MiPie Company - the Achievement of the Marketing Budget and Effective Marketing Process Control - Case Study Example

MiPie Case Study is a representation of a company that has considered outsourcing as one of the ways of increasing the profitability of the company in that it enables the costs as well as the expenses to be cut down. The company wanted to outsource the production of pies in order for it to concentrate more on the issue of brand imaging as well as sales development in the territories of European Union. The differences as far as the issue of outsourcing came up when the marketing and production directors refused to support the finance manager’s opinion of going ahead with the issue. The reason as to they were against the idea was different also for the two of them (Mintzberg, 1979). The marketing director was aware that by doing it there was a probability of an increase in terms of five folds especially in the budget of marketing but this meant that after £8million increase it will eventually lead to only £5million increase in sales as well as a cost of £4million even after the outsourcing is done (Finlay, 2000). Some of the factors that were considered include the expenses that will be incurred, the issue of old employee losing jobs so as to employ new ones who can be able to deal with the operations of the new project. This is also another factor of consideration due to the fact that it will mean new expenses for training them. A profitable proposal was then suggested which was to deal with setting up an energy sources that are renewable. First it is environmental friendly hence helping in the environmental sustainability (Hill, & Jones, 2007). The methane gas being produced is simply due to the reuse of waste and then the wind energy is due to harnessing of the wind hence no purchase of raw materials. It will help the company remain competitive yet reduce its cost of production as well as have a source of energy that is sustainable. Cost of the projects= £15million Total Cash outflow for wind turbines= yr1+ yr 2+ yr 3+ yr 4+ yr 5= £10.7 Total Cash outflow for waste water lagoon= yr1+ yr 2+ yr 3+ yr 4+ yr 5= £5.4 Total Cash outflow in million = Total Cash outflow for wind turbines+ Total Cash outflow for wind waste Water lagoon= £10.7+£5.4= £16.1 Total cash inflow for wind turbines= yr1+ yr 2+ yr 3+ yr 4+ yr 5= £15 Total cash inflow for waste water lagoon= yr1+ yr 2+ yr 3+ yr 4+ yr 5=£8.06 Total Cash inflow in million = Total cash inflow for wind turbines+ Total cash inflow for waste water Lagoon=£15+£8.06=£23.06 Net cash flow for wind turbines= yr1+ yr 2+ yr 3+ yr 4+ yr 5= £24.3 Net cash flow for wastewater lagoon= yr1+ yr 2+ yr 3+ yr 4+ yr 5= £12.66 Total Net cash flow= Total cash flow for wind turbines+ Total cash flow for waste water = £24.3+£12.66= £36.96 Cumulative cash flow for wind turbines= yr1+ yr 2+ yr 3+ yr 4+ yr 5= £29.6 Cumulative cash flow for waste water lagoon= yr1+ yr 2+ yr 3+ yr 4+ yr 5= £16.66 Total Cumulative cash flow = Cumulative cash flow for wind turbines+ Cumulative cash flow for waste water lagoon = £29.6+£16.66= £46.26 Net profit = Total Cumulative cash flow - Total Net cash flow = £46.26-£36.96= £9.3 To know how much the new proposal will be profitable then it means the cost or expenses it will cut off through the electricity bill or the savings represents the profitability which is £9.3 The marketing perspective of the proposal means a marketing plan. The following are the contents of the marketing plan, the strategies of pricing, market segmentation, description of the location of the business alongside the disadvantages and advantages of marketing in that place (Boselie et el, 2005). It also contains the budget of the advertisement and the promotion strategy. This will answers the following question, the current marketing objectives and strategies.* How effective the marketing process is controlled, the achievement of the marketing budget, how to realize or if there is a realization of the objectives in a smart way, the level of staffing, the way to develop staff and train them and finally the experience and learning achieved as per that level. Investment appraisal for the business of MiPie company was put forth just like any other business (Burns, 1961). The purpose as to why the assessment must be done is to find whether the business is able to recover all of its cost of production, to find out if there are savings that have been made and ensure the profit has made a profit on the investment that were made initially. The MiPie management has use four method of investment appraisal namely payback, the rate of return in accounting, the value of the net present and finally the internal return rate. The three methods had strengthens and weaknesses and each of them gave different results. Payback was a method that simply calculated the time the investment projects will take to pay back for itself all the initial cost and expenses through savings (Chandler, 1962). It should be noted that every project incurs most of the great expenses right during the setting up of the project. According to the evaluation of the payback procedure, it was discovered that by the end of the third year the project was running at a negative cumulative negative of £1.9 million meaning the savings are still paying for the original cost. The method enabled the company to establish that the payback process for wing turbines is 3 years and 8 months while for the lagoon is 4 years and 1month. Return rate accounting as used by the MiPie considers the issue of investment in terms of paying for the cost of the