Performance Control at Happy Chips, Inc.

Performance Control at Happy Chips, Inc.

Wendell Worthmann, manager of logistics cost analysis for Happy Chips, Inc., was faced with a difficult task. Harold L. Carter, the new director of logistics had circulated a letter from Happy Chips’ only mass merchandise customer, Buy 4 Less, complaining of poor operating performance. Among the problems cited by Buy 4 Less were: (1) frequent stock outs (2) poor customer service responsiveness and (3) high prices for Happy Chips’ products. The letter suggested that if Happy Chips were to remain a supplier to Buy 4 Less, it would need to eliminate stock outs by: (1) providing direct store delivery four times per week (instead of three) (2) installing an automated order inquiry system to increase customer service responsiveness ($10,000.00) and (3) decreasing product prices by 5 percent. While the previous director of logistics would most certainly have begun implementing the suggested changes, Harold Carter was different. He requested that Wendell prepare a detailed analysis of Happy Chips’ profitability by segment. He also asked that it be prepared on a spreadsheet to permit some basic analysis. This was something that Wendell had never previously attempted, and it was needed first thing in the morning.
Company Background
Happy Chips, Inc. is the fifth largest potato chip manufacturer in the metropolitan Detroit market. The company was founded in 1922 and following an unsuccessful attempt at national expansion has remained primarily a local operation. The company currently manufactures and distributes one variety of potato chips to three different types of retail accounts: grocery, drug, and mass merchandise. The largest percentage of business is concentrated in the grocery segment, with 36 retail customer locations accounting for 40,000 annual unit sales and more than 50 percent of annual revenue. The drug segment comprises 39 customer locations which account for 18,000 annual unit sales and more than 27 percent of annual revenue. In the mass merchandise segment, Happy Chips has one customer with three locations that account for 22,000 annual unit sales and almost 22 percent of annual revenue. All distribution is store-
direct, with delivery drivers handling returns of outdated material and all shelf placement and merchandising.
Recently, Happy Chips has actively sought growth in the mass merchandise segment because of the perceived profit potential. However, while the company is acutely aware of overall business profitability, there has never been an analysis on a customer segment basis.
Performance Statistics
Wendell recently attended a seminar at a major Midwestern University concerning activity-based costing. He was anxious to apply the techniques he had learned at the seminar to the current situation, but was unsure exactly how to proceed. He did not understand the relationship between activity-based costing and segment profitability analysis, but he knew the first step in either is to identify relevant costs. Wendell obtained a copy of Happy Chips’ most recent income statement (Table 1).
He also knew specific information concerning logistic costs by segment (Table 2).
All deliveries were store-direct with two deliveries per week to grocery stores, one delivery per week to drug stores and three deliveries per week to mass merchandisers. To obtain feedback concerning store sales, Happy Chips purchased scanner data from grocery and mass merchandise stores at an aggregate annual cost of $1,000.00 per segment. The drug store segment required use of handheld scanners by delivery personnel to track sales. The cost of delivery to each store was dependent on the type of vehicle used. Standard route trucks were used for drug stores and grocery stores, while extended vehicles were used to accommodate the volume at mass merchandisers.
Trade prices for each unit were different for grocery ($1.90), drug ($2.30), and mass merchandise ($1.50) customers. Wendell was also aware that Buy 4 Less required Happy Chips to cover the suggested retail price with a sticker bearing its reduced price. The machinery required to apply these labels had an annual rental cost of $5,000.00. Labor and materials cost an additional $.03 per unit.

Cases in Strategic Management

Manufacturing Firms
1. Cosmetics
- Estee Lauder Companies, Inc, 2008
- Revlon, Inc - 2007

2. Food
- Krispy Kreme Doughnuts - 2008
- Pilgrim's Pride Corporation - 2007

3. Beverages
- Coca-Cola Company - 2007
- Anheuser-Busch Companies, Inc. - 2007

4. Computers
- Hewlett-Packard Corporation - 2007
International Business Machines - 2007

5. Automotive
- Ford Motor Company - 2007
- Winnebago Industries - 2008
-Skoda Auto - 2007

6. Small business
- S/W Printing Company
- Waterford Wedgwood PLC - 2007
- Toll Brothers, Inc. - 2007
- Cellox - 2007

Service Firms:

