Richard Scott, CEO of XYZ Enterprises, is considering a merger with Empire Inc., which is led by CEO Mickey Thompson. The merger of their two firms will enable the creation of a very large diversified conglomerate, with businesses ranging from office supplies to sporting goods, industrial paints, consumer electronics, video games, and marine engines. Consultants from Boston Consulting Group have advised Scott and Thompson that the merger could create a great deal of value, because the new combined entity can use several lucrative yet mature "cash cows" within Empire Inc. to fund the growth of several promising, but not yet highly profitable, young businesses. Scott and Thompson have decided to seek a second opinion from your consulting firm, International Associates.

Please respond to the following questions posed to you by these two CEOs:

• Could you please explain the BCG matrix to us? What is the logic of this model? What are the model’s limitations and weaknesses?
• Should we be employing the matrix to evaluate this merger? Could we create value in the manner that BCG has described?

suggest steps the company might take to reduce its losses and establish profitability,

the cenario:

Roots Corporation reported quarterly loss of $5.6 million in first quarter of 2018. Comparing to last year, the net loss increased from $5.1 to $5.6 million. The clothing retailer applies expansion strategy in US and is opening its first “brand activation centre” in Boston that will allow shoppers to familiarize themselves with the Canadian brand. It also plans to open 10 to 14 stores in the US by the end of 2019. Sales from corporate retail stores and e-commerce channels accounted for $44.2 million, up nine per cent from $40.5 million in last year’s first quarter. Jim Gabel, president and CEO of Roots, explained, “while sales in the quarter were good, we believe they would have been even stronger had we not faced a major ice storm across approximately 80 per cent of our store network in mid-April.” Roots remains confident about achieving its full-year target, between $35 million and $40 million of adjusted net income and between $410 million and $450 million of sales for fiscal 2019.

Reference:

Roots reports quarterly loss despite improvement in sales. (June 13, 2018). Retrieved from:https://www.thestar.com/business/2018/06/13/roots-reports-quarterly-loss-despite-improvement-in-sales.html

Pearson Industries uses platinum in its manufacturing process.  The company will need 1,000 troy ounces of platinum in January of 2020 for a production run in that month.  The company is concerned that the price of platinum will rise during the next several months.  On October 14, 2019, Pearson acquired a futures contract to buy 1,000 troy ounces of platinum On January 2, 2020 at a price of $480 per troy ounce.   Spot prices and current futures prices per troy ounce of platinum are as follows:

                                                            Oct. 14            Dec. 31            Jan 2               

Futures price per oz (current)              $480                $525                $525                             

Spot price per oz                                 $480                 $524               $525    

Fair Value of Contract            $  0    

On January 2, 2020, the company settled the options and purchased 1,000 troy ounces of platinum for $525 per ounce.

11)  This is:   A Fair Value Hedge      A Cash Flow Hedge      Not a Hedge            Pick one

12) On the December 31, 2019 Statement of Financial Position, what amount, if any, would be listed for the Derivative- Platinum Futures Contract?    

13) If your answer to 12 was not zero, would the amount be an asset or liability? If zero put neither.

14) On the December 31, 2019 Statement of Financial Position, what amount, if any, would be listed for the Inventory of Platinum?    

15) If your answer to 14 was not zero, would the amount be an asset or liability? If zero put neither.

16)  On the Income Statement for year ended December 31, 2019, what amount, if any, would appear as a gain or loss from the Derivative- Platinum?  

17) If your answer to 16 is nonzero, is it a gain or loss? If zero put neither.  

18)  On the Statement of Comprehensive income for year ended December 31, 2019, what amount, if any, would appear as a gain or loss as Other Comprehensive Income?  

