Integrated Case Study Complete Edition

ISSUE

SOLUTION &

RECOMME NDATION

st

1  Issue

ISSUE 1st Issue

Mr .Nelly expected COLD CUTS LTD LTD (CC) to reduce the price since that they have a lot of competition from China who have been able to  produce a product like like them at much much cheaper prices.

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SOLUTION 1) Cutting overhead cost in manufacturing and revise the pricing strategy 

To help decrease your overhead costs when it comes to manufacturing is to reduce the amount of products that you have in inventory. The reason that this will lower your inventory costs is because you will only be making the products as your customers want to purchase them.

Cont. To implement some kind of a manufacturing process, such as lean manufacturing or six sigma . These  programs are designed to reduce reduce the amount of of waste that is created when you are manufacturing your  products. These programs programs increase your productivity productivity  because they get rid of waste and poor quality, quality, which means you are producing more quality products and you are not wasting time or energy on production costs.

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Cont. 

Decreasing the cost of your manufacturing is the quality of the final product. Many companies lose money on warranty items. But ensuring that you are manufacturing the highest quality products

2) Review Standard St andard Operating Procedures It is important to re-evaluate operational processes from the bottom to the top, and make changes like trimming unnecessary steps that were needed before  but are not anymore, anymore, or making new changes changes to labour functions.

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3) Use Technolog Technology y

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A proper adoption of the right technology products for your business can save you money in the long run. It is important for business owners and managers to stay informed on the latest technology products in their industry.

4) Convince the client

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The Cold Cuts Ltd needs to convince Secconz and tell them that product is far better quality than nearest competitor that is why Cold Cuts sell the  product with high price. price. If you want to be the "lowcost leader", you must be priced lower than your competition.

RECOMMENDATION 

After review all the option of the solution, we strongly to recommend choosing solution for first problem which is:

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Cutting overhead manufacturing cost and revise the pricing strategy. In our opinion, this is the more suitable recommendation for problem of the price for component is over material cost as said by Mr. Nelly from Secconz. We choose this solution because this step is being able to t o save costs and also be able to save in terms of time such as no need to waste time to run the business

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2 Issue Issues on Other Parties

ISSUES

United States International Trade Commission saying that CC is pricing their products much lower than the fair value (dumping).

OPTIONS •

•

RECOMMENDATION RECOMMEND ATION

Seek for legal advices,  World  World Trade Trade Organization (WTO). Paying the huge antidumping tax.

Seek for legal advices about the anti-dumping tax and revise the product price and refer with the “Anti-Dumping  Agreement”.

Reference: www w ww.wto.org .wto.org

ISSUES

Staff of United States International Trade Commission want some bribes.

OPTIONS •

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Take action towards the person that making bribe. Ignore the person.

RECOMMENDATION RECOMMEND ATION

Take action towards the person such as, report repo rt to their top management of United States International Trade Commission and report to local authorities.

FINANC FINANCIAL IAL ANALYS ANALYSIS IS

Selling price to Secconz Per Unit ($)

Direct materials

40

Direct labour

10

Direct costs

50

Factory Overheads

8

Manufacturing cost

58

Margin before machinery machine ry depreciation deprecia tion and administration adminis tration costs

82

Selling price

140

 Annual sales = 25,000 units units X $140 = $3,500,000 Margin = 25,000 units X $82 = $2,050,000

Selling price to European customers Per Unit ($)

Direct materials

40

Direct labour

10

Direct costs

50

Factory Overheads

8

Manufacturing Manufacturi ng cost

58

Margin before machinery machiner y depreciation deprecia tion and administration administ ration costs

42

Selling price

100

 Annual sales sales = 50,000 units X $100 = $5,000,000 Margin = 50,000 units X $42 = $2,100,000

SWOT SW OT ANAL ANALYSIS YSIS

STRENGTH • • •

WEAKNESSES

Have specializing in refrigeration components. Develops own brand –  brand –  Fuzzy  Fuzzy Frost. Product were exported worldwide.

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Higher price. Don’t have proper price strategy. The cost of manufacturing is higher. No proper knowledge on antidumping.

SWOT  ANALYSIS  ANALYSIS OPPORTUNITY • •

Expansion to China Invest in new market

THREAT •

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The competitor produce same product with cheaper price –  price –  China. Bribery. Will loss the biggest customer –  customer – 

RECOMMENDATION OVERHEAD MANUFACTURING COST Cutting overhead manufacturing cost and revise the pricing strategy. strategy. 

PRODUCT PRICE They need to seek for legal advices about the anti-dumping tax and revise the product price by refer with the “Anti-Dumping Agreement”. 

BRIBERY Take an action towards the person who proposes the bribes such as, report to their top management of United States International Trade Commission and also report to local authorities. 

THE COMPANY COMPANY The company should implement a strategy for combating possible the  practices of bribery includes organizational organizational measures, measures concerning corporate management and staff and, very importantly, monitoring measures adapted to the the size of the the company company and the markets and / or sectors in which it is operating. 

QUESTION Page 48 1-5

QUESTION 1) Explain to the board how the problem with Secconz can be damaging financially. 

As we know Secconz is a major customer of CC, losing of Secconz will give a big impact to the financial of the company especially in their revenue. The revenue of CC will drop about one third of the existing revenue stream. If this happens it will affect the company profit as well.

2) What are the strategic options for the CC Board? •

The strategic options for the CC Board are cutting overhead cost in manufacturing and revise the  pricing strategy, strategy, review their company company Standard of Procedures (SOP), used new technology and convince the client.

3) What are CC’s reporting obligations? obligations ? 

Section 45 of the Companies Companies (Auditing and Accounting) Act 2003 will, when commenced impose an obligation ob ligation on directors of certain companies to prepare statements on their company's compliance with its relevant obligations. Relevant obligations consist of all obligations under the Companies Acts and under tax law, law, together with obligations under und er certain other enactments.

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In addition to the obligations specified, a company is obliged under a number of provisions to do certain things when so required by notice from the Revenue Commissioners or one of their officers.

4) What are the implications on the financial statements? What accounting standards are relevant to present a better picture of the CC’s performance and valuation of its assets?

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The financial statement show that the sales will drop if Secconz going to reduce the price lower than the price they

 pay.  pay. Although they they reduce the the price but but the quality quality of the  products they use are still in a high quality. quality. So, to overcome overcome this problem, the CC must deduct the cost of the operation department such as reducing employees. Thus, they are still able to maintain their profitability pr ofitability..

5) How should the request for a bribe be handled and what are the potential consequences of the various options open to them? 

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By take action towards the person such as, report to their top management of United States International Trade Commission and report to local authorities. For example, report to SPRM in Malaysia. In international stage, we also can refer to INTERPOL, FBI, and IAACA or known as International Associate of AntiAntiCorruption Authorities). The consequences of a conviction for bribery can be very severe. Even as a first time offender, offender, bribery can lead to t o felony charges  being brought against you, meaning meaning large fines and imprisonment. imprisonment. The government will pursue cases involving bribery with the sole  purpose of proving your guilt, regardless regardless of your true intent.

Reference    

http://www.fbi.gov/birmingham/about-us/priorities/priorities http://www.interpol.int/Crime-areas/Corruption/C http://www .interpol.int/Crime-areas/Corruption/Corruption orruption http://www.sprm.gov.my/bidang-kuasa.html http://www.iaaca.org/AntiCorruptionA http://www .iaaca.org/AntiCorruptionAuthorities/html uthorities/html

Thank you

ANY QUESTION ?