirstoftheserequirementswastheoperatingdivision’sdemonstratedmitmenttocontinuousimprovement（C.I.）,thecriteriaofwhicharedescribedinExhibit5.Thesecondrequirementwasthatallprojectsofmorethan$300,000beincludedintheStrategicPlan.Thefinalrequirementwasthatforprojectsgreaterthan$1million,theoperatingdivisionhadtoachieveitsprofittarget.However,ifaprojectfailedtomeetanyoftheserequirements,therewasamechanismthroughwhichemergencyfundsmightbeallocatedsubjecttothecorporateexecutivemittee’sreviewandapproval.Iftheprojectwaslessthan$1millionanditmetallthreerequirements,onlydivisionalreviewandapprovalwasnecessary.Otherwise,approvalwasneededfromtheexecutivemittee.

TheproposedWinnipegplantprojectwasconsideredaclass2projectastheexpendituresweremeanttoincreasecapacityforexistingproductsortoestablishafacilityfornewproducts.Capitalprojectscouldfallintooneofthreeotherclasses:

costreduction（Class1）;

equipmentorfacilityreplacement（Class3）;

orothernecessaryexpendituresforR&

D,productimprovements,qualitycontrolandconcurrencewithlegal,government,health,safetyorinsurancerequirementsincludingpollutioncontrol（Class4）.Aprojectspendingauditwasrequiredforallexpenditures;

however,asavingsauditwasalsoneedediftheprojectwasconsideredeither1or2.Eachclassofprojecthadadifferenthurdleratereflectingdifferentlevelsofrisk.Class1projectswereconsideredthemostriskyandhadahurdlerateof20%.Class2andClass3projectshadhurdleratesof18%and15%,respectively.

KnowleswasresponsiblefordevelopingtheWinnipegdivision’sCapitalPlanandpletingallAFEforms.

WINNIPEGPLANT’SEXPANSIONOPTIONS

LaurentianhadmanufacturedfrozenpizzasattheTorontoplantuntil1992.However,afterthepanybecamethesolesupplierofprivate-labelfrozenpizzasforalargegrocerychainandwasforcedtosecureadditionalcapacity,itacquiredtheWinnipegfrozenpizzaplantfromapetitor.Aprogramofregularmaintenanceandequipmentreplacementmadethenewplantthelowcostproducerintheindustry,withanoperatingmarginthataveraged15%.

Theplan,withitsprovenmitmenttocontinuousimprovement,hadsuccessfullymetitsprofitobjectiveforthepastthreeyears.Aftertheshortageofcapacityhadbeenidentifiedastheplant’slargestsourceoflostopportunity,managementwaseagertorectifythisproblemastargetedforintheStrategicPlan.BecausethefacilityhadalsoincludedtheproposedplantexpansioninitsStrategicPlan,itmetallthreerequirementsforconsiderationofapprovalforacapitalproject.

Annualsaleshadmatchedplantcapacityof10.9millionfrozenpizzaswhenLauentianconcludedthatopportunitiessimilartothoseinCanadaexistedintheU.S.AnopportunitysurfacedwherebyLaurentiancouldhaveanexclusivearrangementtosupplyalargeU.S.-basedgrocerychainwithitsprivate-label-brandfrozenpizzasbeginninginApril,1996.Asaresultofthisarrangement,frozenpizzasaleswouldincreaserapidly,adding2.2millionunitsinfiscal19