Analysis of Robert Wiseman Dairy Company - Case Study Example

Running Head: Company Analysis Report Name: University: Course: Tutor: Date of Submission: Introduction Robert Wiseman Dairy Company was established in the year 1947 on a family farm in the East of Kilbride, Scotland. The business was established initially as a business whose main aim was to deliver milk to its customers’ at doorsteps but after several years in early seventies, the business switched its focus to wholesale trade. This company has grown to a larger company and today its accounts for 30% of the fresh milk consumed on daily in UK. The company which is based in the United Kingdom has several subsidiary companies all over UK which primarily are engaged in processing and distribution of milk as well as other associated products (Tamime, 2009,pp.45-60). The company operates from seven other processing diaries located in the United Kingdom and it has fifteen depots. The company has established thirteen distribution depots throughout UK which is a factor that has contributed to its tremendous growth over the years. Despite, the fact that Robert Wiseman diaries is still based in Scotland, the sales in England today account for more than 60% as far as company sales are concerned. Doorsteps deliveries today continue to reduce at an alarming rate due the increase in sales from the supermarkets. Multiple retail sales account for the largest share of company sales since they contribute to approximately 70% of the total sales of the company. Among the seven subsidiaries established a larger proportion of fresh is usually accounted by Droitwich dairy which has capacity of 500 million litres as well as the largest fresh milk producer in the whole world. The company has a strong and diverse customer base all over United Kingdom (Great Britain, 2009, pp.12-30). Company processes Processing of milk is a significant process which actually requires professional skills as well as momentous amounts of energy as a result of this the company has invented environmental methods which use less energy. Robert Wiseman Dairies processes and delivers fresh liquid milk throughout Britain which has been contributed too by new technological inventions as well as a large proportion of company’s investment in its processes(Great Britain,2009,pp.12-30). The growth of Robert Wiseman dairies as a leading liquid milk company has been contributed at large by the creation of a strong relationship with farmers who are the major suppliers, unparalleled investment in both new and existing dairies and distribution depots and lastly through exceptional customer care services and use of effective account management systems and techniques. Company policies Robert Wiseman Dairies upholds the policies of integrity, giving positive impacts to the society, being continuously committed, and working towards customer as well as employee satisfaction. As a global company, it has an impact on many people and this determines its mode of operations. The principles set guide the company and its individual milk subsidiaries. Robert Wiseman like any other company has implemented employee policies, competition, pricing as well as other polices related to goods packaging. Competition Milk industry in United Kingdom is very which competitive, despite the fact that Robert Dairies is an established milk company which processes and delivers about 1.21 billion litres of milk annually to its customers all over UK its faces stiff competition from other established milk companies such as Tesco, J Sainsbury and Asda. These companies too are providers of fresh milk hence increasing stiff competition among the supermarkets. This has in recent times affected the operations of Robert Wiseman dairies with the company being forced to cut down prices so as to compete adequately something which has affected its interim profits as well as annually profits(Tamime, 2009,pp.45-60).. Company products Robert Wiseman processes and distributes approximately 30% of the fresh milk which is usually consumed daily in UK by everybody. The company has wide range of milk products and they include; Black & White, Glass bottle milk, the One’, Puriti, freshnlo and Shock. Robert Wiseman Dairies Black and White range is perceived to be the cornerstone of the company since it is the milk product range that the business began with. The company has over the years invested heavily in this product innovation to grow to cater for the evolving needs and tastes of the modem consumers since it is liked by many consumers. The Black and White range is today available in a range of sizes and they include; whole, semi-skimmed and skimmed variants and in a variety of sizes to which actually are meant to meet each of the consumers needs. The Glass bottle milk is milk provided in glass bottles and they are from the milkman which normally is delivered straight to consumer’s door (Tamime, 2009, pp.45-60). The company uses the innovative plastic bottles as way of keeping the milk fresh and of quality. The third product is the One’ which has a distinct purple packaging it was the first 1% milk to hit the market when the company introduced it in the year 2004.It is a fantastic healthy option for many consumers since it provides all the taste of semi-skimmed milk with almost half the fat. The fourth product is the Puriti which actually is almost twice the shelf life of standard milk hence it tastes fresh for longer. Usually it produced in 1-litre cartons and 2-litre