财务管理案例（LAURENTIAN BAKERIES）

1、精品资料网（）25万份精华管理资料，2万多集管理视频讲座精品资料网（）专业提供企管培训资料LAURENTIANBAKERIESThedecision-makermustmakearecommendationonalargeexpansionproject.Discountedcashflowanalysisisrequired.InlateMay,1995,DanielleKnowles,vice-presidentofoperationsforLaurentianBakeriesInc.,waspreparingacapitalexpenditureproposaltoexpandthecompany’sfrozenpizzaplantinWinnipegManitoba.IftheopportunitytoexpandintotheU.S.frozenpizzamarketwastaken,thecompanywouldneedextracapacity.Adetailedanalysis,includinganetpresentvaluecalculation,wasrequi。

2、redbythecompany’sCapitalAllocationPolicyforallcapitalexpendituresinordertoensurethatprojectswerebothprofitableandconsistentwithcorporatestrategies.COMPANYBACKGROUHDEstablishedin1984,LaurentianBakeriesInc.(Laurentian)manufacturedavarietyoffrozenbakedfoodproductsatplantsinWinnipeg(pizzas),Toronto(cakes)andMontreal(pies).Whileeachplantoperatedasaprofitcenter,theysharedacommonsalesforcelocatedatthecompany’headofficeinMontreal.AlthoughtheTorontoplantwasresponsibleforover40%ofcorporaterevenuesinfiscal。

3、1994,andtheotherplantswasaccountedforabout30%each,allthreedivisionscontributedequallytoprofits.Thecompanyenjoyedstrongcompetitivepositionsinallthreemarketsanditwasthelowcostproducerinthepizzamarket.IncomeStatementsandBalanceSheetsforthe1993to1995fiscalyearsareinExhibits1and2,respectively.Laurentiansoldmostofitsproductstolargegrocerychains,andinfact,supplyingseveralCanadianchainswithprivatelabelbrandpizzasgeneratedmuchofthesalesgrowth.Othersalesweremadetoinstitutionalfoodservices.Thecompany’ssucc。

4、esswas,inpart,theproductofitsmanagement’sphilosophies.ThecornerstoneofLaurentian’soperationswasitsincludingacommitmenttoabusinessstrategypromotingcontinuousimprovement;forexampleallemployeeswereempoweredtothinkaboutandmakesuggestionsforwaysofreducingwaste.AsDanielleKnowlessawit:“ContinuousimprovementisawayoflifeatLauremtian.”Also,thecompanywasknownforitsabove–averageconsiderationforthehumanresourceandenvironmentalimpactofitsbusinessdecisions.Thesephilosophiesdroveallpolicy-making,includingthosep。

5、oliciesgoverningcapitalallocation.DanielleKnowlesDanielleKnowles’scareer,whichspanned13yearsinthefoodindustry,hadincludedpositionsinotherfunctionalareassuchasmarketingandfinance.ShehadreceivedanundergraduatedegreeinmechanicalengineeringfromQueen’sUniversityinKingston,Ontario,andamasterofbusinessadministrationfromtheWesternBusinessSchool.THEPIZZAINDUSTRYMajorsegmentsinthepizzamarketwerefrozenpizza,deli-freshchilledpizza,restaurantpizzaandtake-outpizza.Ofthesefour,restaurantandtake-outwerethelarge。

6、st.Whilethesesegments精品资料网（）25万份精华管理资料，2万多集管理视频讲座精品资料网（）专业提供企管培训资料consistedofthousandsofsmall-ownedestablishments,afewlargeNorthAmericanchains,whichincludedDomino’s,PizzaHutandLittleCaesar’s,dominated.Although12firmsmanufacturedfrozenpizzasinCanada,thefivelargestfirms,includingLaurentian,accountedfor95%ofproduction.McCainFoodswasthemarketleaderwith44%marketshare,whileLaurentianhad21%.PercapitaconsumptionoffrozenproductsinCanadawasone-thirdofthelevelinU.S.whereretailpriceswerelower.ECONOMICCONDIT。

7、IONSTheNorthAmericaneconomyhadenjoyedstronggrowthsince1993,afterhavingsufferedasevererecessionforthetwopreviousyears.Interestratesbottomed-outinmid-1994,afterwhichtheU.S.FederalReserveslowlyincreasedratesuntilearly1995inanattempttofightinflationarypressures.Nevertheless,NorthAmericaninflationwasexpectedtoaverage3%to5%annuallyfortheforeseeablefuture.TheBankofCanadafollowedtheU.S.FederalReserve’sleadandincreasedinterestrates,inparttoprotecttheCanadiandollar’svaluerelativetothevalueoftheU.S.dollar.。

8、TheresultwasaNorthAmericangrowthrateofgrossdomesticproductthatwasshowingsignsofslowingdown.LAURRENTIAN’SPROJECTREVIEWPROCESSAllcapitalprojectsatLaurentianweresubjecttoreviewbasedonthecompany’sCapitalAllocationPolicy.Thelatestpolicy,whichhadbeendevelopedin1989whenthecompanybeganconsideringfactorsotherthansimplythecalculatednetpresentvalueforprojectevaluation,wasstrictlyenforcedandmanagersevaluatedeachyearpartiallybytheirdivision’sreturnoninvestment.Thepurposeofthepolicywastoreinforcethemanagement。

9、philosophiesbyachievingcertainobjectives:thatallprojectsbeconsistentwithbusinessstrategies,supportcontinuousimprovement,considerthehumanresourceandenvironmentalimpact,andprovideasufficientreturnoninvestment.Priortotheapprovalofanycapitalallocation,eachoperatingdivisionwasrequiredtodevelopbothaStrategicandanOperatingPlan.TheStrategicPlanhadtoidentifyandquantifyeitherinefficienciesorlostopportunitiesandestablishtargetsfortheirelimination,includeathree-yearplanofcapitalrequirements,linkcapitalspend。

10、ingtobusinessstrategiesandcontinuousimprovementeffort,andachievethecompany-widehurdlerates.ThefirstyearoftheStrategicPlanbecametheAnnualOperatingPlan.Thiswassupportedbyadetailedlistofproposedcapitalprojectswhichbecamethebasisforcapitalallocation.InadditiontomeetingallStrategicPlancriteria,theOperatingPlanhadtoidentifymajorcontinuousimprovementinitiativesandbudgetfortheassociatedbenefits,aswellasdevelopatrainingplanidentif。