QUESTION 1 (50 MARKS)

Lopten Industries is one of the largest, listed consumer durables manufacturers in the world, making washing machines, tumble dryers and dishwashers. It has recently expanded into Beeland which is a developing country where incomes have risen to the point where demand is increasing for Loptens goods among the growing middle-class population.

Lopten believes in the economies of scale of large manufacturing sites with dispersed selling branches in the markets in which it operates. Therefore, it has entered the Beeland market 10by setting upa local sales force and supporting them with a national marketing campaign. The company is currently selling only two products in Beeland (both are types of washing machines):

a basic product (called Cheerful) with functions which are comparable with the existing local competitors output and

a premium product (called Posh) which has functions and features similar to Loptens products in other developed countries.

Both products are manufactured and imported from its regional manufacturing hub, which is in the neighbouring country of Kayland.

The competitive environment in Beeland is changing rapidly. The washing machine market used to be dominated by two large local manufacturers who make simple, cheap and reliable machines. There are two other major international manufacturers apart from Lopten. One of these has already opened a factory in Beeland and is producing machines similar to Cheerful to compete directly with the existing local producers. The government of Beeland has supported this new entrant with grants, as it is keen to encourage inward investment by foreign companies and the resulting expertise and employment which they provide. The other international competitor is now considering entering the Beeland market with more highly specifiedmachines similar to Loptens Posh brand.

Loptens stated mission is to be the most successful manufacturer of its type of products in the world. The board has set the following critical success factors (CSFs) for Loptens Beeland operations:1. to obtain a dominant market presence 2. to maximise profits within acceptable risk 3. to maintain the brand image of Lopten for above average quality products.

The board is considering using the following key performance indicators (KPIs) for each product: totalprofit, average sales price per unit, contribution per unit, market share, margin of safety, return on capital employed (ROCE), total quality costs and consumer awards won.

(Note: Margin of safety has been defined as [actual sales units breakeven salesunits]/actual sales units.)

The board has asked you as a consultant to assess its current performance measurement systems. They want a report which calculates the various indicators suggested above and then assesses how the key performance indicators address issues in the external environment. The report should assess the balance between planning and controlling represented by the KPIs as they want to ensure that these match what they should be doing at the strategic level in Lopten. Also, it should evaluate how the KPIs fit with the CSFs which have been selected. The data given in Appendix 1 has been collated for your use.

Finally, the board is considering two new marketing strategies going forward:

Plan A is to continue operations as at present allowing for 4% growth p.a. in volumes of both Cheerful and Posh.

Plan B is to dramatically reduce the marketing spend on Cheerful and to reallocate resources to focus the marketing on Posh. This is expected to lead to an anticipated growth in volume of 15% p.a.for Posh and flat sales for Cheerful.

The target operating profit for the Beeland operation in two years time is set at $135m and the board wants an evaluation of these strategies in meeting that target.

*Appendix see the photo

Notes:1. Cheerful has won one best buy award from the Beeland Consumer Association.2. Posh has won four best buy awards from the Beeland Consumer Association.3. The allocations of fixed costs are based on a recent activity-based costing exercise and are considered to be valid.

Required:Write a report to the board of Lopten which:

(i) calculates the key performance indicators (KPIs) suggested by the board for the assessment of performance of the Beeland operations; (12marks)

(ii) uses PEST analysis to identify issues in the companys external environment and then evaluates the effectiveness of the suggested KPIs in addressing these issues; (12marks)

(iii) takes each critical success factor (CSF) in turn and evaluates how the suggested KPIs fit to the CSFs given; (10 marks)

(iv) assesses the extent to which the suggested KPIs would be suitable for use in planning rather than controlling; (6marks)

(v) evaluates whether the two proposed marketing strategies result in a performance gap. (10marks)

O Mail - Law Yi Thong - Outlook X ACC301_ISD_ELM.pdf Get Homework Help With Cheo X O file:///C:/Users/User/AppData/Local/Temp/ACC301_ISD_ELM.pdf INO t 11 of 21 + Automatic Zoom . >>> Appendix 1 Beeland operation's information for the most recent financial year Total Variable costs Materials Labour Overheads Distribution costs Quality costs Cheerful $ per unit 90 60 40 45 20 Posh $ per unit 120 80 50 45 30 Fixed costs Administration costs Distribution costs Quality costs Marketing costs $m 18 16 6 80 $m 18 16 6 80 $m 36 32 12 160 Other data Revenue Capital employed $m 448 326 $m 308 250 $m 756 576 Total market size (millions) Beeland operation's sales (millions) Units 9.33 1-12 Units 1-33 0-44 Units 10-66 1-56 Notes: :: Type here to search ENG 9:24 PM 9/1/2020 O Mail - Law Yi Thong - Outlook X ACC301_ISD_ELM.pdf Get Homework Help With Cheo X O file:///C:/Users/User/AppData/Local/Temp/ACC301_ISD_ELM.pdf INO t 11 of 21 + Automatic Zoom . >>> Appendix 1 Beeland operation's information for the most recent financial year Total Variable costs Materials Labour Overheads Distribution costs Quality costs Cheerful $ per unit 90 60 40 45 20 Posh $ per unit 120 80 50 45 30 Fixed costs Administration costs Distribution costs Quality costs Marketing costs $m 18 16 6 80 $m 18 16 6 80 $m 36 32 12 160 Other data Revenue Capital employed $m 448 326 $m 308 250 $m 756 576 Total market size (millions) Beeland operation's sales (millions) Units 9.33 1-12 Units 1-33 0-44 Units 10-66 1-56 Notes: :: Type here to search ENG 9:24 PM 9/1/2020