provide you with a realistic business scenario

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TASK
The following case study has been developed to provide you with a realistic business scenario
from which you can develop the necessary decision making skills to meet the learning outcomes
of this subject. The case study will form the basis for Assessment Item 2 and 3.
Background
Sara Tea Pty Limited (STPL) is a 100 percent privately owned business. Incorporated in 1972, the
company manufactures and distributes four core products to Australian supermarkets, bakeries,
cake shops, restaurants, and delicatessens. The company’s products include decorated macasponges (desert style cake that is a combination of a macaroon and a sponge), cheesecakes,
celebration cakes, and assorted pastry products. The company’s mission is to ‘bring joy to all our
consumers’.
The business supplies maca-sponges in three sizes. The large maca-sponge weighs 1.5kg in and
serves up to 24 people. The medium maca-sponge serves 10-12 people and weighs 800 grams.
The smallest, and the most popular, maca-sponge weighs 300 grams and serves 5-6 people.
Maca-sponges can be purchased as simple base cakes or as decorated products. Sales of the
undecorated maca-sponge cake account for approximately 95 percent of all sales.
Competition
Historically STPL was the first mass producer of maca-sponges in the world and by the year 2000
controlled 96 percent of the total Australian market. During STPL’s founding years, competitors
tended to be small local delicatessens or bakeries that could not service a national market. In
contrast, STPL was able to supply Australia’s two largest supermarket chains with high-quality
maca-sponges in the volumes demanded by them. Further, the large volume of maca-sponges
supplied by STPL (400,000 units in 2010, 520,000 units in 2011) allowed the business to establish
reliable and efficient distribution networks. Additionally, the entrepreneurial flair of the business
owner, Mrs Esmeralda Watson, enabled STPL to grow a large and efficient production plant. By
2011, the business occupied a factory and warehouse of over 5,000 square metres and operated
12 ovens capable of cooking 10 large maca-sponges each. The automation process within the
production plant meant qualified chefs were no longer required to prepare the product which
allowed the use of low-cost labour, particularly inexpensive teenage workers.
By 2015 the monopoly enjoyed by STPL had been eroded. Specifically, a new mass supplier of
maca-sponges had entered the market and was competing with STPL on price and quality. This
new competitor, Nona Pty LTD (NPL), claimed to have a superior packaging process that meant
its products had a longer shelf life than STPL products. This was further supported by promotional
literature that stated that they used qualified chefs and superior technology which utilised the
latest cooking techniques.
Business Context
The consolidation of the Australian sugar industry saw STPL’s four small sugar suppliers
consolidated into a single sugar supplier, CRS Ltd. With the loss of competition amongst sugar
wholesalers, the price that STPL paid for this major ingredient rose sharply.
The simultaneous reduction in the number of Australia’s small and medium supermarket outlets
and the further consolidation of the market in the larger supermarket chains, namely
Dangerway/Furworths and Holes/Lyer, diminished the ability of STPL to influence its major
customers and made the firm more dependent on maintaining their relationship with these major
retailers. As a result, during this period, STPL became a price taker rather than a price setter.
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During 2017 Holes/Lyer and Dangerway/Furworths commenced installing bakeries into their
supermarkets. These bakeries are capable of producing maca-sponges in-store and
consequently, they promote them as baked fresh today. The supermarket chains however also
continue to purchase maca-sponges from STPL and their competitor NPL.
Finally, the business has been significantly influenced by changing health and safety standards.
Specifically, consumers are becoming more conscious about what they eat and where their food
has come from. This issue has been magnified by the increased regulation of safe work practices
and food handling processes. These pressures have generated significant additional costs for
STPL as its factory and warehouse were not purpose-built food production facilities, having been
converted from what was originally a crop chemical mixing plant.
Operations
STPL’s core operation is the production and distribution of maca-sponge bases to the Australian
retail market. The business does not currently have a new product development process and has
only sought to implement new products on an ad-hoc basis. For example, in 2014 STPL produced
the first ‘Vegemite Maca-Sponge’ a vegemite flavoured maca-sponge. This product, however,
proved unsuccessful and was quickly abandoned before there was any damage to the brand
name. In 2015 the business imported a meringue making machine that adds colour and different
flavours to products. Sales of these products have been very successful and STPL wants to
continue investing in other machines that might add variety and value to their product lines.
Marketing is conducted through four sales representatives, each of whom is a relative of the
business owner, Mrs Esmeralda Watson. These sales staff have had little formal training in