project as well as contributing to the profitability (Boxall & Purcell, 2003). The accounting return rate is calculated in terms of its percentage as compared to the initial investment. The most important reason as to why MiPie went for the method was to get to know if the projects were yielding sufficient returns. It was discovered that the turbines yielded £4.3 million while the lagoon £1.66 million by the end of five years. This is a good return as far as the issue of profitability is concerned. The present net value is another method the company used to do the project evaluation. This is whereby the method enabled the MiPie Company to find out if the project’s initial cost of investment was greater as compared to the value the company was anticipated to lose if it did not invest in the energy saving project. The essence of the calculation is finding the opportunity cost. It enabled the business to discover the value of money the company was expecting to get was worth in the future. The issue of time effect was also considered as far the investment was concerned. Another very important factor that the method helps in is discovering the changes in the rate of interests (Corby et el, 2009). Return rates internally is another very important method that the company used which is the cash flow discounted. This is a method use in a situation where the present net value is at zero. According to the findings of the MiPie Company, the project was discovered fit to go on but care must be taken especially on the issues of risks involved in the project like increase in the maintenance cost or decline in the savings. The present net value is another method the company used to do the project evaluation. This is whereby the method enabled the MiPie Company to find out if the project’s initial cost of investment was greater as compared to the value the company was anticipated to lose if it did not invest in the energy saving project. The NPV evaluation has a slight problem. This is because the figures that were used were only for the wind turbines to analyze the NPV and the conclusion was given for both projects. Also it did not use the 10% discount. The following is the reevaluation. End of year Cash flow for turbines Discount factor Present value for the turbines 0 (10.0) 1.000 (10.00) 1 2.5 0.893 2.23 2 2.7 0.797 2.15 3 2.9 0.712 2.06 4 3.0 0.636 1.91 5 3.2 0.568 1.82 £0.17m Accounting plays major importance in a far as the management of a company or organization is concerned. It has both advantages and disadvantages because it is not always that accounting contributes to the well being of the organization. Accounting is a practice in any given organization that involves binding of all organizational space together in a real sense whereby one of the paramount boundaries of that organization is usually defined as per the boundaries of the system of its accountability (Gerhart et el, 2009). Accounting refers to the collection, identification, accumulation, measurements, preparation, analysis, interpretation and then presentation of information about an activity or activities in an organization, If the above activities are not done effectively and efficiently then the organization will not achieve the right results. This is whereby for any person to be termed as being part of that organization, he or she must be part of its accountability system. In order for any manager to maintain a smooth and a good organizational culture, he or she should adopt some very important organizational theories (Guest, 1997). The theories that any organization will adopt must provide a strong link between the employees and the management for easy and accurate accountability because some of the theories do not contribute positively to the accountability of the organization and if this is not the case then there is a probability of low productivity in the organization. This means that they have to be structured in such a way that they provide great motivation and courage to the employees for the purpose of improving their working skills and productivity. In addition, the theories also must infuse some aspects of the organization like values, experiences attitudes and beliefs. This is because these organizational theories are the instrument that every organization uses to cause motivation among all of its workers and employees (Hendry, 2003). The problem in this is that, human resource management may also account to a great expense hence a disadvantage to the organization. These theories comprises of beliefs and ideas of which each and every member of that organization must comply with so as to achieve the objectives and the goals of that particular organization. This then means that the theories must be made in such a way that they are acceptable to all the members of the organization whether in the management or employee level. Accounting in any organization must be divided into three main parts to contribute to the success of the organization namely; the cost accounting, management accounting and the financial accounting. It is the management accounts that are responsible for measuring and then reporting all of the nonfinancial and the financial information which is very helpful to the managers in their efforts to achieve the organizational objectives and goal (Corby et el, 2005). If the above department is not well considered then, it means there is no positive outcome for the organization despite it being used. The financial accountants report their findings to the external parties but if not there will be not accountability. They are involved in all of the