1. E-Commerce
- E-Trade Financial, Inc. - 2007
- Amazon.com - 2007

2. Retailing
- Zale Corporation - 2008
- Gap, Inc - 2007

3. Food Service
- Wendy's International - 2007
- McDonald's Corporation - 2007
- Compass Group PLC - 2007

4. Travel-Air or Sea
- Continental Airlines, Inc - 2007
- Southwest Airlines Co. - 2007
- Carnival Corporation - 2007

5. Hotel/Motel
- MGM Mirage - 2007
- Marriott International - 2007
- Starwood Hotels and Resorts Worldwide, Inc. - 2007

6. Non-profit organizations
- Miami University - 2007
- Wesley United Methodist Church - 2007
- Riverbanks Zoological Park and Botanical Garden - 2007

Business Seminar Photo

Vision and Mission of RMTU

Vision:

Ramon Magsaysay Technological University shall be a university for sustainable development- a learning and resource center for the development of leaders and entrepreneurs responsive to appropriate and emerging advance technologies for the sustainable utilization of natural, indigenous and human resources for community-centered development within a dynamic and ever-widening society.

Mission:

The Ramon Magsaysay Technological University shall primarily provide instruction, undertake research and extension, and provide advanced studies and progressive leadership in agriculture, forestry, engineering, education, arts, sciences, humanities, and other fields as may be relevant to the development of the province.

RMTU logo and DPBE logo

Pattern for Case Study in Strategic Management

Pattern for Case Study in Strategic Management

I. The Executive Summary:

II. The Comprehensive Written Analysis:

1. Identify the firm’s existing vision, mission, objectives, and strategies.
2. Develop vision and mission statements for the organization.
3. Identify the organization’s external opportunities and threats.
4. Construct a Competitive Profile Matrix (CPM).
5. Construct an External Factor Evaluation (EFE) Matrix.
6. Identify the organization’s internal strengths and weaknesses.
7. Construct an Internal Factor Evaluation (IFE) Matrix.
8. Prepare a Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix,
Strategic Position and Action Evaluation (SPACE) Matrix,
Boston Consulting Group (BCG) Matrix,
Internal-External (IE) Matrix,
Grand Strategy Matrix,
and Quantitative Strategic Planning Matrix (QSPM) as appropriate.
Give advantages and disadvantages of alternative strategies.
9. Recommend specific strategies and long-term objectives.
Show how much your recommendations will cost.
Clearly itemize these costs for each projected year.
Compare your recommendations to actual strategies planned by the company.
10. Specify how your recommendations can be implemented and what results you can expect.
Prepare forecasted ratios and projected financial statements.
Present a timetable or agenda for action.
11. Recommend specific annual objectives and policies.
12. Recommend procedures for strategy review and evaluation.

Pattern for Case Study in Management for Business Logistics

Pattern for Case Study in Management for Business Logistics:

I. Case Background:
II. Identification of the Problem:
III. Core Objective:
IV. Alternatives:
V. Analysis of the Case (SWOT):
Strength:
Weakness:
Opportunity:
Threat:
VI. Decision Criteria:
VII. Recommendation:

