MCS PRESENTATION

Presented by:
Leena Chellani
11015
Nikunj Gajara
11046
Chandan Pahelwani 11047
Rinku Salat
11068

Strategic Planning Process

Meaning of Strategic Planning

It is the process of deciding on the programs

that the organization will undertake

on the appropriate amount of resources that
will be allocated to each program over the
next several years.
The document that describes how the
strategic decision is to be implemented is
the strategic plan.

Reviewing &
Updating from
last year

Deciding on
assumptions &
guidelines

Analysis

First Iteration
of the new
Strategic Plan

Second
Iteration of the
new Strategic
Plan

Final review
and approval

Reviewing and Updating the

Strategic Plan

During the year, whenever there is a need

management takes decisions that change the
strategic plan.

Actual experience is reflected in accounting reports

for first few months of current year, and these are
extrapolated further for current year as a whole.

If computer program is sufficiently flexible, it can

extend the impact beyond the current year and if
not, rough estimates are made manually.

Cont

The implication of new program decisions on

revenues, expenses, capital expenditure & cash
flow are incorporated.

Planning staff usually makes this update and

management may be involved if there are
uncertainties or ambiguities.

Deciding on Assumptions and

Guidelines

The updated strategic plan incorporates broad assumptions

such as growth in Gross Domestic Product, cyclical
movements, labor rates, prices of important raw materials,
interest rates, selling prices.

Market conditions such as competitors and impact of

government legislation.

These assumptions are reexamined and if necessary, are

changed to incorporate the latest information.

Updated strategic plan contains financial information for new

plants, existing plants and closing plants.

Cont

A rough approximation is adequate as a basis for

senior management decisions about objectives and
key guidelines are to be observed in planning to attain
these objectives.

Objectives are stated separately for each product line

expressed as sales revenue, profit percentage and
return on capital employed.

Guidelines are assumptions about wage and salary

increases, new or discounted product lines and selling
prices.

First Iteration of the Strategic

Plan

Using the assumptions, objectives and guidelines,

business units and other operating units prepare
their first cut of the strategic plan which includes
changes made compared to current plan, these are
supported by reasons.

Business unit staffs do much of the analytical work,

but managers make the final judgments.

The completed strategic plan consists of income

statements and quantitative information about sales
and production in detail.

Analysis

When headquarters receives the business

unit plans, they aggregate them into an
overall corporate strategic plan.

Headquarters examine the business unit

plans for consistency also.

Sometimes individual plans does not add up

to attainment of the corporate objectives,
which is known as planning gap.

Cont...

There are three ways to close a

planning gap:
find opportunities for improvements in the

business unit plans

make acquisitions
review the corporate objectives.

Second Iteration of the Strategic

Plan

Analysis of first submission may require a revision

plans of only certain business units, but it may lead
to changes that affect all business units.

Technically, revision is simpler to prepare than the

original submission but organizationally, it is
difficult because it requires difficult decisions.

Some companies do not require a formal revision,

they negotiate changes informally and enter the
results into plan at headquarters.

Final Review and Approval

A meeting of senior corporate officials usually

discusses the revised plan at length.

The plan also may be presented at meeting of board of

directors.

The chief executive officer gives final approval.

The approval should come prior to the beginning of the

budget preparation process, because strategic plan is
an important input to that process.

Y
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D
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a
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Objectives of case

To construct Value Chain Analysis

To use value chain as a power tool

To implement strategic plans in

accordance with the value chain

GIST OF CASE
Dairy

Pak is Ohio based international company.

Dairy Pak began their operations in 1947 as one of the

original license of the Pure-Pak Technology.

They focused on producing polyethylene coated paper

carton for milk and orange juice.

Due to growing demand, it expanded its operations and built

converting plants in different states.

During the early 1960's through 1988 Champion steadily

produced 2,50,000 tons of polyethylene coated boards
annually.

During this period, the paper board industry was

threatened by the intrusion of plastic containers but
Champion did not falter and continued with its
existing operations without changes in strategy or
equipment.

At this point, the company decided to have the

harvest strategy.

Incidentally, the paper carton did not die, and since

there were no major changes in Champion its
infrastructure got old and technologically outdated.

In the early 1980's the sudden increase of the

juice market created opportunities which
Champion did not expect.

In 1988 however, Champion successfully

managed to retain its share in the declining
market while losing almost half of its share in the
fastest-growing segment, the branded juices.

Champion strategy was to be the low cost

producer in commodity dairy segment.

In 1988, the Vice President of the Dairy-Pak

Division of Champion International has to make
some tough choices. He is facing:
Declining market share in the growing Branded

Juice segment of domestic paperboard carton

segment
Their manufacturing system is old
Limited output capability which had not grown in
10 years.
Rapidly expanding international market which the
corporation had seen as fraught with some
problems than competitors.

