BSBMGT616 Case Study 2 Assignment Question

Case Study – 2 

Having completed MacVille’s review of the vision, mission and values, you should then consider the environmental factors that could impact on MacVille’s goals and objectives. To help you with this assessment, you are provided with an industry consultant’s report that contains a recent and comprehensive review of the industry and general operating environment.

Industry consultant’s report

You have noted the following points from the report.

• New commercial espresso machines are being developed that use 30% less energy to run, with an innovative and more efficient heat exchanger.
• Planned changes in trade, where all tariffs on imported goods, including espresso coffee machines, will be removed in line with the government’s free trade policy.
• The development of the home consumer market for consumer espresso machines is experiencing high growth.
• There is a lifestyle trend towards eating out more frequently as the population ages and becomes more affluent.
• A steady population growth rate is predicted for Australia, from 22 million in 2010 to 36 million in 2050.
• The prediction of a strengthening Australian dollar against all our major trading partners over the next few years is a concern.
• Higher-than-expected growth in the economy is predicted, as a result of a resources boom.
• A carbon tax has a strong possibility of being introduced on all energy-intensive products used in a commercial enterprise.

Senior manager’s meeting

At a meeting with the CEO and other senior managers, the following points were noted in regard to the operations of MacVille. In response to your question about how effectively MacVille adds value to its products and services, the following responses were agreed  by all.

• Inbound logistics is a problem, due to the lack of experienced personnel in importation and customs operations. The lack of solutions from Human Resources management has meant that delivery timelines are sometimes delayed because the proper procedure was not followed.
• The operations of MacVille is an area of strong value-add, with the state-of-the-art

Management Information System (MIS) forming part of MacVille’s infrastructure. The MIS has allowed for sound corporate/strategic planning, along with strong internal controls in accounting and finance.

• Outbound logistics is an area that could be improved. Currently, MacVille relies on a three-year contract with a delivery firm to deliver its goods to customers. Sometimes there is a delay in getting the appropriate vehicle to deliver the espresso coffee machines, which is causing some issues with customers. The contract delivery firm seems to be struggling to deliver the promised quality with their fast expansion.
• All managers agreed that marketing and sales are strong points for MacVille. The marketing communications and promotions mix seems to be working well, particularly with the social marketing that MacVille has introduced in the past year. Technology developments are helping MacVille to reduce costs, yet expand the message via internet marketing activities.
• Service is another strong point for MacVille, which enjoys a good reputation in this field. The installation, after-sales service, complaints handling and training all get top marks from customers. Some of MacVille’s procurement policy has helped in this regard, with MacVille outsourcing work where it cannot meet customer demand. The policy of putting the customer first and guaranteeing service calls within 24 hours has been a key reason for the increased sales.

In a brainstorm with the CEO and senior managers, the following points were noted. When asking about the potential for opportunities, threats and competitors, the consensus was the following. 

• Moving into the new Sydney market, where the bulk of espresso machines are sold each year, and from which a major (but ineffective) competitor has withdrawn.
• Other opportunities could be found in strategic alliances with coffee bean suppliers, where market penetration could easily be achieved and costs of advertising and service could be shared.
• There was also concern about the rising Australian dollar having a severe long-term impact on tourism, which was a major category buyer of espresso machines. Raising interest rates that are predicted for the coming years could impact negatively on the disposable income of coffee-drinking patrons.
• The concerns of the group were centred on a global corporation, Nufix Inc., shifting from instant coffee into the espresso bean and machine market. The resources they would have at their disposal in marketing, finance and human resources could be a serious threat to MacVille’s plans. However, they would still struggle to gain a foothold in a market that already has strong supplier/buyer allegiances, with most stretching over many years. Global players like Nufix Inc. have difficulty being adaptable to the needs of niche market buyers.
• Another competitor of note was BeanEx, a large coffee bean supplier that had recently started importing espresso machines for their customers. There was talk of them selling the espresso machines as wholesalers. They certainly had easy access to markets with their coffee bean trade, but they had no established service arm to help wholesale clients maintain the machines that they purchased.
• MacVille has been keen to pursue strategic alliances as part of its strategy to achieve its objectives. It called for tenders from interested parties, who were asked to complete a tender application form that provided information relating to the tender requirements. Some notes have been included by senior managers who assessed some of the information.

