Posted on August 7, 2023 by Cheapest Assignment

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Brief about Artificial Intelligence and Machine Learning

Assessment 2 – Semester

Case Study – Operations Plan

“ASOMBROSO-CREAM” is an ice-cream company from Bolivia. The head quarter and main production facility of ASOMBROSO-CREAM (AC) is in La Paz from which they operate throughout South America. They currently produce 86 metric tons of premium sorbet per annum in their modern production plant. The sorbet comes in three flavours: Tamarillo, Curuba, and Lucuma which are exported to regional wholesalers (indirect sales) across South America to unknown retailers and establishments.

While the business is successful in the region, they lack necessary skills to embrace international opportunities. At core, they lack understanding of international logistics, the nature of international business (IB) and necessary IB management skills. Due to
various societal, political, and market challenges in that region, the production plant is currently underutilized with capacity for IB expansion.

]After hiring a new CEO, a former executive at Cadburys, Mrs Tina, a veteran in the FMCG marketplace with >10 years IB experience, she utilized her network to raise the necessary funds ($20mn) towards ASOMBROSO’s international expansion. Once the first IB-expansion step is completed (e.g., ensured successful operations in the first target country outside South America) she plans to undertake an IPO and list ASOMBROSO on the Sydney stock-exchange.

During her first month at work, Mrs Tina re-organized ASOMBROSO and replaced the entire Top Management Team (TMT) with specialists through a geocentric HR approach and announced her expansion plans. This is where you enter the picture: congratulations! Your studies at QUT paid off. You got the job as the International Operations Manager (IOM). As IOM, you report to both the CEO and CMO due to ASOMBROSO’s matrix-organization. The new TMT consists of:

Title           Name             Nationality                Global Responsibility
CEO           Mrs Tina             Australian                      Chief Executive Officer
CFO           Dr Juan               Mexican                          Chief Financial Officer
CTO           Mrs Li-Jin          Hong-Kong                     Chief Technology Officer
CMO          Mr Garg              Hungarian                      Chief Marketing & Sales Officer
IOM           “You”                  [your culture here]        International Operations Manager

From the raised funds, the CEO and CMO decided to allocate AUD $9 million towards the first expansion phase outside the ‘Americas’. The new TMT decided to enter five markets in the APAC region in the next five years. The target countries are Malaysia, Indonesia, Philippines, Thailand, and Australia. The first host market is Australia.

Relocating to Australia as an expatriate (unless you are already living here), your task is to: set up ASOMBROSO’s regional HQ (wherever the HQ will be located is where you will live for the next three years); to recommend the best business capacity approach; to create all needed operational capabilities; and implement them to successfully operate in the trial APAC country. You must also plan and design the
Australian operations, so it enables a later expansion into the other APAC countries.

You must for example, erect a robust supply-chain, high-quality operations, a logistics system covering the Australian needs, securing production volumes (at Home or in the Host Market), and design, build, and implement sales and distribution capability. Make sure you therefore address the input side, the transformation, and the output side of the value-chain in detail. Once the Australian operations are productive it must be scalable to successfully enable sales and distribution into the other target markets.

You therefore need to ensure the capability to meet the business metrics: to supply 65 metric tons of sorbet for the trial market and reach the expected revenue of $6-10 million the second fiscal year (FY2).

The above capacity is equivalent to 520,000 servings of sorbet (approximately). To get a ‘tighter grip’ of the customers, the TMT decided to sell directly to the ultrapremium segment (i.e., high-quality upper-end restaurants located in luxury hotels).

These will be your customers. The patrons to these restaurants will in turn be their customers. You must make all your location decisions (about warehousing, DC’s, cross-docking facilities etc.) based on the location of your customer clusters.

It is forecasted that this strategy will generate an annual EBIT (operating profit) of $2-4 million AUD for ASOMBROSO (representing a net profit target of approximately $1-2 million AUD). Expect that similar projections, performance, quotas, and outcomes etc. applies in the other target markets as well. The approximate wholesale price is projected to be $14-20 AUD per serving (SKU) at a recommended retail price (RRP) of $30-38 (approximately) per serving. The current HQ in La Paz expect that 60% of net profits should be transferred from each APAC market until the IPO. Funds should be paid in the local currency Boliviano and exceed Bs 3 million. Your ROA KPI is
expected to exceed 20%.

Conducted market research displays a strong market potential for ASOMBROSO’s products in the APAC region indicating a sales spread for the three products of 30%, 25% and 45% (for the Tamarillo, Curuba, and Lucuma sorbets respectively) at RRP range >Bs 145-175. While the end-user always is a consumer (B2C) your business transactions always occur in a B2B format (business with the retailers, i.e., your customers). Success in this industry is therefore dependent on logistics excellence, strong customer and supplier relationships, and amazing customer service.

The TMT have discussed how to best enter the Australian market to enable scalability focusing on benefits and challenges for the following entry modes:

Alt. A: Expand the Bolivian operations (production capacity) by 250% and export FGI (by sea or air) to your selected HQ site in Australia (costs exclude labour).

Alt. B: To enter a Joint-Venture (JV) with a larger ice-cream company located in Kuala Lumpur and produce the specialty sorbet in their existing production plant for export to Australia.

Alt. C: To acquire and convert an Indonesian sorbet company based in Surabaya with similar production capacity as the Bolivian operation.

Alt. D: Set up a Wholly owned Subsidiary (WoS) including a purpose-built sorbet production plant somewhere in Australia with four times the current maximum capacity of the Bolivian plant (costs include labour).

While discussing the above as potential avenues each being common and feasible entry options in IB, you must first explain why you in this case do not believe that B or C would work, and whether any strategic differences between ‘A’ and ‘D’ exists. This is a specific requirement from your CEO who favour alternative B and C based on prior experience. You must therefore assess alternative A and D in detail, compare the outcomes for each of them, and make your capacity decision and subsequently make all capability decisions for the ASOMBROSO international business expansion.

Your job is therefore to make specific, detailed, and justified decisions based on – among other things- the ‘Income Statement’, and the ‘Strategic Profit Model’ outcomes. In addition, you also need to complete the Risk Assessment; the Procurement Tactics Plan; construct a comprehensive and detailed description of your recommended value-chain design (covering every component thereof) and complete
the required foundation research listed as appendices in the assignment description.

Assume you will have a local staff of 32 FTE at your disposal (average salary $1,650/FN and per FTE plus twenty-five per cent in social costs) to get your APAC expansion operative (apart from costs listed in the spreadsheets, these FTEs might be part of your budget. Assume that your team (the staff) jointly have the correct job skills and language capabilities (English, Betawi, Thai and Malaysian) so that they as a team are capable to perform the different organizational functions and tasks meeting the future expansion objectives.

Additional operating information is provided in the provided excel-spreadsheets. Remember, your decisions should not rest upon costs or profit outcomes alone.

Good Luck with your new job assignment!

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