Chapter 2: Formulating the Business Vision and Mission Statement

The Mission Statement
n The mission statement can be defined as a broad statement of characteristics (product and market), goals (profit and growth), and philosophies of a business; or simply its purpose and philosophies. It is an expression of the vision for the company. The statement lays a foundation for the future actions, and the major philosophies (values) that underlie those actions.
Importance of Mission Statements
n Firms with mission statements generally outperform those without one. In a study of the Business Week 1000, firms with mission statements were seen that they had an average return on stockholder’s equity of 16,6%, while the return for those without mission statements was 9,7%. The figures indicate a 71,1% disparity between the two groups of firms.
Reasons for a Mission Statement
n To help promote clarity of purpose throughout the company,
n To function as a foundation point for major decisions,
n To motivate management and employees of the firm; to gain commitment within the company,
n To foster understanding and support outside the company (helps external public relations)
Central Issues in the Creation of a Mission Statement
Peter Drucker stresses the importance of answering three questions during the process of preparing the firm’s mission:
What is our business?
n This must be defined based on the customer’s perception: What are the key satisfactions (and values) derived from purchasing our product or service? Why do target customers purchase the company’s products or services? Customers buy the satisfaction of a need – the core benefit. The core benefit of a restaurant would be satisfaction of hunger?, Status? The actual product or value enhancing attributes would be quality, large plates of food, unique spices, fresh baked bread, a convenient location, a relaxing atmosphere, courteous service, fast or leisurely service, status or price.
What will our business be?
n Although today’s product offering may be quite successful, it may not elicit the same prosperity next year, in the future. Will restaurants change their present menu mix, pricing, promotional and distribution strategies in the next three to five years? Will changes in the economy, personnel supply or characteristics, societal trends or technological changes have an effect on managerial decisions? What current or future needs of customers are not currently being met? Are there certain features that could be added to the business, such as delivery, internet reservations or advertising, upgraded product quality or services, less fat, more spices, or market penetration in nontraditional locations.
What should our business be?
n Are there forecasted changes in the environment that should be incorporated into the business’s current operating philosophy? If there is perceived opportunity for rapid expansion, should the firm proceed? If 50% of customers say they want something that no competitor is currently offering but the service would require a major change in current operating logistics, should the service be considered?
Mission Statement Components
Mission statements can do vary in length, content, format, and specificity. Most practitioners and academicians of strategic management feel that an effective statement exhibits nine characteristics or components. Because a mission statement is often the most visible and public part of the strategic-management process, it is important that includes all of these essential components:
1. Customers – who are the firm’s customer?
2. Products or services – what are the firm’s major products or services?
3. Markets – geographically, where does the firm compete?
4. Technology – is the firm technologically current?
5. Concern for survival, growth, and profitability – is the firm committed to growth and financial soundness?
6. Philosophy – what are the basic beliefs, values, aspirations, and ethical priorities of the firm?
7. Self-concept – what is the firm’s distinctive competence or major competitive advantage?
8. Concern for public image – is the firm responsive to social, community, and environmental concerns?
9. Concern for employees – are employees a valuable asset of the firm?
Examples of the Nine Essential Components of a Mission Statement
1. Customers
We believe our first responsibility is to the doctors, nurses, patients, mothers, and all others who use products and services. (Johnson & Johnson)
To earn our customers’ loyalty, we listen to them, anticipate their needs, and ct to create value in their eyes. (Lexmark International)
2. Products or Services
AMAX’s principal products are molybdenum, coal, iron ore, copper, zinc, petroleum and natural gas, potash, phosphates, nickel, tungsten, silver, gold, and magnesium. (AMAX Engineering Company)
Standard Oil Company is in business to find and produce crude oil, natural gas, and natural gas liquids; to manufacture high-quality products useful to society from these raw materials; and to distribute and market those products and to provide dependable related services to the consuming public at reasonable prices. (Standard Oil Company)
3. Markets
We are dedicated to the total success of Corning Glass Works as a worldwide competitor. (Corning Glass Works).Our emphasis is on North American markets, although global opportunities will be explored. (Blockway)
4. Technology
Control Data is in the business of applying micro-electronics and computer technology in two general areas: computer-related hardware; and computing-enhancing services, which include computation, information, education, and finance. (Control Data)