19) If your answer to 18 is nonzero, is it a gain or loss? If zero put neither.                                       

20) Assume the platinum purchased on January 2, 2020 was used to make inventory that was sold in 2020. On the Income Statement for year ended December 31, 2020, what amount, if any, would be included in cost of goods sold related to the platinum?  ___________________

For ten years, Illinois Tool Works (ITW) has followed an acquisition strategy where it focused on growing from 800 to 1,000 businesses, each of which sought to follow an 80/20 rule where 80% of revenues business came from 20% of its products or customers. In support of this strategy, ITW sent hundreds of managers for training to sharpen their negotiating and deal making skills. As a result, ITW bought 201 companies between 2004 and 2008. Indeed, new acquired companies added $1 billion a year to annual revenues totaling nearly $18 billion.

Now, however, company leaders believe they’ve focused too much on acquisition. Former CEO David Speer said, “I can buy a lot of companies and fix them, but are they something I want to own four or five years from now?” So ITW is switching to a divestiture strategy aimed at making the company stronger through subtraction rather than addition. Divesting, or selling companies or their parts, is often done to get rid of business units that no longer fit strategic plans. The goal is to raise cash, streamline operations, and focus on the remaining core businesses. Research ITW’s divesting strategy, summarize it, and explain its goals and tactics. Find out the latest developments from the last few years. Do you think the divesting strategy will work?

Carolyn Shaw is 27. - She works as an accountant for an oil company. - Her salary next year will be $80,000. - She expects to receive a 5 percent raise each year until she retires at age of 65. - Carolyn is considering a return to school to pursue an MBA degree. - She expects the cost of books, tuition, and fees to be $70,000 the first year and $72,000 the second. - These costs are paid at the beginning of the year (as you surely know). - She will not work while in school. - Graduates of the school Carolyn is considering receive starting salaries that average $130,000. - Raises average 7 percent per year. - Carolyn considers the opportunity costs to be 12 percent. a)Determine the present value of Carolyn’s lifetime earnings if she does not return to school. b)Determine the present value of Carolyn’s lifetime earnings with an MBA degree. Remember, she won’t start her job for two years. c) What is the NPV of an MBA degree given Carolyn Shaw's assumptions?

Translation and Remeasurement of Account Balances

U.S. Industries has a subsidiary in Switzerland. The subsidiary’s financial statements are maintained in Swiss francs (CHF). Exchange rates ($/CHF) for selected dates are as follows:

The following items appear in the subsidiary’s trial balance at December 31, 2020:

1. Cash in bank, CHF4,000,000.

2. Inventory, CHF3,000,000. The inventory was acquired on November 30, 2020.

3. Machinery and equipment, CHF11,000,000. A review of the records indicates that the company bought equipment costing CHF5,000,000 in January 2018 (20 percent of this was sold in January 2020) and additional equipment costing CHF7,000,000 in January 2019. Ignore accumulated depreciation.

4. Depreciation expense on machinery and equipment, CHF1,100,000 (depreciated over ten years, straight-line basis).

Required

Calculate the dollar amount for each of the above items, assuming the functional currency of the Swiss subsidiary is

(a) the U.S. dollar and

(b) the Swiss franc.

Enter answers using all zeros (do not abbreviate to millions or thousands).

Organizational Effectiveness and Development Scenario (Human Resources)

A small, family-run organization has always pursued a differentiation strategy that emphasizes quality and customer service. The CEO decides to retire and sell the business to a mid-sized competitor who has always employed a cost leadership strategy. As part of the sale agreement, the CEO insists that all current employees be retained. Within four months of the acquisition, the VP of HR sees that almost 40% of the acquired employees have left the organization, taking critical knowledge with them. If this continues, it will affect customer service.

1. What type of OED( Organizational Effectiveness and Development) intervention should the VP of HR consider first? ( support the answer with appropriate reasoning as per the above scenario with 100 words)

Koala Ltd provide financial advice to Trump-Biden Inc. for an agreed fee of US$1 million on 10 July 2019. The monies are paid into the USA bank account of Koala Ltd on 10 July 2019. Koala Ltd decide to leave the monies in the USA bank account and will receive interest at a rate of 10% on 30 June each year. The appropriate exchange rates are noted below:

• 10 July 2019: A$1.00 = US$0.78
• 30 June 2020: A$1.00 = US$.75

Provide the journal entries (including narrations) that would need to be made in the books of Koala Ltd to account for the above transactions for the year ended 30 June 2020.

