AC2105 Accounting for

Decision Making and Control

Seminar Group 10 Team 1:
Lim Jia Wen | U1710785D
Yeo Yee Ting, Denise| U1710379D
Presented for: Jeremy Tan Hong En| U1710938C
Sng Zhi Ping, Gabriel | U1610677A
Prof Chan-Ng Ai Lin Lew Shu Yuan | U1510588J
Question 1:
Vince Coffee Express
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Case Facts
OPERATIONS: MANAGEMENT:
Vince Coffee Express Drive-through Managed by Vincent,
Coffee Establishment with 2 employees
Tuas Industrial Estate
Hours: 6am to 12am COFFEE: SANDWICHES:
4 types 3 types

OPENED: PRODUCTS:
New Coffee Cafe 2 years after Vince
Coffee Express, due
Decaf-coffee
Jurong Point to rising demand for
Snacks
decaffeinated coffee
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Case Facts
Management Structure
Owner:
Vincent Chow
Oversees entire enterprise

Assistant:
Assist in procurement, accounting and admin

Day-to-Day
Operations:
+
Manager Team of employees
Qn 1(a)
For Vince Coffee Express, identify the primary or support activities of
Vince Coffee Express that demands Vincent’s greatest attention.

Which activity/activities create the most value for Vince Coffee

Express?
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Value Chain Analysis

 Qn 1(a) Qn 1(b)
Primary activities that demands attention
Operations
● Changing inputs (coffee
beans) into outputs
(coffee) that are sold to
customers.
● Involves making of coffee
and preparing of
sandwiches.
● Helps to ensure that
products are
produced/prepared
efficiently.
*Most important.
Qn 1(c)
Marketing
*Only at the start of the
business (initial stage).
*Not so crucial in an ongoing
stage because the targeted
customers are the same
(drivers working in tuas).
*No need to constantly
provide incentives to
customers because coffee is a
necessity.
Qn 2(a) Qn 2(b)
Service
● Need to maintain value of
product and service after
product is sold.
● Helps to build goodwill.
● Attracts long-term loyal
customers.
● Seek to address
customers’ complaints
and feedback.
*Not very important.
 Qn 1(a) Qn 1(b)
Support activities that demands attention
Technology
● Produce more coffee at a
shorter period of time
with the same quality.
● Enhances customer
drive-through experience
through mobile
application, saving time.
● E.g. Product innovation
-> coming up with new
offerings, layout of
kitchen.
● E.g. Process design
● Technology development does not
refer to the literal usage of
technology.
Qn 1(c) Qn 2(a) Qn 2(b)
HR Management Procurement
● Need for motivation and ● Source for low cost coffee
rewards to retain the beans without
workers due to long compromising the quality.
working hours. ● Competitive advantage for
VCE.
*Managing
employees/training is usually
left to the managers on site.
*There is no need for hiring
of more employees.
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Activities that create the most value

Critical Success Factor: Quality of coffee.

Procurement
- Procurement will affect the quality of the coffee.
- Better quality -> attract more customers and retain long term customers.
- Help to increase value to consumers.
- Increases revenue.
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Activities that create the most value

Critical Success Factor: Convenience.

Target group: Drivers.

- There is no need to park the cars, able to get coffee quickly.

Critical Success Factor: Price.

- There are many other food places nearby and hence the price
should not be priced too high. Customers will be paying a slightly
higher price as compared to normal coffee just for convenience
sake.
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Activities that create the most value

Critical Success Factor: Speed and efficiency.

HR Management
- Hire competent people that will be able to serve the potential huge crowds
and work for long hours.

Operations and Technology

- Improving processes allow for more coffee to be made at a shorter period
of time.
- Cater to more customer at a time, improving efficiency and increasing
revenue.
Activity 1
Choose 2 of Amazon’s most value added activities
Sales & Marketing Inbound Logistics

Primary Activities Operations Outbound Logistics

Services

Human Resource
Support Activities Management
Procurement

Technology
Firm Infrastructure
Development
Choose 2 of Amazon’s most value added activities
Sales & Marketing Inbound Logistics

Primary Activities Operations Outbound Logistics

Services

Human Resource
Support Activities Management
Procurement

Technology
Firm Infrastructure
Development
Choose 2 of McDonald’s most value added activities
Sales & Marketing Inbound Logistics

Primary Activities Operations Outbound Logistics

Services

Human Resource
Support Activities Management
Procurement

Technology
Firm Infrastructure
Development
Choose 2 of McDonald’s most value added activities
Sales & Marketing Inbound Logistics

Primary Activities Operations Outbound Logistics

Services

Human Resource
Support Activities Management
Procurement

Technology
Firm Infrastructure
Development
Choose 2 of Google’s most value added activities
Sales & Marketing Inbound Logistics

Primary Activities Operations Outbound Logistics

Services

Human Resource
Support Activities Management
Procurement

Technology
Firm Infrastructure
Development
Choose 2 of Google’s most value added activities
Sales & Marketing Inbound Logistics