bottles hence it achieves the normally Extended Shelf Life due to its unique micro filtration process as well as high pasturisation at a higher temperature and primarily this meant to ensure that the milk stays fresh for longer and tastes great too. Freshnlo is the fifth product which actually is semi-skimmed milk which over 25 years has been the family favourite. Freshnlo was the first UK’s semi-skimmed milk with low fat and very much nutritious for the kids. This milk helps families to keep fit and healthy hence it is considered as the milk choice amongst many Scottish families. The last milk product is Shock which actually is fresh milk that has three great natural flavors which kids love. The milk comes in three great flavours thus Chocolate, Strawberry and Banana as well as it has no artificial preservatives. Normally it’s usually packaged handy lunchbox-sized 250ml cartons hence it is considered as a great source of calcium and it’s low in fat too. Robert Wiseman dairies milk products has been over the years perceived as the most nutritious since it contains all the essential nutrients for the body growth(Tamime, 2009,pp.45-60). Company’s current Account Management Good and effective account management technique was perceived as contributing one of the factors to Robert Wiseman Dairies growth is its. Robert Wiseman Dairies at large is a big company with approximately seven major processing dairies as well as fifteen transport depots. The company currently has employed over 5,000 people whom 3,300 in England while 1,700 in Scotland .In Addition the company has around 2,000 in driving roles all UK which calls for a proper account management. Currently the company uses the full cost accounting systems and financial accounting systems (Tamime, 2009, pp.45-60). Robert Wiseman Dairies uses full cost accounting primarily to make a track of the milk products from the seven major processing dairies. This assists the company as far as pricing is concerned since the company’s uses this information to implement various milk product prices in a manner that the price actually reflects the true costs as well as it includes both environmental as well as other social costs. As far as the financial statement analysis is concerned, the company uses the financial accounts to keep a track of the business incomes as well as outflows. These financial statements are meant to reflect on the generally company performance and most of the time are used by key shareholders and investors (Tamime, 2009, pp.45-60). Review of Management accounting Management accounting involves the preparation of accounting information that is aimed at the managers in organizations. Management accounting aims to assist the managers whether top level, middle level or even the lower level managers in their day to day decision making processes. The accounts derived by management accounting involve splitting the organization into its functional units and calculating the costs and revenues in each unit. This is then used by managers to make their decisions on funding of the different units and other critical decisions. (Belinda, 2008, pp.60-70) Belinda ( 2008,pp.60-70), explains that management accounting assists managers to make decisions that help achieve their objectives, formulate policy, monitor performance, plan for the future, control day to day activities , manage efficiently scare resources in the organization, and focus attention to the issues that require their immediate consideration. Chadwick summarizes management accounting role as one tool of providing relevant information that assists management in decision making, planning of economic performance, controlling costs and improving overall profitability. The information provided should however not be used as a standalone kind of information, but rather as just part of the decision making process. Management accounting thus mostly focuses on measuring costs, revenues, and profits in different departments of the organization. There are different types of costs that include marginal costs, fixed costs, variable costs, absorption costs, historic costs, standard costs, and incremental or relevant costs. These different types of costs are used in determining different ratios that assist in decision making (Steven, 2007, pp.12-20). Historical costs are costs that are ascertained after they are incurred, which is mostly used to compare the costs of previous periods to those of a different organization. In most cases they usually used as foundation for company’s price fixing as well as costs estimation. Predetermined costs are standard costs that are used to analyze the variances between actual costs and the set budgets. These thus provide management with a means of control and comparison. Standard costing has various advantages in that they are used to measure efficiency in the organization in terms of the set objectives and the actual costs(Steven,2007,pp.12-20). Forward planning is also an advantage to the organizations and historical costs also offer continuous control of operations by management. Costs can be classified in various ways, by type, location or behavior. The types of costs include direct and indirect costs. Indirect costs are usually costs that do not form part of the product, which could include the office rent, maintenance fees, and other overheads. Direct costs normally in accounting forms part of the company’s product hence they usually comprises of direct labor, direct materials, and