Question 1 [Balance Scorecard]

A). The board of directors of ClariMak, a manufacturing enterprise has tasked its management to develop a new mission statement that details the enterprise’s line of business, market size and niche. The new mission statement reads: “We want to continually grow through our commitment to quality and delivering quality products to our customers”. In addition, the management of ClariMak developed the following set of vision statements to complement the mission statement:

• Provide superior returns to our shareholders
• Continually improve our business processes
• Delight our customers
• Learn from our mistakes and work smarter in the future

Required:
i) Explain how the Balanced Scorecard can assist ClariMak Ltd to deliver on its new mission

statement [16 marks]

B) Ashesi University is Ghana’s number one university in the 2020 Times Higher Education Impact Ranking. The university presently measures its performance by comparing its actual costs against its budgeted costs for the year. Given the university’s international status, it is currently facing stiff competition from both public and privately-owned universities in Ghana. At one of its executive meetings, a member in the finance department has suggested that Ashesi needs to consider additional performance measures such as those indicated by the Balanced Scorecard.

Required:

1. Briefly elaborate on your understanding of the Balanced Scorecard and how the management of Ashesi university can utilize this approach to performance measurement [10 marks]

2. Discuss two (2) non-financial indicators (from different perspectives of the balanced scorecard) that Ashesi University could use for its performance evaluation. [4 marks]

   [Question 1 = 30 marks]

Case Study I

HAIER’s foray into International Markets :

In the late 1990s, the Haier group (Haier) was the leader in the Chinese consumer appliances market (with a 39.7%, 50% and 37.1% market share in refrigerators, air-conditioners and washing machines respectively in December 1998). But deflation in the Chinese economy slowed sales.

ut deflation in the Chinese economy slowed sales growth from 50% in 1998 to around 30% in 1999. Haier decided to look for new markets. Since the US had a large demand for consumer appliances, Haier entered the US market in 1999. Analysts were doubtful about Haier's acceptability to American consumers, as there was a general perception in the US that Chinese goods were of low quality. Haier, however, was confident that with its product differentiation strategy it would be able to create a positive image for its products among the American public. In the early 2000s, the consumer appliances market in the US started hotting up as Haier entered the market. By 2009, Haier products were sold in 9 of the 10 top retail chains in the US.

With Wal-Mart agreeing to stock Haier products, many analysts believed that Haier would be able to shake up the US consumer appliances market. In 2009, Haier had a 6% market share in the US refrigerator market; it stated that it was aiming for a 15% market share by 2015.

The history of Haier dates back to 1984 when Ruimin Zhang (Zhang), a bureaucrat with the local government was asked to take charge of Qingdao General Refrigerator Factory, a state-owned enterprise that is manufacturing refrigerators for sale in China. When Zhang took over the management, the company was on the brink of bankruptcy, with no funds to pay the salaries of its employees or to invest in new product development. When Zhang took charge of the company, he realized that the company did not look after the quality of its products; nor did it bother about customer satisfaction. In 1985, Zhang started importing technology from a German firm and began manufacturing technically sophisticated refrigerators.

Zhang emphasized the elements of customer satisfaction and quality control in the company. In 1985, when a customer complained about the poor performance of his refrigerator, Zhang conducted a quality check and found that out of 400 refrigerators inspected, 76 were defective.

He had all the defective refrigerators destroyed with a sledge-hammer. According to Zhang, this made the workers realize that quality is of only two types - acceptable and unacceptable. In 1989, the company changed its name to Qindao Refrigerator Co. Ltd., and it was restructured with funds raised from banks and government agencies. In 1991, the company once again changed its name to Qindao Haier Group Co. and in the same year it merged with Qingdao Air-conditioner Plant and Qingdao Freezer General Plant. In 1992, the company set up Qingdao Freezing Equipment Co. In the same year, it merged with another previously state-owned enterprise Qingdao Condenser Factory, which manufactured refrigerator condensers.