We will continually strive to meet the preferences of adult smokers by developing technologies that have the potential to reduce the health risks associated with smoking. (RJ Reynolds)
5. Concern for Survival, Growth, and Profitability
In this respect, the company will conduct its operations prudently and will provide the profits and growth which will assure Hoover’s ultimate success. (Hoover Universal)
To serve the worldwide need for knowledge at a fair profit by adhering, evaluating, producing, and distributing valuable information in a way that benefits our customers, employees, other investors, and our society. (McGraw-Hill)
6. Philosophy
Our world-class leadership is dedicated to a management philosophy that holds people above profits. (Kellogg)
It’s all part of the Mary Kay philosophy - a philosophy based on the golden rule. A spirit of sharing and caring where people give cheerfully of their time, knowledge, and experience. (Mary Kay Cosmetics)
7. Self-Concept
Crown Zellerbach is committed to leapfrogging ongoing competition within 1,000 days by unleashing the constructive and creative abilities and energies of each of its employees. (Crown Zellerbach)
8. Concern for Public Image
To share the world’s obligation for the protection of the environment. (Dow Chemical)
To contribute to the economic strength of society and function as a good corporate citizen on a local, state, and national basis in all countries in which we do business. (Pfizer)
9. Concern for Employees
To recruit, develop, motivate, reward, and retain personnel of exceptional ability, character, and dedication by providing good working conditions, superior leadership, compensation on the basis of performance, an attractive benefit program, opportunity for growth, and a high degree of employment security. (The Wachovia Corporation)
To compensate its employees with remuneration and fringe benefits competitive with other employment opportunities in its geographical area and commensurate with their contributions toward efficient corporate operations. (Public Service Electric & Gas Company)
Characteristics of a Mission Statement
· Broad in scope
· Less than 250 words in length
· Inspiring
· Identify the utility of a firm’s products
· Reveal that the firm is socially responsible
· Reveal that the firm is environmentally responsible
· Include nine components
Customers, products or services, markets, technology, concern for survival/growth/profits, philosophy, self-concept, concern for public image, concern for employees
· Enduring
Examples of Mission Statements
Fleetwood Enterprises will lead the recreational vehicle and manufactured housing industries (2, 7) in providing quality products, with a passion for customer-driven innovation (1). We will emphasize training, embrace diversity and provide growth opportunities for our associates and our dealers (9). We will lead our industries in the application of appropriate technologies (4). We will operate at the highest levels of ethics and compliance with a focus on exemplary corporate governance (6). We will deliver value to our shareholders, positive operating results and industry-leading earnings (5). (Author comment: Statement lacks two components: Markets and Concern for Public Image)
We aspire to make PepsiCo the world’s (3) premier consumer product company, focused on convenient foods and beverages (2). We seek to produce healthy financial rewards for investors (5) as we provide opportunities for growth and enrichment to our employees (9), our business partners and the communities (8) in which we operate. And in everything we do, we strive to act with honesty, openness, fairness and integrity (6). (Author comment: Statement lacks three components: Customers, Technology, and Self-Concept)
We are loyal to Royal Caribbean and Celebrity and strive for continuous improvement in everything we do. We always provide service with a friendly greeting and a smile (7). We anticipate the needs of our customers and make all efforts to exceed our customer’s expectations (1). We take ownership of any problem that is brought to our attention. We engage in conduct that enhances our corporate reputation and employee morale (9). We are committed to act in the highest ethical manner and respect the rights and dignity of others(6). (Author comments: Statement lacks five components: Products/Services, Markets, Technology, Concern for Survival/Growth/Profits, Concern for Public Image)
Dell’s mission is to be the most successful computer company (2) in the world (3) at delivering the best customer experience in markets we serve (1). In doing so, Dell will meet customer expectations of highest quality; leading technology (4); competitive pricing; individual and company accountability (6); best-in-class service and support (7); flexible customization capability (7); superior corporate citizenship (8); financial stability (5). (Author comment: Statement lacks only one component: Concern for Employees)
Procter & Gamble will provide branded products and services of superior quality and value (7) that improve the lives of the world’s (3) consumers. As a result, consumers (1) will reward us with industry leadership in sales, profit (5), and value creation, allowing our people (9), our shareholders, and communities (8) in which we live and work to prosper. (Author comment: Statement lacks three components: Products/Services, Technology, and Philosophy)

