Strategy Product Mix & Tactical Decisions
Assessment item 2 – Strategy, Product Mix & Tactical Decisions
Value: 20%
Due Date: 19-Apr-2020
Return Date: 12-May-2020
Submission method options: EASTS (online)
Task
This assessment task, together with Assessment Item 3 (Sustainable, Transfer Price & Investment Decisions), is designed to provide you with an opportunity to apply your understanding of strategic and sustainable management accounting concepts and practices to a real-life business, Luxottica Group.
Background
Luxottica Group is the world’s largest eyewear firm, controlling more than 9,000 stores globally. In Australia, these stores include OPSM and Sunglass Hut. The firm’s own brands of sunglasses (i.e. Ray-Ban, Oakley) together with those it manufactures under license (i.e. Giorgio Armani, Chanel, Ralph Lauren) dominate the market (D&B Hoovers 2020).
Question 1 – Strategic Management (40 marks) (Maximum report length: 2,000 words)
You have been asked to prepare a report on the future strategic positioning of Luxottica Group. For simplicity, you are encouraged to focus on a narrow range (i.e. one or two) of the firm’s products/brands/stores. Areas you need to address include:
- A brief overview of the nature and history of the firm together with the firm’s current strategic priorities (6 marks).
- A detailed overview of the firm and its environment using Porter’s Five Forces Model. (20 marks).
- Using Porter’s generic strategies, what strategy would you recommend for the firm going forward? This recommendation should be detailed and make specific reference to the firm’s product lines and segments (5 marks).
- Potential financial and non-financial measures the firm could use to evaluate the success of your recommended strategy. It is suggested that you provide around five measures and these measures should be clearly linked to the different components of your strategy recommendation (5 marks).
Using APA referencing, this report must be supported by reference to a range of relevant academic and other research sources (4 marks for academic writing).
Question 2 – Product Mix (5 marks)
Oakley manufactures a range of duffle bags. The following discussion presents hypothetical information in regards to the production of this line of products. This information assumes that these products are manufactured on the same production line:
| Packable Duffle | Factory Pilot Duffle | Utility Duffle | |
| Selling price per unit | $50.00 | $135.00 | $160.00 |
| Direct materials per unit | $10.00 | $30.00 | $35.00 |
| Direct labour per unit | $7.50 | $15.00 | $17.00 |
| Variable overhead per unit | $7.50 | $15.00 | $17.00 |
| Fixed overhead per unit | $5.70 | $11.30 | $12.80 |
| Machine hrs per unit | 0.4 | 1.0 | 1.4 |
| Monthly demand | 15,000 | 8,000 | 5,000 |
Required:
- If Oakley had unlimited machine hours, which product line should be the focus of the firm’s production efforts and why? (2 Marks)
- If Oakley had only 18,000 machine hours available, how many of each product line should be manufactured and why? (3 Marks)
Ensure that your answers for the above are discussed and supported by relevant calculations/workings.
Question 2 – Tactical Decisions (5 marks)
Ray Ban is one of the most recognisable sunglasses brands. The following presents hypothetical information in regards to the receipt of a special order by this firm.
Ray Ban currently has capacity to produce 120,000 units per month which it sells for $170 per unit. The typical cost to manufacture each pair of sunglasses is provided below:
| Direct materials | $40.00 |
| Direct labour | $20.00 |
| Variable overhead | $15.00 |
| Fixed overhead | $10.00 |
Ray Ban is currently operating at 98% capacity. Recently, Ray Ban was approached by a national sporting team who was wanting to purchase 5,000 pairs of custom sunglasses for the members of their team and support staff for $100 per pair. These sunglasses will include a custom colour finish and case that will cost an extra $20.00 per unit. This special order will need to be completed in the next month. If the special order is accepted, Ray Ban will need to hire a temporary staff member to facilitate the relationship between the firm and the sporting team. The cost associated with the staff member is expected to be $15,000 for the month.
Required:
- Evaluate whether this order is acceptable on financial grounds. Ensure that your answer is discussed and supported by relevant calculations/workings (3 Marks).
- Identify and discuss at least three relevant qualitative factors that should be considered in the evaluation of this special order (2 Marks).
