You have been the General Manager of MacVille's successful import/export business centre in Sydney for the past two years. You have been asked by the Board to assist in the development of a strategic plan by initially conducting a review of the vision, mission and values of the organisation. You review the annual report for the previous year, and note the following statement by the Chair of the Board:
'Within the next five years, MacVille will become a national brand, and will be accepted as an integral part of the hospitality industry, perceived as a key component in the success of hospitality establishments, both large and small.' 'MacVille is in business to provide espresso coffee machines that meet the efficiency, reliability and sustainability needs of our hospitality clients who, in turn, reward us with profits that will allow our stakeholders and the communities in which —ate to prosper.'
Being part of the management that assisted t.::_hc..t!ding the values of the organisation, you have been made very aware of the Chair and Board's views on the following values and, after reviewing your papers and reports, you speak with the CEO, who replies:
`MacVille's values have been the same for as long as the organisation has existed. For our stakeholders, it has always been about stewardship and about adhering to professional and moral standards of conduct in all that we do. For our people, we are committed to encouraging self-directed teams, we cultivate leadership and we maintain high levels of safety. Externally, we are committed to wise environmental practices and offering meaningful value to our customers.'
Later in the review process, you are presented with an opportunity to discuss the application of the vision, mission and values with the CEO again. This time, you are more interested in researching what had changed since the last strategic vision was formulated. The CEO explains:
'In the past few years, since the last strategic plan was formulated, there have been developments in new areas that were not clearly recognised when developing the last plan. These changes are becoming an important part of our operations on a daily basis, and should be reflected in our vision, mission and values.'
'There is a real need to incorporate innovation into our mission because it has been an outcome from the self-directed team's directive. Finding new ways to improve the efficiency of processes and effectiveness of customer solutions has become a priority. There has always been a need to evaluate what we were doing, to continually challenge our methods and ask how we can simplify and improve our business. We should never rest on our laurels, but instead constantly innovate and raise our standards, because we are not afraid to try new ideas and concepts. The organisation needs to embrace strategic alliances and to seek out new partnerships that support and promote our mission, desired outcomes, and strategies.' When prompted for further changes that had taken place, the CEO stated: 'MacVille needs to identify more closely with the community it serves. We need to be a good corporate citizen that recognises our responsibility to be active participants in our local communities, and even donate a percentage of profits every year to a wide variety of community and non-profit organisations.'
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 dev6 Dr-;c1 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 its fast expansion.
• All managers agreed that marketing and sales are strong points for MacVille. The marketing communications and promotions mix scorns to be working well, particularly with the social marketing that MacVille has introduced in the air,s! year. Technology developments are helping MacVille to reduce costs, yet expand the MOSSAg& 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. 1 • 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 centered on a global corporation, Nut ix 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 Nuf ix 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.
You are provided with the minutes of the board ripening, where the CEO spoke about the strategic objectives that will form part of the strategic plan.
Manville Board Meeting Minutes: 1 July 201X 6:00 pm Board Room, Brisbane
Present: Alan Jones (Chair), Jenny Ng, Olga Hartwick (Secretary), John Brennen, James Laird, George Saldais. Absent: Quorum present? Yes.
Others present: CEO: Patricia Mees. Proceedings:
Meeting called to order at 7.00 pm by Chair, Alan Jones, who explained that this was a special meeting of the Board to hear the presentation of the strategic plan by the CEO Patricia Mees. (Last month's) meeting minutes were amended and approved.
Overview of the strategic plan: Patricia Mees • Patricia Mees gave a presentation concerning the objectives that would form part of the strategic plan for the next five years.
• Objective 1 - To sell and service MacVille espresso coffee machines in every state of Australia. This was a top priority that would involve the acceptance of Java Estate's tender. This was an important alliance and one that should be managed at the highest level. With the Sydney warehouse now established, it was important to look for other warehouse opportunities in high-volume states. The other states could be managed with an agent's network and by outsourcing the maintenance.