Primary Activities Operations Outbound Logistics

Services

Human Resource
Support Activities Management
Procurement

Technology
Firm Infrastructure
Development
*Firm Infrastructure does not refer to HR, but leadership and IT.
Qn 1(b)

Analyse the coffee cafe at Jurong Point using the

SWOT analysis and Porter’s Five Forces model.
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

SWOT Analysis
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

SWOT Analysis
Strengths: Weaknesses:
1. Management’s foresight 1. Lack of variety in food choices
2. Focuses on decaffeinated coffee 2. Management’s lack of personal
involvement in daily operations after
expansion

Opportunities: Threats:
1. Rising trend for decaffeinated 1. Direct competition from nearby cafes
beverages and snacks 2. Low barriers to entry → threat of new
2. Strategic location entrants
3. Threat of substitutes
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Porter’s Five Forces Model

 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Porter’s Five Forces Model

Rivalry among existing competitors: High
❏ A few large F&B companies are situated in the vicinity
❏ Products of these large F&B chains are differentiated
❏ Cost leadership
❏ Low or no switching costs
❏ Brand loyalty is established
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Porter’s Five Forces Model

Threat of new entrants: Moderate
❏ Low barriers to entry
❏ But the F&B industry is concentrated with many big players →
discourages new entrants from entering
❏ From Jurong Point management’s point of view, they may not be willing to
bring in another F&B company → cannot have too many of the same
offering

Threat of substitutes: High

❏ Close substitutes are widely available
❏ Low or no costs of switching
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Porter’s Five Forces Model

Bargaining power of (individual) buyers: Low
❏ Substitutes are widely available in the vicinity
❏ Low or no costs of switching
❏ Customers do not buy coffee in bulk and is unable to collaborate and
boycott the company → translates into low power

Bargaining power of suppliers: Moderate

❏ Unable to purchase coffee beans in bulk due to the scale of the
company
❏ Many suppliers supplying coffee beans, pastries and sandwiches
Qn 1(c)
Using the Michael Porter’s three generic strategies
model, identify the strategies that Vincent should
adopt for Vince Coffee Express and the new coffee
café at Jurong Point
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Porter’s 3 Generic Strategies Model

Driven by: Driven by:
- Efficiency - Uniqueness, branding
- Size, scale, scope - Product innovation
- Cumulative experience - Perceived value of customers in
- Lowest cost areas like needs & importance
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Porter’s 3 Generic Competitive Strategies

Vince Coffee Express (Tuas) → Cost Focus Strategy
❏ Located at Tuas Industrial Estate, which is relatively remote with limited
public transportation to the Cafe
❏ Main customers would be workers from nearby factories and buildings

❏ Conclusion: Due to remoteness, there is little to no competition in that

area, hence there is no need to differentiate. Instead, VCE should adopt a
Cost Focus Strategy to focus on lowering selling prices to attract more
customers.
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Porter’s 3 Generic Competitive Strategies

New Jurong Point Outlet → Differentiation Strategy
❏ High rivalry amongst existing competitors due to large F&B companies
situated in the vicinity
❏ These large F&B companies are likely to be enjoying economies of scale
❏ Bargaining power of buyers, threat of new entrants and substitutes are
high due to low differentiation of coffee and snacks

❏ Conclusion: It is ineffective to use cost leadership in such a competitive

location as VCE does not have the size, scale, scope and experience to
achieve the lowest cost in the industry. Instead, VCE should pursue a
differentiation strategy.
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Porter’s 3 Generic Competitive Strategies

Differentiation Focus Strategy
❏ Focus on healthy products targeted at health-conscious customers
❏ Rising preference for healthy, low calories products → can offer
decaffeinated coffee, low-fat snacks and pastries etc
❏ Difficult to find shops which offer a wide selection of healthy food → a
food concept that Jurong Point does not offer at the moment → little or
no direct competitors
Activity 2
Porter’s 3 Generic Strategies
Cost Differentiation
Cost Leadership Differentiation

Broad

Cost Focus Differentiation

Focus
Narrow
Porter’s 3 Generic Strategies
Cost Differentiation
Cost Leadership Differentiation

Broad

Cost Focus Differentiation

Focus
Narrow
Porter’s 3 Generic Strategies
● Low-cost structure
● Generally short-haul routes to minimise costs
● Only essential features provided, all other
services are on a add-on basis

● Regional airline
● Aims to maximise revenue by streamlining brand
strategy and standing out from the crowded
low-cost carrier market

● Stuck-in-the-middle
● Employs a hybrid dual strategy by taking up both
cost leadership and differentiation concurrently
● Uses this dual strategy to achieve service
excellence while keeping cost low
Porter’s 3 Generic Strategies
Cost Differentiation
Cost Leadership Differentiation

Broad

Cost Focus Differentiation

Focus
Narrow
Question 2:
D-light Pte Ltd
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Case Facts
CORPORATE BUSINESS SALES
25%
2 areas Dazzle makes up more than 25% of total
corporate business sales
- Corporate
- Retail PRICING
Total Manufacturing Cost +25%
All sales orders are priced by adding a
mark-up of 25% to full manufacturing cost
Qn 2(a)
Explain why D-light is not doing well in its
Corporate Business. Show relevant computations
and use them to support your explanation.
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Hint: Analyze a typical Dazzle order and a typical Small Customer order
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Profitability Analysis:
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Sales and Marketing Costs:

Not taken into account for profit mark-up
Customer-sustaining Costs
❏ Lower profit due to significantly higher customer-sustaining costs
contributed by visits to Dazzle outlets:
❏ The D-light teams make an average of 36 visits to Dazzle outlets each year, as
compared to 2 visits on average per year for Small Customer.