direct expenses. Costs classified by location involve costs shared among the departments or cost centers, where each department is allocated their own costs(Steven,2007,pp.12-20). Young (2003,pp.70-80), states that the idea that different costs are used for different purposes is a basic management accounting principle. He identifies the various cost accounting techniques used, that include differential cost accounting, absorption coating, activity-based and variable costing. Young (2003,pp.70-80), summarizes the definition of management accounting as producing useful information for the management, where accounting involves producing all useful information that help in running a business smoothly. The information may thus be financial or non-financial, accurate or broadly correct, based in the past or in the future, detailed, presented via written word or in tables and graphs. The information should guide the management in regard to profits or losses, trends, efficiency, quality indicators or in volumes. Management accounting may expand past the boundaries of accounting and costing to cover broader disciplines. This is because the interpretation of information presented to the management will require the aid of other disciplines. Such disciplines are inclusive of financial accounting, cost accounting, financial statement analysis, forecasting and budgeting, cost control techniques, inflation accounting, management reporting, quantitative techniques, taxation, internal audit, and office services. All these areas of specialization have an input into making management accounting information contribute positively to the manager’s decision making process and arrive at accurate projections due to well supported management accounting. The evolution of accounting to a tool of forecasting, budgeting and budgetary control rather than a mere recording device led to the emergence of management accounting (Young 2003,pp.70-80). The management accounting process involves the management using information presented to them to make budgeting decisions, credit and collection decisions, control system decisions, financial analysis decisions, payroll decisions, inventory decisions, cost allocation decisions, performance responsibility accounting decisions, product design decisions, pricing decisions, and quality decisions. These are the decisions that managers require to get from accurate management accounting so as to enable them to make the appropriate decisions in regard to running the organization (Young (2003,pp.70-80), Belinda (2008,pp.60-70) ,lists the tools and techniques of management accounting as financial statement analysis, fund flow analysis, cash flow analysis, costing techniques, budgetary control, statistical and operational research, responsibility accounting, and management reporting. Financial statement analysis includes using tools like ratio analysis, trend analysis, comparative financial statement, and common-size statement. Fund flow analysis is the analysis of inflows and outflows of funds, commonly referred to as the working capital by preparing a fund flow statement at the end of an accounting period. Cash flow analysis primarily is concerned with inflows and outflows analysis of cash as well as any other cash equivalents in company’s accounting period. This guides the management’s use of cash to ensure its liquidity. Costing techniques are used in the process of controlling costs and making decisions. Budgetary control involves drawing up budgets and comparing them to the actual results (Belinda, 2008, pp.60-70). The deviations are calculated and necessary actions taken by the management. Statistical research techniques include use of charts, graphs, sampling, time series, game theory, and regression analysis, in the performance evaluation process by managers. Responsibility centers are assigned different but specific responsibilities and each centre works under its own budget. Management reporting involves preparing reports on performance of different activities to management on regular basis. Limitations of management accounting It relies too much on accounting data, its mostly based on historical data, it covers a wide scope, is highly expensive, it lacks objectivity, it’s not a substitute for management, and it has a complicated application as it involves a number of different tools and techniques. Key techniques recommendable to the company Despite the fact that financial statements of the company are used to generate the analysis on its financial position as well as compare it with the past analysis other accounting techniques should be used to give appropriate results on the financial background of the company(Belinda,2008,pp.60-70). Costing accounting on other hand though shows companies total expenses as well as costs based on the cost centers or on products hence perceived as an efficient way of handling its company’s milk subsidiaries as assisting managers to make appropriate decisions in the day to day company decisions, it is necessary that the company use it in relation to the following accounting techniques. Though the company uses full cost accounting as well as financial statement analysis techniques it should incorporate other techniques such as statistical and operational research, budgetary control, and cash flow analysis. Statistical and operational research are important in determining the trends that are emerging and that the management should watch out for when making decisions. An example