In the same year it became the first company in China to get ISO 9001 certification, and the company's name was changed to the Haier Group. In 1993, Haier went in for an IPO of RMB 50 million and got listed on the Shanghai Stock Exchange (SSE).

During the mid-1990s, Haier began to grow through mergers and acquisitions. In 1995, it merged with Red Star Electric Appliance Company (and five of its subsidiaries). This company manufactured washing machines. It also acquired Wuhan Elec-appliance Co., which manufactured freezers and air conditioners. Between 1995 and 1997, Haier acquired seven companies and started exporting its goods to foreign markets.

By 1997, Haier was the number one consumer appliances brand in China and the market leader in all its product segments, which included refrigerators, washing machines, microwave ovens and freezers and its revenues were reported at $1.15 billion (10 billion Yuan)...

Haier's Competitors in the US Market

USA was the world's largest and most competitive market for consumer appliances. The consumer appliances market can be segmented on the basis of products into kitchen appliances and home comfort products. Included in kitchen appliances are products such as dishwashers, disposers, compactors, food preservation appliances, refrigerators, freezers etc.

In the home comfort segment are included products such as room air-conditioners and dehumidifiers. The home appliances market in the US was dominated by American companies, namely GE Appliances (a subsidiary of General Electricals), Whirlpool and Maytag. The only strong foreign player in this market was Sweden's Electrolux. GE Appliances, Whirlpool, Maytag and Electrolux together accounted for around 98% of the 9 million standard refrigerators sales in the US every year. In the 1990s, many Asian players such as LG Electronics and Samsung entered the US market in a big way. The big four companies in the US market concentrated on the high- end market comprising full-size refrigerators and washing machines, since the margins in this segment were high...

Strategies in the US Market

Haier decided to compete with the US brands on the quality plank rather than on price. However, analysts felt that it would be very difficult for the company to win over American consumers who associated Chinese goods with low quality. To strengthen its presence in the US market, Haier adopted a localization strategy.

It opened a design center in the Los Angeles and employed US designers for designing its products for the US market. Haier also opened a marketing center in New York. The company focused on enhancing consumer awareness about the company and its products. Commenting on Haier's strategy, Zhang said, "We want consumers to feel that Haier is the one company that comes closest to satisfying their needs." For instance, none of the consumer appliances companies in the US offered a compact refrigerator to satisfy demand from college students who could not afford normal size refrigerators...

Going High-End

Most analysts felt that Haier would feel the real competition only when it entered the high-end market. In the compact refrigerator segment, Haier did not face much competition from established players in the US, who did not focus on the low margin segment.

However, the major US players were keeping track of Haier's activities. Commenting on the competition from Haier, GE Appliances Chief Executive, Jim Campbell said, "I take it very seriously. They may be producing only 200,000 refrigerators per year now, but that's going to get bigger."

On the negative side, some analysts felt that Haier lacked the brand image to make a dent in the high-end segment. They pointed out that in general US consumers were brand-conscious, and this was especially true in the case of high-end products. The lack of a positive brand image in this consumer segment would probably make it difficult for Haier to succeed in the high-end markets. Analysts felt that Haier had an additional weakness in its distribution and service centers...

Future Prospects

Despite a few reservations, analysts too were, by and large, upbeat about the company because of its strong performance in breaking into the American market in a short time.

Said Nicholas Heymann of Prudential Securities, "Over five years, it could become a force." With quality products and lower prices, it was felt that Haier would be able to garner a sizeable market share in the US. Haier's experience in the geographically vast and diversified Chinese market would serve it well in catering to the US market.

However, a major worry for Haier is how to fund its expansion plans. Increasing competition in the domestic markets is bringing Haier's finances under pressure.

Questions 4:

What should be the marketing strategies that Haier should employ in Emerging Markets, Maturing Markets and Declining Markets ? Explain the reasons behind it.