business transactions by measuring and recording. These accountants produce the statements of finances based on the acceptable principles of accounting. The cost accountants are the most important accountant in any given organization because they are the ones that give information to the financial and the management accountants. The management accountants are the most influential people in as far as the strategy development, resources and capabilities building as well as strategy implementation are concerned. Accountants also have the role of planning and controlling the operations of a given organization Accounting practices are very important in as far as the success of any organization is concerned but if they are not efficiently done there will be no tangible evidence of the organization’s success. This is because the information derived from the process of amounting is what influences the actions of the managers and the employees of the organization (Druker & White, 2009). This means that the accounting information can be referred to as being socially constructed since it affects every person in the organization. Accounting is also a process that in it can not function effectively without the use of some theories. This is whereby some theories like the contingency theories must be involved in the accounting process so as to avoid some of the loopholes which may fail the process but if these theories are not applied the right way then the organization will end to a great downfall. Budgeting is a very important tool as far as the issue of management accounting is concerned especially as far as the issue of control and planning are concerned. A budget that is perfect should be very specific, time scaled, realistic, measurable and achievable. It is very important especially through enabling the managers to plan for the actual operations (Francis & Keegan, 2006). This is why the management of the MiPie Company had to draw a budget so as to find out what problems they were anticipating or they were likely to find on the process of operations. Also it enables the managers to get to discover the changes in terms of the conditions that may probably occur and then come up with the solution. In the MiPie Company, there was an anticipated change in the interest rate of some materials in the future and so the budget took care of such issues. It is a very essential tool in as far as accounting management is concerned because of the fact that it enables the activities of the company to be coordinated (Paauwe, 2009). Decision making is another very important factor as far as the accounting management is concerned. This means that some of the financial inputs are of great help like the future or anticipated cash flow which will depend on the variety of alternatives offered (Trevor, 2009). Relevant revenues and costs are important in making decisions about selling prices, product mix, outsourcing and discontinuation. All of the named activities need proper accountability before their implementation and this explains how important the issue of accounting management is for the success of the organization. It is also very important as far as the special decisions on pricing are concerned. Management accounting is also enabled by proper outsourcing process in which services and goods are obtained form the external sources and not from the organization. This is one of the cost effective practices of any organization in terms of cutting off the financial expenses. The MiPie is a company that had considered outsourcing at some point but after some consideration it was discovered that not always that outsourcing leads to financial management (Woodward, 1958). This whereby the company discovered that through the marketing director that by doing it there was a probability of an increase in terms of five folds especially in the budget of marketing but this meant that after £8million increase it will eventually lead to only £5million increase in sales as well as a cost of £4million even after the outsourcing is done. Some of the factors that were considered include the expenses that will be incurred, the issue of old employee losing jobs so as to employ new ones who can be able to deal with the operations of the new project (Becker & Huselid, 2006). Organizational theories are very important tools as far as the management and accountability of any organization is concerned. This is because they are the ones that determine the behaviors to be expected in a certain organization. Another very important fact is that the help insetting goals and objectives of the organization. Despite the fact that they are very important tools, no single theory can be applied on its own to yield effective results because challenges are also arising on daily basis and one of the best ways for overcoming them is through practicing some of the management theories and functions (Woodward, 1965). It is very evident that most of the organizations experiences problems of scale because they are they are based on the formal rules as well as the issue of hierarchy offices. Reference Becker, B. & Gerhart, D. 1996. The Impact of Human Resource Management on Organization Performance: Progress and Prospects?, Academy of Management Journal, 39(4), pp. 779-801. Becker, B. & Huselid, M. 2006 Strategic Human Resource Management: Where do we go from here? Journal of Management, 32(6), pp. 898-926. Boxall, P. & Purcell, J. 2003. Strategy and Human Resource Management, Palgrave Macmillan: New York. Boselie, P., Dietz, G., & Boon, C. 2005. 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