Batch-Level Costs
❏ Higher batch-level costs due to higher frequency of order-processing
and delivery
❏ Dazzle has 40 sales orders and hence 40 deliveries as compared to Small
Customer which only has 5 sales orders and hence 5 deliveries.
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Other Issues
Net Profit Margin
❏ Net profit earned from Dazzle is significantly less than Small
Customer
❏ Net profit Margin: Dazzle (7.41%) VS Small Customer (15.95%).
❏ Dazzle’s net profit margin is half of Small Customer.

Profit per unit

❏ Issues with economies of scale in producing goods for Dazzle
❏ Profit per unit: Dazzle ($15.75) VS Small Customer ($30.30).
❏ Dazzle’s profit per unit is about half of Small Customer.
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Conclusion
D-light is not doing well because
❏ Dazzle, being D-light’s biggest customer, contributes more than 25% of
sales. Therefore the lower profit per unit generated by sales from Dazzle
would and have been decreasing the overall profitability of Dazzle.
❏ D-light is too focused on Dazzle to the extent that D-light is losing Small
Customers, which is more profitable than Dazzle.
Qn 2(b)
What changes would you recommend in order to
improve the profitability of the Corporate
Business? In making your recommendations
include suggestions with regards to the Dazzle
account.
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Recap:
Dazzle Small Customer

Manufacturing Cost per Unit $170 $152

Average number of 36 2
customer visits

Net Profit Margin 7.41% 15.95%

Profit per Unit $15.75 $30.30

1. Cost
3 perspectives to
2. Revenue
address profitability 3. Strategy
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

1. Costs
Customer Visits
❏ Consider making fewer customer visits
❏ The D-light teams make an average of 36 visits to Dazzle outlets each year, as
compared to 2 visits on average per year for smaller customers
❏ Dependent on Dazzle’s needs

Batch-Level Costs
❏ Reduce delivery costs by combining sales orders together
❏ Require a minimum delivery quantity

❏ Impose a higher minimum order quantity on Dazzle

❏ Spreads the batch-level costs across a greater number of units
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

1. Costs
D-light’s Factory

“This weak performance was surprising as its factory in Indonesia was operating at
full capacity for the last couple of years, ever since it managed to get orders
from Dazzle, a large well-known regional lights and fittings retailer”

❏ Consider having separate divisions or facilities to manage orders

❏ A smaller factory or division focusing on customised fittings will free up
capacity in producing standardised fittings for other customers
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

2. Revenue
❏ Factor in customer visits when determining the price of the product
❏ Selling price is currently based on manufacturing costs only (25% markup)
❏ E.g. charging Dazzle $x each time after the 10th visit

❏ Charge Dazzle a higher price

❏ Dazzle requires customised lights and has specialised demands
❏ As each delivery only has 40 units of completed goods, D-light may consider charging
Dazzle a higher delivery fee unless it meets a minimum quantity

❏ Reduce selling price for the small customer segment

❏ May be able to attract more sales
❏ Can afford to do so since the small customer segment has high profitability
❏ Feasible as long as the increased sales can make up for the reduction in selling price
 Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

Costs and Revenue

Issues to Consider
❏ Dazzle is a major customer, taking up at least 25% of D-light’s sales
❏ Reducing costs may not be easy or practical since Dazzle will have a high
bargaining power
❏ It will be easy to charge more as well, though it is still a possible
recommendation to consider
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

3. Strategy
...(D-light’s) main business is its “Corporate Business”...

Dazzle is a major customer with growing sales which accounts for more than
25% of D-light’s total corporate business sales.

Doing business with Dazzle is seen as a great opportunity for the company to
capture a bigger market. Thus, there was little concern when the company
lost some of its regular, smaller customers.
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

3. Strategy
❏ Implication 1: A significant portion of D-light’s business comes
from Dazzle
❏ The more it does business with Dazzle, the lower D-light’s profit margin is
going to be

❏ Implication 2: D-light may be too dependent on Dazzle

❏ Should Dazzle decide to contract with other manufacturers, it will have an
adverse effect on D-light’s financial performance
❏ Will be hard to recover through smaller customers since they have been
overlooked.
Qn 1(a) Qn 1(b) Qn 1(c) Qn 2(a) Qn 2(b)

3. Strategy
❏ D-light should focus on building their small customer base and
retail business sector to reduce over-reliance
❏ Also can allocate resources to innovate new lightings for the Retail
Business so as to increase sales, given their knowledge in designing
customised products
❏ Provides a higher profit margin