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Coors key business strategies or “six planks” Essay

1/Link the Coors vision statement to Coors key business strategies or “six planks”. Are there any gaps? Post1:According to Coors Vision Statement, the vison can be come up with four fundamentals: (1)improving quality, (2)improving service, (3)boosting profitability, and (4)developing employee skills. And then to link with “six planks”so that to drive these fundamentals in the future. 1/baseline growth: we will profitably grow key brands and key markets – (3)boosting profitability 2/incremental growth: we will selectively invest to grow high potential markets, channels, demographics, and brands – (3)boosting profitability 3/product quality: we will continuously elevate consumer perceived quality by improving taste, freshness, package integrity, and package appearance at point of purchase – (1)improving quality 4/distributor service: we will significantly enhance distributor service as measured by improved freshness, less damage, increased on-time arrivals, and accurate order fill at a lower cost to Coors –

(1)improving service 5/productivity gains: we will continuously lower total company costs per barrel so Coors can balance improved profitability, investments to grow volume, market share, and revenues, and funding for the resources needed to drive long-term productivity and success – (1)improving quality, (2)improving service, (3)boosting profitability, (4)employee skills 6/people: we will continuously improve our business performance through engaging and developing our people – (4)employee skills I agree that analyze from macroscopic perspective, the strategies seem to match the visions here, which i sum up above. Each one corresponds to one or more of the fundamentals. However, I believe the gaps occur within the four fundamentals from the vision statement and the “six planks”due to their broad description and focus. In particular, the last one people mentioned in the “six planks”which does not cover the development of employee skills overall.

Post 2:If the analysis of Coors Vison Statement as follows: at first, it shows two aspects 1) Tradition and history: has a proud history of visionary leadership, quality products and dedicated people; 2) Human, financial and physical: to bring great tasting beer, great brands and superior service to the distributors, retailers and consumers and to be a valued neighbor in the communities. Then, it focuses on the 4 fundamentals: a) improving quality, b)improving service, c) boosting profitability, and d) developing employee skills. Corresponding to the “six planks”, we can find out:

Basline Growth – boosting profitability
Incremental Growth – boosting profitability
Product Quality – improving quality
Distributor Service – improving quality and service
Productivity Gains – – boosting profitability
People – employee skills

Personally, from the aspect of financial management, Coors’ general business strategies seem to focus a bit more on financial measures than other aspect of the business such as how to become a valued neighbor in the communities.

Post3: 回复– I like your description way that combine the Vison Statement and “six planks”correspondently, making the comparison much clearer. So it inspired me to do it with the same way.

Post4: Another way to compare Coors vision statement and the business strategies is that we should understand what is the different between them. The Vision of a company is the way that it views its products, its markets, its customers and itself. The Vision answers the simple question “Why are we here?”. The Vision is a goal. It is not the same as a strategy; business strategy tells you how a company is going to achieve (or maintain) its Vision. The strategy is a plan, the tactics are how the plan will be executed and the Vision is the end-result.

Post5: Additional explanation of the last one in “six planks”, in order to develope employee skills referred in Coors Vision Statement, we can not only improve our business performance through engaging but also, building up salaries rate regulation, developing training system and Providing opportunities for increased responsibility and career advancement 2/Link the Coors Operations and Technology (O&T) department vision statement to the O&T strategies or “supply chain guiding principles”. Are there any gaps?

We can divide Coors Coors Operations and Technology (O&T) department vision statement into 4 parts:1/process, 2/quality and innovation,3/information and technology, 4/learning and exercises a tenacious approach, and then compare each of one with the O&T strategies as following. 1/Well-defined and understandable processed is required to design, safely produce, and deliver greater tasting beer at its freshest, with superior packaging beer with superior packaging and competitive cost. (1) Simplify and stabilize the process

(2) Balance and optimize the overall process

2/By the quality and innovation we employ in all enables Coors to be more competitive and notable. (3)Relentlessly purse continuous improvement
(5) People doing the work are critical to lasting improvement (9) Know your customers’ expectations
3/Using accurate information and appropriate technology improve organization’s performance. (6)Short cycle time + reliability = flexibility
(12)What gets measured gets done
4/By learning and exercising a tenacious approach, we can eliminate and reduce cost. (2)Eliminate non-value added time and waste
(7)Find and fix the root cause
(8)Know your costs
(10)Make decisions where work is performed

With above analysis, Coors O&T department vision statement is pretty much aligned with the its strategies. However, Inventory is a liability, not an asset – The vision statement doesn’t really capture the importance of this concept. Coors should stress the importance of getting inventory out the door and giving special attention to its inventory that sees the most demand from its customers.