marketing with the most senior of the sales team holding only a diploma in marketing. Mrs
Watson’s nephew, Shaun Lamb, is the operations manager at the manufacturing plant with over
15 years’ experience in that role. In recent years, he has not been as motivated to work as he
was when he commenced with STPL. He often comes in late and is very reluctant to adopt any
ideas that staff or customers suggest.
The manufacturing plant operates on three 8 hour shifts. Cleaning and maintenance occurs over
the weekend. Production begins with the addition of raw materials which are first measured and
checked for quality. Whilst the raw materials are being weighed the machines are started to
ensure the ovens are warmed up ready for the baking process.
Recipe ingredients are then loaded into mixing bowls and the automated process mixes the
different batches. During the mixing process cooking trays and storage boxes are manually
prepared. Once mixing is completed the mixture is then spread onto the cooking trays. After
spreading, the trays are manually loaded into the ovens and cooked. Once cooking is complete
the maca-sponges are manually removed from the oven and placed on cooling racks. After the
maca-sponges are cool they are shrink-wrapped and boxed ready to be transported to the
warehouse from where the products will be distributed to customers.
The various cooking processes on the factory floor are overseen by a core team of seven
supervisors who have varied years of experience. The seven supervisors manage a staff of 60
people who are predominately teenagers. Staff turnover in the organisation is very high, with the
average length of employment only 6 months.
STPL takes great care in using generous amounts of the best quality ingredients to make their
high-quality products perfectly. The owner prides herself on going the extra distance to ensure
that the ingredients used are sourced from Australia wherever possible, and if unavailable only
from approved overseas suppliers.
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STPL conduct their own distribution by road transport. STPL owns a fleet of 5 trucks that are fully
serviced and maintained by in-house mechanics. Mr Sherlock Watson, Esmeralda’s husband, is
the head of STPL Logistics and has progressively strengthened the performance of the
company’s trucking fleet. Mr Watson has been so successful that the STPL fleet are now doing
additional contract work, distributing products for other companies, and generating further income
for the company. The management of the business has developed a goal for the coming years
which it has encouraged staff to adopt. ‘Our company will be recognised for delivering superior
quality products. We will bring joy to our customers’. STPL Management has set some
aspirational goals they hope to achieve by the year 2025:
• We will be the leading supplier of maca-sponge products to Holes/Lyer and
Dangerway/Furworths.
• Sales in Victoria, NSW and Queensland will be 60% of the total market share.
• We will have the largest product range supported by leading innovative processes
ensuring profitability and satisfaction of customer’s needs.
• Our reputation will be built on delivering a quality service to our customers where they will
be delighted in the products they consume.
• We will be recognised as an employer of choice with motivated and challenged employees.
• We will be identified by our corporate citizenship and sponsorship of eligible charities. Our
ethical and environmental standards will set the standards for other organisations.
However, in 2019 STPL has the following issues to contend with:
• The factory and processing machines are ageing. This makes it difficult for STPL to
compete with the output of competitors with newer technology.
• STPL has been affected by quality issues. In December 2019 there was a major product
recall because of packaging issues.
• The original converted factory is consistently causing problems. Only one of the last five
inspections passed the minimum standards and that was after three attempts. Closure by
regulatory authorities has been threatened on three occasions.
• The majority of management are members of the owner/founder’s family. Family feuding
and personal disputes have plagued any attempt at conducting strategic management
discussions. These personal family issues have divided company management and
distracted them from focussing on growing the business.
• SPTL has been unable to secure any long term contracts with Holes/Lyer and
Dangerway/Furworths.
Mrs Watson has appointed you into the role of Management Accountant. You have been tasked
with resolving the issues identified and enabling the business to grow to meet its 2025 aspirational
objectives.
Question 1 (15 marks)
You have been asked to prepare a report for Mrs Watson on the strategic position Sara Tea Pty
Ltd should pursue. The business wants to increase its market share in the baking area. You need
to present a response at the next board meeting. Areas you need to address:
a) Identify STPL’s competitive advantage
b) Identify fours threats and four opportunities available to STPL
c) Identify four strengths and four weaknesses for STPL
d) Evaluate STPL objectives for their strategic plan.
e) Use Porter’s generic strategies to recommend a strategy for STPL?
Question 2 (20 marks)
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STPL is considering acquiring Pie Smiles, a small chain bakery that specialise in making gourmet
pies. A sales manager from Pie Smiles has provided the following forecast of sales:

Required:
1. Using exponential smoothing with a weight of α =0.3, develop forecasts for years 2021
through to 2025. (3 marks)
2. Using smoothing constants of 0.6 and 0.9, develop forecasts for the sales of pies. (3 marks)
3. What effect did the smoothing constant have on the forecast for the sale of pies? (3 marks)
4. Use a 3-year moving average forecasting model to forecast the sales of pies. (3 marks)
5. Using the trend projection model, develop a forecasting model for the sales of pies. (3
marks)
6. Which is the preferred method to predict the sales of pies: exponential smoothing with a
smoothing constant of 0.3, a 3-year moving average or a trend line? In your response justify
why you made that choice. (5 marks)
Question 3 (15 marks)
The purchasing manager Jack Cruise, who is also Mrs Watson nephew, has a very relaxed
approach to purchasing ingredients. Jack places orders every week for the same amount of
ingredients. He finds that this way if he doesn’t turn up to work there will still be a plentiful supply
of raw materials. Jill has just started as Jack’s assistant and believes that ordering could be done
more efficiently. She has devised the following table to prove her point:

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Required:
1. Using Excel, complete the table. What is the economic order quantity (EOQ)? Comment on
your results? (4 marks)
2. Prepare a graphical analysis of the EOQ decision. (3 marks)
3. STPL is about to introduce a Web-based ordering system for its customers that Jill
estimates will reduce STPL’s ordering costs to $49 per purchase order. Calculate the new
EOQ and the new annual ordering and carrying costs. (4 marks)
4. Prepare a graphical analysis of the new EOQ decision and comment on the differences. (4
marks)
Online submission via Turnitin is required for this assignment. Details will be provided by your
subject lecturer.
RATIONALE
SUBJECT LEARNING OUTCOMES
This assessment task will assess the following learning outcome/s:
be able to demonstrate problem-solving skills in assessing, organising, summarising and
interpreting relevant data for decision making purposes.
be able to apply decision theory to business situations.
be able to explain the use of simulation in complex decisions.
The requirements of this assignment cover up to and including Topic 5 of the Online Learning
materials. The assignment is designed to develop your problem solving, spreadsheet (Excel)
design, and written communication skills. The questions require you to apply the knowledge and
tools covered in the subject topics in order to demonstrate your understanding of the subject
content and also to illustrate your capacity for strategic thinking. The assignment will also test
your ability to communicate and explain the impacts of your findings whether through quantitative
or written reports. The ability to communicate effectively has been identified by the accounting
professional bodies as being critical to your future role as an accountant.
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GRADUATE LEARNING OUTCOMES
This task also contributes to the assessment of the following CSU Graduate Learning Outcome/s:
Academic Literacy and Numeracy (Knowledge) – CSU Graduates understand the use and
structure of appropriate language in written, oral, visual, mathematical, and multi-modal
communication.
Digital Literacies (Knowledge) – CSU Graduates understand professional, social and cultural
implications of the global use of technology.
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MARKING CRITERIA AND STANDARDS

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PRESENTATION
Your response is to be in a written business format and it is compulsory for you to lodge both the
report (word file) which is to include all your answers and your calculations (excel)
Your business report should include:
1. a cover page addressed to your required audience;
2. an executive summary (refer to the note below regarding an executive summary);
3. a table of contents (linked to the headings in the report);
4. headings and subheadings clearly identifying what is being discussed;
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5. brief explanation and purpose on what each question is addressing
6. a conclusion; and
7. referencing (using APA style).
For help with writing an appropriate report, please see the Charles Sturt Academic Skills
site: https://www.csu.edu.au/current-students/learning-resources/build-your-skills/academic-skillshelp
REQUIREMENTS
Preparation and submission requirements
This assignment requires a Microsoft Word document, as well as a Microsoft Excel spreadsheet
solution. Both of these must be submitted online using Turnitin.
You must submit both a Word file AND an Excel file. 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 by, for example,
changing values of input variables. Marks will be awarded on the basis of correctness of answers,
appropriate use of spreadsheet modelling, effective worksheet design, and level of professional
presentation.
A reference list is mandatory for this assessment item. It is important that you are aware of
how to reference properly and a reference list must be provided, properly formatted using APA
guidelines with a hanging indent. Please note that it is a submission requirement that you
include a reference list.
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.
The CSU Library site provides an on-line guide to APA style referencing. This is the referencing
style adopted by the School of Accounting and Finance. The guide can be found at:
https://www.csu.edu.au/current-students/learning-resources/build-your-skills/academic-skillshelp/referencing
Any difficulties in submitting your assignments online electronically using Turnitin should be
immediately reported to the Subject Coordinator 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.
Spreadsheet requirements
Your spreadsheet must have a separate worksheet (tab) for each question answered. For each
question, the worksheet should have a data entry section where all (or most) of the question data
is entered, followed by a model or results section. The results section should be mainly formula
driven.
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NB There should be as little as possible data entry in the model/results section of the
spreadsheet.
Most, if not all, data should be imported into the model from the data entry section. A number of
Excel resources will be provided through the subject Interact site to assist you to complete this
assignment however there is no substitute for getting in and trying it out. An excel resource file
specific to the assignment is provided on the subject Interact site and you should review the
various formulae demonstrated on that file.

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