Conclusion
Every organization has a unique purpose and reason for being. This uniqueness should be reflected in vision and mission statements. The nature of a business vision and mission can represent either a competitive advantage or disadvantage for the firm. An organization achieves a heightened sense of purpose when strategists, managers, and employees develop and communicate a clear business vision and mission. Drucker says that developing a clear business vision and mission is the “first responsibility of strategists.”
A good mission statement reveals on organization’s customers; products or services; markets; technology; concern for survival, growth, and profitability; philosophy; self-concept; concern for public image; and concern for employees. These nine basic components serve as a practical framework for evaluating and writing mission statements. As the first step in strategic management, the vision and mission statements provide direction for all planning activities.
Well-designed vision and mission statements are essential for formulating, implementing, and evaluating strategy. Developing and communicating a clear business vision and mission are the most commonly overlooked tasks in strategic management. Without clear statements of vision and mission, a firm’s short-term actions can be counterproductive to long-term interests. Vision and mission statements always should be subject to revision, but, if carefully prepared, they will require infrequent major changes. Organizations usually reexamine their vision and mission statements annually. Effective mission statements stand the test of time.

Assignment #1 in Strategic Management

Exercise #1C
The Ethics of Spying on Competitors
Purpose
This exercise gives you an opportunity to discuss in class ethical and issues related to methods being used by many companies to spy on competing firms. Gathering and using information about competitors is an area of strategic management that Japanese firms do more proficiently than American firms.
Instructions
On a separate sheet of paper, number 1 to 18. For the eighteen spying activities listed as follows, indicate whether or not you believe the activity is ethical or unethical and legal or illegal. Place either an E for ethical or U for unethical, and either an L for legal or an I for illegal for each activity. Compare your answers to those of your classmates and discuss any differences.
1. Buying competitor’s garbage.
2. Dissecting competitor’s products.
3. Taking competitor’s plant tours anonymously.
4. Counting tractor-trailer trucks leaving competitors loading bays.
5. Studying aerial photographs of competitor’s facilities.
6. Analyzing competitors labor contracts.
7. Analyzing competitors help wanted ads.
8. Quizzing customers and buyers about the sales of competitor’s products.
9. Infiltrating customers and competitor’s business operations.
10. Quizzing suppliers about competitor’s level of manufacturing.
11. Using customers to buy out phony bids.
12. Encouraging key customers to reveal competitive information.
13. Quizzing competitor’s former employees.
14. Interviewing consultants who may have worked with competitors.
15. Hiring key managers away from competitors.
16. Conducting phony job interviews to get competitor’s employees to reveal information.
17. Sending engineers to trade meetings to quiz competitor’s technical employees.
18. Quizzing potential employees who worked for or with competitors’.

Measures of Variation,Skewness, & Kurtosis

My fellow classmates in MBA I'm Jamaica Austria here is your copy of Group #5 report in Business Statistics & I'm with my co-reporter Sir Norvadez Gonzales.


Chapter 5: Measures of Variation, Skewness, and Kurtosis:

Importance of measures of variation:

- Measures of variation are statistics that indicate the degree to which numerical data tend to spread about an average value. It is also called dispersion, scatter, spread.
- In the simple words “the measurement of the scattering of the mass of figures (data) in a series about an average is called measure of variation”.

Measures of Variation:

1. Range
2. Quartile Deviation
3. Average or Mean Deviation
4. Standard Deviation
5. Coefficient of Variation
6. Standard Score

Range:

The Range is the simplest measure of variation. It is defined simply as thedifference between the highest value and the lowest value of observation in aset of data.

Note: These formulas applicable for grouped and ungrouped data.

Range = Highest Value – Lowest Value

Coefficient of Range = highest value - lowest value/highest value + lowest value

Quartile Deviation:

Quartile Deviation is another measure of variation, also termed as semi-inter
quartile range.

Qd = Q3 - Q1 / 2

Note: Where in asymmetrical distribution are not equidistant from median.

Coefficient of Quartile deviation or the relative measure of Qd:

Coefficient of Qd = Q3 – Q1 / Q3 + Q1

Note: These formulas applicable for grouped and ungrouped data.

Q1 = L1 + { [ (n/4-cf) / f ] (Xi) }

Where: n= total sum of observation
Xi=class interval (for the daily expenditure of students)
f=frequency ( for the number of students)
cf=cumulative frequency
L1=lower limit of class intervals


Q3 = L1 + { [ (3n/4-cf) / f ] (Xi) }

Where: n= total sum of observation
Xi=class interval
f=frequency
cf=cumulative frequency
L1=lower limit of class intervals


Average or Mean Deviation:

- the mean deviation overcomes the above weakness by considering all the items of a data set. The mean deviation is the arithmetic mean of absolute difference between the items in a distribution and the average of that distribution. Theoretically, mean deviation can be computed from the mean or the median or the mode. However, in actual practice the mean is frequently used in computing the mean deviation. Under this method, algebraic signs (+, –) are ignored while taking the deviations from average.