The Competitors

International Paper
It was the industry leader & considered to be low cost

producer.
It is also the most technologically advanced company.

Champion was currently a strong number 2, with

more domestic volume.

Potlatch, Westvaco, and Weyerhaeuser all ranked

in a third tier of competition facing difficulties
related to quality and inefficient scale.

The Pure-Pak Customers

Domestic Dairies- The diarys product was usually a

commodity that achieve price premium for brand name.

Differentiated Juicers- This was the fastest growing

segment in liquid packing in 1988.

Special Uses- This market had grown slowly, volume per

customer was very low it was 4% of Champions volume.

Export Market- The fourth group of customers for the

Pure-Pak carton was the export market.

Process
Flow

Pulp

Paper Mill
Extruder
Conversion

Regional
Diary

Orange
Juice

Minute
Maid

Processor

Processor

Processor

Super Markets &

Distributors
Customer

Champions Market position

Domestic Consumption of Pure-Pak Cartons (000)
1980 (tons)

1987 (tons)

% change

Dairy

506

374

-26%

Non Dairy

66

120

+82%

Total

572

494

-14%

Champions Domestic Pure-Pak Cartons

1980 (tons)

% share

1987 (tons)

% share

200

39%

150

40%

30

46%

30

25%

230

40%

180

36%

For the purpose of competition and to invest,

Earle Bensings first proposal was to renovate
paperboard machine.

Second proposal was to add a third extruder at

the Waynesville, North Carolina plant.

Third was to add roll wrapping equipment at the

Waynesville location.

Fourth potential area for investment was adding

rotogravure printing.

Q&A

A process flow value chain

Regional Dairy

Branded OJ

MILK

OJ

MM/CH

TROPICANA

Consumer Pays

1.16

1.50

1.89

2.26

Store pays

1.04

1.20

1.42

1.79

Store Margin

0.12

0.30

0.47

0.47

Dairy pays

0.75

0.80

0.64

Shrinkage

0.06

0.06

0.11

Pasteurising/advertisin
g

0.06

0.06

0.36

0.87

0.92

1.11

Carton cost

0.08

0.08

0.06

Cost to dairy

0.95

1.00

1.17

Dairy/juice margin

0.09

0.20

0.25

Computing the margin in value chain

milk

orange

Manufactures margin

0.08

0.06

For 14400 tons

1152

864

Cost of transport

10

10

Printing

231

231

Cost of buying roller

663

663

Total processing cost

904

904

Margin processing

248

-40

Price of roll

663

663

Transport cost

35

35

Cover roll

94

94

Cost of buying rolls

530

530

Total cost of roll

659

659

Processing cost

Extrusion cost

Margin extrusion plant

Mill

SP to customer

530

Cost
Pulp

319

Machining

105

Freight to customer

47

471

Mill margin

59

Extruder cost
Transfer cost :
Mill cost
Pulp

319

Machining

105

Freight to extruder

Mill margin

59

486

Other costs

94

Freight to converter

35
615

Q-2 & Q-3

Milk
Margins

Assets

ROA

Super Market

1728

1800

96

Dairy/ Juices

1296

5400

24

Converter

318

830

38.3

Extruder

(22)

190

(11.6)

59

2800

2.1

3379

11020

30.7

Paper Mill
Total

Orange Juice
Margins

Assets

ROA

Super Market

4320

1800

240

Dairy/ Juices

2880

2890

99.7

Converter

318

830

38.3

Extruder

(22)

190

(11.6)

59

2800

2.1

7555

8510

88.8

Paper Mill
Total

Branded OJ
Margins

Assets

ROA

Super Market

6768

1800

376

Dairy/ Juices

3600

2890

124.6

30

830

3.6

(22)

190

(11.6)

59

2800

2.1

10435

8510

122.6

Converter
Extruder
Paper Mill
Total

Buyer Power Analysis

Base

Commodity
Dairies

Branded OJ Products

Buyer Concentration (No of

buyer)

1000

Size of Buyer as a
corporation

Relatively small

Same size as paper board

manufactures

Buyer Switching Cost

Low, but
commodity board

High, but differentiated board

Ability to backward integrate Nil

into paperboard

Nil

Substitutes (Products)

Plastic, other?

Plastic, glass, other?

Cost of Carton/ Total Cost

0.08/0.95 =8.42%

0.06/1.17 = 5.13%

Buyers Margin

0.09/1.04 = 8.65% 0.25/1.42= 17.6%

Champions ROI

9.3%

1.75%