财务管理案例LAURENTIANBAKERIES英文版.docx

财务管理案例LAURENTIANBAKERIES英文版.docx

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财务管理案例LAURENTIANBAKERIES英文版

LAURENTIANBAKERIES

Thedecision-makermustmakearecommendationonalargeexpansionproject.Discountedcashflowanalysisisrequired.

InlateMay,1995,DanielleKnowles,vice-presidentofoperationsforLaurentianBakeriesInc.,waspreparingacapitalexpenditureproposaltoexpandthecompany’sfrozenpizzaplantinWinnipegManitoba.IftheopportunitytoexpandintotheU.S.frozenpizzamarketwastaken,thecompanywouldneedextracapacity.Adetailedanalysis,includinganetpresentvaluecalculation,wasrequiredbythecompany’sCapitalAllocationPolicyforallcapitalexpendituresinordertoensurethatprojectswerebothprofitableandconsistentwithcorporatestrategies.

COMPANYBACKGROUHD

Establishedin1984,LaurentianBakeriesInc.（Laurentian）manufacturedavarietyoffrozenbakedfoodproductsatplantsinWinnipeg（pizzas）,Toronto（cakes）andMontreal（pies）.Whileeachplantoperatedasaprofitcenter,theysharedacommonsalesforcelocatedatthecompany’headofficeinMontreal.AlthoughtheTorontoplantwasresponsibleforover40%ofcorporaterevenuesinfiscal1994,andtheotherplantswasaccountedforabout30%each,allthreedivisionscontributedequallytoprofits.Thecompanyenjoyedstrongcompetitivepositionsinallthreemarketsanditwasthelowcostproducerinthepizzamarket.IncomeStatementsandBalanceSheetsforthe1993to1995fiscalyearsareinExhibits1and2,respectively.

Laurentiansoldmostofitsproductstolargegrocerychains,andinfact,supplyingseveralCanadianchainswithprivatelabelbrandpizzasgeneratedmuchofthesalesgrowth.Othersalesweremadetoinstitutionalfoodservices.

Thecompany’ssuccesswas,inpart,theproductofitsmanagement’sphilosophies.ThecornerstoneofLaurentian’soperationswasitsincludingacommitmenttoabusinessstrategypromotingcontinuousimprovement;forexampleallemployeeswereempoweredtothinkaboutandmakesuggestionsforwaysofreducingwaste.AsDanielleKnowlessawit:

“ContinuousimprovementisawayoflifeatLauremtian.”Also,thecompanywasknownforitsabove–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

AllcapitalprojectsatLaurentianweresubjecttoreviewbasedonthecompany’sCapitalAllocationPolicy.Thelatestpolicy,whichhadbeendevelopedin1989whenthecompanybeganconsideringfactorsotherthansimplythecalculatednetpresentvalueforprojectevaluation,wasstrictlyenforcedandmanagersevaluatedeachyearpartiallybytheirdivision’sreturnoninvestment.Thepurposeofthepolicywastoreinforcethemanagementphilosophiesbyachievingcertainobjectives:

thatallprojectsbeconsistentwithbusinessstrategies,supportcontinuousimprovement,considerthehumanresourceandenvironmentalimpact,andprovideasufficientreturnoninvestment.

Priortotheapprovalofanycapitalallocation,eachoperatingdivisionwasrequiredtodevelopbothaStrategicand