• Objective 2 — To increase profit margins by 5% in the next five years. This should occur naturally, with increased sales allowing for better price negotiations with suppliers, and getting all departments to make optimum use of their staff.
• Objective 3 — To establish the MacVille brand recognition in key markets in the next five years, mostly via new technologies but also through co-branding with our strategic partner. This is also a high priority if the successful rollout is to be achieved.
• Objective 4 — To reduce our waste and energy use by 10% within the next five years. Education programs and incentive rewards for innovations in this area should see the organisation achieve its objectives.
Objective 1 —To sell and service MacVille espresso coffee machines in every state of Australia in the next five years. All states have a MacVille machine, apart from the Northern Territory, where it took some time to get an agent, and an experienced espresso machine repairer has not yet been found to take on the job due to the attractiveness of mining fields.:417 pay rates. • Strategy (a) —Sign, action and establish the strategic alliance agreement with Java Estate. KPI (plan) — 200 machines installed p.a.
KPI (actual) — Agreement signed within the time limit and actioned, but only 180 machines installed in the past 12 months. There was a slower uptake in Northern Territory and North Queensland, due to the tourist slump with the strong Australian dollar.
• Strategy (b) — Establish a MacVille Melbourne warehouse. KPI (plan) — MacVille opens in Melbourne within two years after Sydney opens for business.
KPI (actual) — Melbourne warehouse is still not open. It is currently being run on the more expensive agency model.
• Strategy (c) — Set up agents in other states and outsource maintenance contracts.
KPI (plan) — Agent agreements and outsource maintenance contracts for South Australia, Western Australia, Northern Territory, Tasmania, ACT.
KPI (actual) — Still no service contractor for Northern Territory. All others met the deadline, although agents in Western Australia, Tasmania, and Northern Territory were very expensive.
Objective 2 — To increase profit margins by 5% from our benchmark in the next five years. Profit margins have improved by 2% in the last two financial years. Some agent contracts and outsourcing contracts are very expensive.
• Strategy (d)- Instigate bulk buying negotiations to reduce supplier price.
KPI (Plan) — 100% of purchase by the container load. KPI (Actual) — 100%. Volumes have increased to the point that all orders fill a container. KPI achieved in quicker time due to the initial increase in demand.
• Strategy (e) — Operate all departments at optimum capacity and productivity. KPI (plan) — Wages to turnover ratio of 12.5%. KPI (actual) — 13.8°L. Some states still underperforming Strategy still in line with timetable.
Objective 3 — To establish MacVille brand recognition in our key markets over the next five years. After two fiscal years, 50% of our target market recognise the brand and 87% of those responding said the brand reaction was very positive.
• Strategy (f)— Establish social, Internet and networking marketing.
KPI (plan) — 10,000 clicks per day on the website. KPI (actual) — 12,000 clicks per day. Achieved in half the time allocated. SEO specialist contractor very experienced. • Strategy (g) — Join with Java Estate in co-branding cups and cafe banners. KPI (plan) — 100% of cafes with our machines, using our cups. KPI (actual) — Survey reveals only (50%) uptake. Design and colors not attractive. Strategy introduced within the timeframe.
Objective 4 — To reduce our waste and energy use by 10% from our benchmark within the next five years. After two fiscal years, the reduction is 8% lower than the original financial year benchmarks. • Strategy (h) —Set up innovation and reward programs for reducing waste use. KPI (plan) — 25 suggestions per year; 6 new innovations introduced per year in relation to reducing waste. KPI (actual) — 30 suggestions and 8 new innovations, leading to a significant reduction in waste introduced within the designated timeframe. • Strategy (i) — Develop and implement energy use awareness campaign. KPI (plan) — kW peruse per person to drop to 10kW. KPI (actual) — 12kW per person. Introduced too late in the year and not rolled out across the whole organisation.