+ 补充: Depending on the Operations and Technology (O&T) department of Coors’business strategy, the 4th one “Inventory is a liability, not an asset”doubtfully matches with the vision statement. From the stand of the O&T department, it may state that there exists risk when the inventory transfers into merchandises, so at this time, it is kind of reasonable to say that Inventory is a liability, not an asset. Another explanation of the business strategy from the O&T department listed “Inventory is a liability, not an asset”is that the purpose of this department is to eliminate the cost of the production and then to increase the profit. Therefore, it kind of make sense to say the inventory is a liability instead of an asset.

3/Provide possible explanations for the performance gaps identified by Coors benchmarking analysis. From Table1 Benchmarking Analysis, it shows clearly that there are three gaps existing: Manufacturing cost per barrel; S,g & A cost per barrel; Net profit per barrel. With the general analysis, the domestic market share of A/B is more than twice that of Miller and more than four times that of Coors. A/B has the advantage in the beer industry as the price leader and has the power of setting the selling price. And Coors has the least attractive results out of the three major beer companies (Anheuser-Busch, Miller, and Coors). The manufacturing cost per barrel is the highest for Coors at $55.00. Anheuser-Busch on the other hand had the lowest at $48.00. The S, G & A cost per barrel was also the highest for Coors at $29.00 and Miller had the lowest at $27.00, which was only $0.50 better than Anheuser-Busch.

Therefore, Coors can only make higher profit by cutting costs so that it can be the envy its two competitors. Besides, it can obtain more profits by building its key premium brands in key markets and strengthening its distributor network, with improved supply chain management. (1)The main reason on the gap in the manufacturing cost is because Coors often could not meet its goal to load beer product directly off the production line into waiting railroad cars. This disrupts the production plan and therefore contributes the increase of labor cost.Given Coors lack of production locations, one glaring reason for the gap in profitability is the distance of delivery required under Coors current supply chain. With only 3 domestic production locations and 21 satellite redistribution centers coors will have significantly longer than the 500 mile minimum production to distribution site A/B has established with 13 domestic production plants.

(2) The main reason on the gap in the S,G&A cost is due to the distribution deficiency. Compare to the other two competitors, on average, Coors has had to ship its beer eight to nine times further than its competitors. Also, Coors only has a maximum warehouse capacity in Golden, Colorado of 600,000 cases of beer which is equivalent to one 8-hour production shift. Thus, Coors has had to load per week about 1,500 beer trucks from 68 truck docks and about 400 railroad cars from 22 rail docks.” This distribution deficiency problem causes the variance of sales costs. To sum up, due to both the highest cost of manufacturing cost per barrel and S,G&A Cost per barrel of Coors among the other two competitors, the application of the balanced scorecard seems to the preferable one for Coors. For BSC tries to minimize information overload by providing a limited number of measures that focus on key business processes by level of management. That will help efficiently contribute S,G&A expendsure and eliminate these SG&A gaps.

4/Answer the frequently asked questions (FAQ’s) already raised by employees about the Coors BSC project. Which FAQ’s were critical to Coors successful implementation of its BSC over the last decade? First of all, allocating these fifteen questions into five parts will be more easily to understand. The first part is about some related questions of the balanced scoredcard: 1.Will the balanced scorecard be linked to any incentive plans? Yes, the project strategy was to implement a performance measure process that focused on continuous improvement, rewarded reasonable risk taking and learning to advance performance, and enable employees to understand the opportunity and reward for working productively. 2. What if a measure does not drive the correct behavior after implementation? What process will be used to evolve the scorecard? How will my input be heard? The BSC provides a basis for management to improve the company and align the directives to meet both short and long term goals.

The employees are encouraged to participate in the dialogue surrounding the measurements and speak to their managers about any suggestions or opportunities they see for the Balanced Scorecard. 8. Will the balance scorecard be used to compare the performance of the three U.S. plants? Since each plant is different, how can we be expected to use the same scorecard? Yes. While each plant may be different, all three plants have the same goals. The balanced scorecard will highlight and evaluate how the company can work together to improve and achieve those goals. 10. There may be some important measures excluded from this scorecard.

If so, will they eventually be added to the scorecard? Yes. The scorecard will be adapted to business needs and requirements. It will updated to include the relevant measures as required. 11. Will there be a throughput measure on the scorecard? I cannot affect the number of barrels coming through my plant. That is determined by sales and scheduling that shifts production between my plants. The scorecard will include only those measurements that will help management evaluate the achievement of Coors’ vision and strategy. The purpose of the scorecard is to simplify information, not overload management with information that are not exactly necessary.