Question 3 – Linear Programming (10 marks)
Luxottica Group manufactures a range of womens Dolce & Gabbana sunglasses under license. The following presents hypothetical information in regards to the production of these sunglasses. The production manager would like your assistance to identify the optimal production mix of Exclusive, Original and Special lines. Below is an estimation of the costs to manufacture these products.
| Exclusive | Original | Special | |
| Selling Price | $370.00 | $313.08 | $142.31 |
| Costs: | |||
| Direct materials | $123.52 | $100.18 | $22.20 |
| Direct labour | $86.52 | $50.09 | $14.80 |
| Overhead | $61.48 | $50.09 | $21.06 |
| Selling and admin | $37.00 | $31.31 | $17.08 |
Each of these three products goes through the same manufacturing process. The time for each process and the hours available are provided in the table below.
| Process | Exclusive | Original | Special | Total hours available |
| Lenses | 2.28 | 5.69 | 4.55 | 22,000 |
| Frames | 4.55 | 1.71 | 4.55 | 33,000 |
| Assembly | 17.08 | 11.38 | 11.38 | 275,000 |
| Finishing | 1.71 | 1.14 | 1.14 | 27,500 |
Required:
- Using Excel Solver, formulate a linear program to determine the optimal production mix which ensures that the maximum profit is obtained. Discuss the key features of your results and why this was considered to be the optimal result (4 marks).
- Discuss and suggest three possible ways in which the firm could improve the profit in light of the above Solver analysis. Provide financial information to support your recommendations and clearly illustrate how your proposals impact the production mix and the firm’s profit (6 marks).
Ensure that your answers for the above are discussed and supported by relevant calculations/workings.
Rationale
Subject learning outcomes
This assessment task will assess the following learning outcome/s:
- be able to apply sustainability concepts in the context of accounting and business practices.
- be able to use strategic management principles and technologies in making and assessing business decisions for profit and not for profit organisations;
- be able to generate, evaluate and use quantitative and qualitative information to measure financial and non financial performance of an organisation;
- be able to generate, evaluate and use information for planning and controlling operations within an organisation;
- be able to analyse the impact of the international business environment, global competitiveness and societal and cultural expectations on management accounting in regional, national and multinational organisations; and
- be able to develop and evaluate computer spreadsheet models which aid business decision analysis.
Graduate learning outcomes
This task also contributes to the assessment of the following CSU Graduate Learning Outcome/s:
- Academic Literacy and Numeracy (Skill) – CSU Graduates demonstrate the literacy and numeracy skills necessary to understand and interpret information and communicate effectively according to the context.
- Information and Research Literacies (Skill) – CSU Graduates demonstrate the skills required to locate, access and critically evaluate existing information and data.
- Professional Practice (Skill) – CSU Graduates demonstrate discipline-specific technical capabilities and self-appraisal required for a beginning practitioner or professional.
- Sustainable Practices (Skill) – CSU Graduates apply acquired sustainability knowledge individually and collectively for the improvement of local and global environmental sustainability.
Marking criteria and standards
| Marking Criteria | High Distinction | Distinction | Credit | Pass |
| Overview of the nature and history of the firm together with the firm’s current strategic priorities and application of Porter’s five forces model. | Overview of firm and discussion of the firm’s characteristics (according to Porter’s Five Forces) and competitive strategies is comprehensive, covering all key features of the firm and its strategy and prospects. In depth and accurate conclusions are drawn. An outstanding level of critical evaluation is provided. Evidence of extensive research. | Overview of firm and discussion of the firm’s characteristics (according to Porter’s Five Forces) and competitive strategies is comprehensive, covering most of the key features of the firm and its strategy and prospects. In depth and accurate conclusions are drawn. A high level of critical evaluation is provided. A range of research sources are utilised. | Overview of firm and discussion of the firm’s characteristics (according to Porter’s Five Forces) and competitive strategies is moderately comprehensive, identifying the major facets of the firm and its strategy and prospects. Moderately detailed and mostly accurate conclusions are drawn. Displays satisfactory critical evaluation. A limited range of research sources are utilised. | Overview of firm and discussion of the firm’s characteristics (according to Porter’s Five Forces) and competitive strategies is adequate, identifying the major facets of the firm and its strategies and prospects with minimal depth. Reasonably detailed and mostly accurate conclusions are drawn. Displays minimal critical evaluation. Some evidence of research. |