For grouped data, the formula is:

Md = ∑ f X - X / N

For ungrouped data, the formula is:

Md = ∑ X - X / N

Where:
Md = Mean deviation

X- X = absolute value of the difference between each items and the mean.
It is read: the absolute value of X minus X bar.
N = number of items

For Coefficient of Mean (Md):

Coefficient of Md = Md / Mean


Standard Deviation:

- Standard deviation is the most familiar, important and widely used measure of variation. It is a significant measure for making comparison of variability between two or more sets of data in terms of their distance from the mean.

For ungrouped data, the formula is:

σ = ∑ (X-X) / N-1

For grouped data, the formula is:

σ = ∑ f(X-X) / N-1

where:

σ = standard deviation

(X-X) = the deviation of each value of the series from the mean
N = number of observation

Coefficient of Variation:

- The coefficient of variation expresses the standard deviation as a percentage of the mean. Expressed in percent, it can be used to compare the variability of two or more distributions even when the observations are expressed in different units of measurement.

Interpretation:
- When coefficient of variable is lesser in the data, it is said to be more consistent or have less variability.
- On the other hand, the series having higher coefficient of variable has higher degree of variability or lesser consistency.
- And it is said not satisfactory useful when the mean is close to zero.

Vc = σ / X (100)

Where:

Vc = Coefficient of varaiation
σ = standard deviation
_
X = Mean

Standard Score:

- Another measure of relative variation is the standard score. It tells the relative location of a particular raw score with regard to the mean of all the scores in a series.
- Raw score are scores or measurements which are expressed in the form in which they were originally obtained, like test score, weight, and height measurements.

It can be expressed to:

z = X - X / σ

Where:

z = standard score
X = given raw score
_
X =mean
σ = standard deviation

It can also be expressed to:

t = 10z + 50

where:

t = another type of standard score (if z or raw score is already given)


SKEWNESS & KURTOSIS:

Uses of Skewness and Kurtosis

- The measures of skewness and kurtosis indicate the extent of departure of a distribution from normality and permit comparison of two or more distributions.


SKEWNESS:

- the terms “skewed” and “askew” are used to refer to something that is out of line or distorted on one side.
- measures the degree of symmetry in a frequency distribution by determining the extent to which the values are evenly or unevenly distributed on either side of the mean.

Interpretation:

- If Sk=0, the distribution is a normal curve.
- If Sk > 0, the distribution is more peaked than the normal curve.
- If Sk < 0, the distribution is less peaked than the normal curve.

- Symmetry signifies that the values of variable are equidistant from the average on both sides. In other words, a balanced pattern of a distribution is called symmetrical distribution, where as unbalanced pattern of distribution is called asymmetrical distribution.

There are two important methods for measuring the coefficient of skewness.

1. Karl Pearson’s coefficient of skewness.
2. Bowley's coefficient of skewness.

1. Karl Pearson’s Coefficient of Skewness: (denoted as SKp.)
- This co-efficient of skewness, is obtained by dividing the difference between the mean and the mode by the standard deviation.

The formula of Pearson’s coefficient of skewness denoted as SKp can be expressed in terms of:

Skp= X-Mo/σ

Pearson’s alternative formula for coefficient of skewness:

SKp= 3(Mean-Median)/σ

2. Bowley's Measure of Co-efficient of Skewness
- Bowley's method for coefficient of skewness (SKb) is derived from quartile values and for this reason it is useful in case of open-ended distribution, whereextreme values are presented and/or class intervals are unequal in the collecteddata or the median and quartile values only are available.
The formula ofBowley’s coefficient of skewness denoted as SKb can be expressed in terms of:

SKb = (Q3-Q2) - (Q2-Q1) / (Q3-Q2) + (Q2-Q1)

Alternatively,

SKb=Q3 + Q1- 2 Median/Q3 - Q1

KURTOSIS:

Kurtosis – measures the flatness or peakness of a frequency distribution.

Interpretation:

- If ku=3, the distribution is mesokurtic or it is a normal curve.
- If ku > 3, the distribution is leptokurtic or more peaked than the normal curve.
- If ku <3, the distribution is platykurtic or less peaked than the normal curve.

The moment coefficient of Kurtosis can be expressed in terms of:


Where: a4 = moment coefficient of kurtosis
m4 = fourth moment
_
X = mean
m2 = second moment (variance)
square root of m2 = standard deviation
n = number of data points

End of our Report