13.How often will the scorecard be updated?

Non-monetary measures are reported more frequently than monetary measures. Balanced report cards can be updated as often as daily and as infrequent as annually. It depends on the level of the measurement.

14.Will the scorecard be used as a club?

No. The scorecard is used to highlight improvements to the company and to be used to strategize how to continue improvements. The intention is not to use this to punish employees

The second part refers to the question about load schedule and distributor. 3. Won’t the measures reduce our ability to be flexible with our distributors and make last minute changes for them? No, the balance scorecard includes non-monetary measures such as machine downtime, percentage of capacity used, and deviations from schedule. Part of the Coors vision and strategy is to allow its employees the freedom to continuously improve these measures, and be rewarded for doing so.

4. Why is the window on the Load Schedule Performance measure so tight? What difference does it make if we get a load out within plus or minus two hours? If we get it out the day it is scheduled, won’t the load arrive at the distributor as planned? The window is measured so tight to reduce production bottlenecks. Also, since Coors’ delivery trucks and rail cars have to travel such a distance, they need to be loaded within two hours of their scheduled time to ensure on time delivery. This will increase profitability, customer satisfaction, and the sense of teamwork among Coors’ employees.

The third part can be regarded as the measure change:

5.We already have plant measurements that are working. Why would we want to change them? The traditional, cost-based performance measures are outdated and are no longer an effective means of measuring performance. For example, direct labor variances were becoming less important due to the highly automated nature of the beer production lines. 7. Why would you base Production Stability, Load Schedule Performance, and Load Item Accuracy on the initial weekly schedule? The schedule changes constantly. Why measure me against a weekly schedule that has changed as a result of something I had no control over? Teamwork is critical to the success of Coors. All employees should be engaged whenever it is possible to ensure that the other goals and objectives of the company can be met. Again, production and demand should be homogeneous.

The fourth part is about the production of Coors:

6. The Production Stability Measure does not incent the production lines to run ahead. Doesn’t it make sense to allow us to run ahead on major brands as a cushion for those times when we have problems? So what should we do when we are more than an hour ahead, shut the line down? With the viewpoint that inventory is a liability, we do not want to be running ahead as this increases our inventory on hand that is not moving out the door quickly. We do not want our inventory overflowing our limited warehousing space. By not running over, we can keep our storage costs down and increase profitability.

The fifth part is about people who play a part in a measure: 12.How can you hold me responsible for a measure when I am not the only one who can affect it? Coors’ vision statement outlines the sense of teamwork that the company values. Every employee is working together for the same goals. No one person will be held responsible for a measurement. Also, the balanced scorecard is to incent improvement, not punish. 15.Who will put together this scorecard?

Ken Rider and employees from supply chain management are responsible for putting together this scorecard. However, input from every employee is valued. In my opinion, the 1,3,4 questions are critical to to Coors successful implementation of its BSC over the last decade. 5/Considering the prior gap and benchmarking analyses, design specific performance measures with benchmarked targets (where feasible) and with reporting frequency to create an operational and acceptable BSC for Coors. Which performance measures were critical to Coors successful implementation of its BSC over the last decade? Based on the Balanced Scorecard path an organization first must first know and understand:

1/The company’s mission statement

2/The company’s strategic plan/vision

3/ (1)the financial status of the organization (Financial Perspective) (2)How the organization is currently structured and operating (Internal Business Process) (3)The level of expertise of their employees (Learning & Growth)

(4)Customer satisfaction level (Customer Perspective)

For this case study, I have come up the following performance measures of BSC for Coors: 1) Improve productivity, Long-Term shareholder Value, Grow Revenue (Financial Perspective) 2) Satisfy Customer Needs, Gain Market Share, Improve reputation (Customer Perspective) 3) Manage operations, Product leadership (Internal Business Process) 4) Personnel development, Employee attitudes (Learning & Growth) I think the performance measures under Customer Perspective were critical to Coors successful implementation of its BSC. If customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

The concept of having a balanced scorecard essentially discusses a management control system as a means of gathering and using information to aid and coordinate planning and control decisions throughout an organization. It is usually designed around the concept of the balanced scorecard, with financial and nonfinancial information in each of the four perspectives of the scorecard. These four perspectives are financial, customer, internal business process, and learning-growth. There are four perspectives and information from the case to create performance measures of a balanced scorecard: Financial perspective