| Explain and apply management accounting concepts in a strategic context. | Effectively determines key concepts and applies the concepts in a strategic management framework. Identifies multiple approaches for solving the problem that applies within the specific context, and provides concise and thorough justification for your proposal. | Key concepts are identified and applied to a strategic management framework. Identifies multiple approaches for solving the problem, not all of which apply within the specific context. | Key concepts are identified and limited application within a strategic management framework. Identifies some approaches for solving the problem, only a few of which apply within the specific context. | Key concepts are identified and some application to the strategic management framework. Identifies a few approaches for solving the problem. |
| Identify and apply sustainability concepts to strategic management accounting problems or issues. | Communicates and applies sustainability concepts with clarity and depth. Discussion is supported by extensive research and examples. | Communicates and applies sustainability concepts with sound understanding of concepts. Discussion is supported by relevant research and examples. | Communicates and applies sustainability concepts with limited understanding of concepts. Discussion is supported by relevant research and examples. | Sustainability concepts are identified but with limited research and discussion of examples. |
| Ability to obtain the correct answer for each of the practical questions and sub-questions and workings to support your answer. Ability to make judgements and draw appropriate conclusions based on the quantitative analysis of data and computer spreadsheet models. | Correct answer obtained. Uses the quantitative analysis of data as the basis for deep and thoughtful judgements, drawing insightful, carefully qualified conclusions from the results. Excel worksheets are professionally presented and all calculations are performed using appropriate formula functions. | Correct answer obtained. Uses the result to make a competent judgement, drawing reasonable and appropriately qualified conclusions from the results. Excel worksheets are professionally presented and all calculations are performed using appropriate formula functions. | Correct answer obtained. Uses the result as a basis to make sound judgements and draws a plausible conclusion. Some efforts are made to professionally present Excel worksheets and all calculations are performed using appropriate formula functions. | Correct answer obtained. Uses the result as a basis to make basic judgements and draws a plausible conclusion. Most calculations are performed using appropriate Excel functions. |
| Effectively and appropriately present your material and results and clearly convey your understanding of the results to the reader. All references and resources acknowledged and professionally presented using APA (6th ed) referencing. | Output is well researched, logically argued, and well written in a manner that very effectively conveys the key outcomes and recommendations to the end user. All references and sources acknowledged and professionally presented. | Well researched and well written argument with references and sources acknowledged and output professionally presented. | Well written with a logical argument and with references and sources acknowledged and professionally presented. | Written in clear language with references and sources acknowledged and professionally presented. |
Presentation
Your response is to be in a formal written structure and format. It is compulsory for you to lodge both a Word file which is to include all your answers and your calculations, and an Excel file with the calculations.
When asked to present your discussion in report form (i.e. Question 1), you must:
- Provide a brief executive summary.
- Include a table of contents.
- Structure your report to include introductory, body and concluding sections. Use appropriate headings and sub-headings as relevant sign-posts.
The following guide is also useful in providing further information on effective report writing:
http://libguides.csu.edu.au/ACC311
Requirements
Preparation and submission requirements
All references must be clearly acknowledged in accordance with the APA (6th ed) style.
This assignment requires a Microsoft Word document as well as a Microsoft Excel spreadsheet solution and both of these must be submitted online using EASTS. Failure to submit both of the files by the due date constitutes non-submission and late penalties will apply.
Your spreadsheet solutions must be cut and pasted into the Word document. This Word document is what will be marked and returned to you. Remember that in the business world the professional presentation of information is fundamental and accordingly marks will be deducted for poor presentation. An electronic version of your source spreadsheet is required to enable markers to open the file and test your efficient use of spreadsheet formula. Your spreadsheet must have a separate worksheet (tab) for each question answered.
Review the rules regarding plagiarism and if you are not sure contact your lecturer or student learning skills advisor for advice. There is no excuse for presenting the work of others as your own; this includes cutting and pasting material from the web without properly referencing the source. In this subject there have historically been large numbers of students caught either plagiarising or failing to reference properly.
The CSU Library site provides an on-line guide to APA (6th ed) style referencing. This is the referencing style adopted by the School of Accounting and Finance. The guide can be found at: http://student.csu.edu.au/study/referencing-at-csu
Any difficulties in submitting your assignments online electronically using EASTS should be immediately reported by email. Include your name and student number in the header or footer of all documents submitted. Retain a copy of your assignment for your records.