Tender submissions

Three submissions are attached to this case study.

Business name – Home Espresso Traders

Description of business (include vision, etc.) – Selling consumer home espresso machines to the home market, only in Sydney, and incorporating other digital home entertainment products. 

Description of joint venture – Shared space in four trade shows per year.

Venture: Strengths and weaknesses – Strength: covers the consumer market for espresso machines (which complements the commercial market for espresso machines) to make a full range offer to clients. Weakness: working with a strategic partner who is not solely focused on the hospitality industry.

Venture: Risks – 

1. Partner not fulfilling their financial commitment.
2. Association with a non-industry partner may have a negative effect on MacVille customer base.
3. Partner access to MacVille’s trade secrets.

Venture: Cost-benefit analysis – Costs of the shows are $2,500 each. Four shows costing $10,000, selling 10 machines per show at $500. Each would see a profit of $10,000 for the year and a breakeven after two shows.            

Venture: Financials – 

Venture: Trend analysis – Sales

• – $1.0m
• – $1.3m
• – $1.5m
• – $1.6m
• – $1.6m

Able to provide access to due diligence materials?

• Copies of other strategic alliance agreements? YES ' NO û
• Statement of Financial Position from last tax return? YES ' NO û
• Full personal contact details of all directors? YES ' NO û
• Supporting data for trends, and cost-benefit analysis? YES ' NO û

Business name – Ambrosia Coffee Roast

Description of business (include vision, etc.) – Sell all grades of coffee bean to supermarkets and hospitality outlets around Australia.

Description of joint venture – Share in the cost of outdoor advertising for cafes and restaurants, with shared branding of umbrellas and barriers.

Venture: Strengths and weaknesses – Strength: Supplier is committed to the coffee bean industry, with some sharing of the client base. Weaknesses: Has concerns with sharing information, citing intellectual property. Product image is not quality but more commodity-based.

Venture: Risks –

1. Risks with poor brand association.
2. Long-term commitment in signage.

Venture: Cost-benefit analysis – 50 cafes per year, at $200 per cafe cost for each partner. 50 machines sold at $500 profit is $15,000 profit return for the year. Break-even after 20 cafes.

Venture: Financials – Not available.

Venture: Trend analysis – 

• – $3.2m
• – $3.0m
• – $2.9m
• – $3.0m
• – $3.3m

Able to provide access to due diligence materials?

• Copies of other strategic alliance agreements? YES ' NO û
• Statement of Financial Position from last tax return? YES û NO '
• Full personal contact details of all directors? YES û NO '
• Supporting data for trends, and cost-benefit analysis? YES ' NO û

Business name – Java Estate

Description of business (include vision, etc.) – To sell quality Arabica roasted coffee beans to all states of Australia. 

Description of joint venture – Java Estate provides MacVille espresso machines to client at no charge. Java Estate pays MacVille cost price for the delivery and installation of the machine, then pays the remainder of the purchase price on a 12-month repayment program. 

Venture: Strengths and weaknesses – Strength: Australia-wide partner – 100% committed to hospitality and coffee bean market. Weakness: Other coffee bean suppliers may not recommend MacVille machines with this strong strategic alliance.

Venture: Risks – Concern over the amount of money outstanding.

Venture: Cost-benefit analysis – Potentially 200 machines installed in the first year. Interest costs $40,000 p.a., profit $100,000. Break-even after 80 machines sold.

Venture: Financials – 

Venture: Trend analysis – 

• – $8.2m
• – $9.1m
• – $12.2m
• – $14.6m
• – $16.3m

Able to provide access to due diligence materials?

• Copies of other strategic alliance agreements? YES ' NO û
• Statement of Financial Position from last tax return? YES ' NO û
• Full personal contact details of all directors? YES ' NO û
• Supporting data for trends, and cost-benefit analysis? YES ' NO û

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