1) Manufacturing cost – decrease cost per barrel $2, from $55 to $53 2) S, G & A cost – decrease cost per barrel $2, from $29 to $27 3) Net profit – increase net profit per barrel $2, from $4 to $6 Customer perspective

1) Customer satisfaction – Coors should strive to meet and exceed customer expectations 2) Repeat purchases – Coors should also focus on retaining customers and respecting their input as repeat customers Internal Business Process perspective

1) Load Schedule – improve load time by 40%, from 60% to 100% 2) Load Item Accuracy – improve item accuracy by 5%, from 95% to 100% 3) Production Stability – improve production at planned time by 50%, from 50% to 100% Learning and Growth perspective

1) Employee training – Coors can improve employee performance by continued training and learning opportunities 2) Decentralization – Coors can improve performance by giving employees more freedom to make decisions, especially when quick thinking is needed in a changing environment 6/Perform an economic value added (EVA) analysis to assess its potential as a BSC financial performance measure for Coors. Should EVA become part of Coors BSC? EVA= Net Operating Income (After taxes)- (Capital Invested* Weighted Average Cost of Capital) EVA= Net Operating Income (before taxes) * (1- Tax Rate)- (Capital Invested * Weighted Average Cost of Capital) Based on the given number:

(1)EVA = EBIT (1-tax rate) – (Cost of Capital*WACC)
EVA = 105(1-.44) – ((900+45+65+30) x 10%)
EVA = 58.8 – (1040 x 10%)
EVA = 58.8-104
EVA = (45.2 million)
(2)Net operating profit – (Cost of capital*capital investment) (105 – (900*10%)
= 105 – 90
= $15 million.
But i can not make sure wich one is the right one.

EVA= after tax operating income-[weighted average cost of capital*(total assets-current liabilities)] $82,543,440-[10%*($1,412,083,000-$359,146,000)]
=$82,543,440-(10%*1,052,937,000)
=$82,543,440-$105,293,700
=$22,750,260

EVA should be include as part of the BSC.
$58,800,000-[10%*($1,400,000,000-$170,000,000)]
=$58,800,000-(10%*$1,230,000,000)
=$58,800,000-$123,000,000
=($64,200,000)

7/With all the industry changes, especially the recent mergers and acquisitions (M&As) involving Coors, what were lessons learned for Coors BSC project over the last decade?

Strengths
Molson-Coors benefits from their large market share in the beer industry in North America. Molson Coors is an innovative company, first by surviving prohibition in the US, when their product was deemed illegal; they began to bottle water to keep the company going. 1/Strong Financial Position

2/Alliances with NFL and NASCAR
3/Successful joint ventures
4/Growth in foreign markets
5/Strong brand image

Weaknesses
1/Lower market share in the U.K
2/They rely on only a few popular brand names, which expose the company to vulnerability when sales and economic regions fluctuate. 3/They have dependencies on raw materials.
4/Don’t appeal to class of people with a lower- disposable income. 5/They rely considerably on a small number of suppliers to obtain their packaging. 6/Molson-Coors relies on 70% of its U.S. sales from Coors Light.

Threats

1/Top competitors include: Anheuser- Busch & Heineken
2/Any significant increase in raw materials prices will negatively affect their margins. 3/Any significant decrease in the ability to obtain their raw materials will also affect their margins. 4/Perceptions that beer is not as healthy as other alcoholic beverages like wine. 5/Economic recession
in the US increases the sales of beer at first, but as the recession continues over a longer period of time, it may cause sales to decrease ST Strategies

1: Use market share and alliances in North America to promote company. NASCAR and NFL are only big in the US, not other markets, so have to be smart in how they promote and market their products, but can use those sports to their advantage! 2: Expanding into other markets along with diversification of their brand, will help reduce the risk of sales in challenging financial times in the US. 3: Use company`s strong financial position, along with strong market share percentage and alliances to create a stronger/ potentially healthier brand image.

WT Strategies

1: Coors`s low market share in other markets will suffer as a result of a recession. Expand into foreign markets! 2: Dependency on suppliers, will be influenced even more if there are any changes in raw material prices or during recession periods. The Balanced Scorecard is the preferable one fo Coors to implement. Over the last ten years Coors has not grown, instead they have held at 10% of the market even though they merged with another company during this time. However, the complexity of their distribution channels has required better management which the Balanced Scorecard did assist with. By tracking the production and shipping performance there were improvements. However, based on no growth within the sales/market share perhaps more focus needed to be placed in this area. In order to grow successfully they need to focus not just on costs but generating the sales to grow.


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