could be the massive use of technology in today’s world(Belinda,2008,pp.60-70). Every company is now resulting to advertise vie the internet and even sales can be done solely online. There is also the emergence of social network marketing where companies advertise their products on social networks as many people are now part of them. Such trends help the management to make the right moves when making their marketing decisions. Budgetary control also assists the management when coming up with estimates for the financial years, which help them to know variances that occur in actual budgets. They thus know where variances arise and can take precautionary steps toward minimizing such variances. Cash flow analysis is useful as cash is very significant to every business concern and its efficient management is required for liquidity planning of the organization. Responsibility accounting involves an organization setting up responsibility centers and giving different managers responsibilities in the different units. This normally is very involving as well as tedious hence its just suitable for smaller companies which implies that it can be too much involving since Robert Wiseman is global and big company too(Belinda,2008,pp.60-70). Organizing the different branches into responsibility centers can be a difficult and tasking activity that requires great coordination among all the branches. Management reporting involves giving reports on performance of various activities to management on regular intervals. This can pose a challenge to the company in terms of the regularity of reporting to the managers. The size of the organization can limit the effectiveness of such reported data due to the many different branches and the bulk of the reports that will be thus submitted. If the data cannot be analyzed in a systematic manner to produce results that can assist in timely decision making, then it is just a waste of time and company resources. Given the fact that Robert Wiseman dairies is a large company adequate information on its products and how they perform in different regions, marketing aspect of these products need to be tracked to determine if the expected results is arrived at. The information on procurement and keeping track of the processes involved is important since it ensures that the products get safely to the market (Bhattacharyya, 2011,pp.45-60). Simplifying such processes by management will assist them in making appropriate as well as timely decisions. The organization has a lot of employees who whom primarily should keep track on their performances on the job. In addition, the company should strive to achieve employee satisfaction to extend of offering goodwill to the customers. Their information needs should include what the consumer needs, health issues related to its milk products, competitors, supply management streamlining and financial reporting. Strengths and weaknesses of analysis The company provides detailed explanations on the company operations, the products, and the policies that guide the running of the company. The challenges of the analysis involve lack of detailed competitor analysis of the company. If the competitors are high ranking, the company can be inclined to benchmark their costs, profit margins, and information needs to those of their competitors. Additional knowledge on the techniques of management accounting used could have also helped to compare the recommended techniques in the analysis and the actual used. This would have brought to light some techniques the company uses and why they use them. Conclusion Management accounting is a backbone of the decision making process in organizations. For managers to smoothly run an organization and increase its profitability, they require information on the performance of the business on a timely basis. If a piece of information is communication even ten minutes after its timeliness, then it is of no use to management even if it is a relevant piece of information. Robert Wiseman Dairies Milk Company is a global company faced with the challenge of integrating all its data bases for the employees to get faster access to information needed and communicate it according to the level of urgency needed to the managers. The company requires management accounting techniques that will assist mangers to make relevant timely decisions in the face of their competitors and constantly changing dynamics in the industry environments. The strengths of the analysis include detailed descriptions of the company’s policies, products and the scope of operations, while the weakness includes lack of competitor analysis in detail as well as company processes. References Belinda, S (2008). Essential Management Accounting: How to Maximize Profit and Boost Financial Performance.Chicago: Kogan Page Publishers, pp.60-70 Bhattacharyya, D( 2011). Management Accounting. India: Pearson Education India,pp.45-50 Great Britain (2009).Dairy Farmers of Britain: fifth report of session 2009-10, Vol. 2: Oral and written evidence. Publisher: Parliament House,pp.12-36,Vol 2 Steven, M (2007). Management accounting best practices: a guide for the professional accountant. London: John Wiley and Sons,pp.12-20 Tamime, A., Y (2009).Dairy powders and concentrated milk products.Publisher: England: John Wiley and Sons,pp.45-60 Young, D., W (2003). Techniques of management accounting: an essential guide for managers and financial professionals. Publisher: McGraw-Hill Professiona,pp.70-80 Read More