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Managing Finance and Operations
Scenario: New Life Brewery Plc
New Life Brewery is a growing company with an authorised and issued share capital of £10m paid up £1 ordinary shares. There are 20 shareholders each have identical share holdings.
Sobia Schburt, the managing director, has a vision of the company floating on the LSE within 5 years and is embarking on a strategy of growth to achieve this five year target.
Currently the company brews and distributes cask ale and has a strong regional and national reputation, although the beers have yet to be sold though any major retail outlet. They are based in Kent and 80% of their sales are within the south east of England. Key corporate data is as follows:
Working capital ratio
Long term debt
£3m @ 5%
These results have been generated from a product range of 6 cask beers, distributed on their two lorries which operate 6 days a week, 8 hours a day.
Sobia wishes to expand into the spirits market by distilling gins, vodka and cognac and storing them in used beer casks to infuse the flavours of their own beers. Trevor Schubert & Co, management consultants, have provided the following estimates:
Wholesale price per bottle
Staff production costs per bottle
Cost of extending the brewery to allow for distilling £5.0m Cost of new equipment £2m, replaceable every 6-8 year
Expected sales years 1-3 is 100,000 bottles per year rising to 250,00 bottles thereafter.
Some directors have doubts about the project and have already pointed out that ingredient costs of £1 per bottle have been omitted and the consultants have not appeared to consider operational factor, financing needs & sources. One particular director who worked for a national brewer and distiller advises their owners sought a cost of capital of 9%.
As the recently appointed Corporate Services & Development Manager you have been asked to prepare detailed report for the board covering:
a) An evaluation of operational and regulatory factors to be considered by the board 25%
This requires research into the relevant environment and application of operations management theory.
b) Identification of financing needs (short and long term) with an evaluation of alternative
sources of finance
This requires identification and evaluation of alternative sources of finance.
c) A critical evaluation of the financial worth of the current proposal AND an alternative
evaluation including all costs and revenues you deem to be appropriate.
Contribution analysis, breakeven, payback, ARR and NPV should be applied to the case materials alongside your critical challenge to the proposal with associated re-modeling of financial plans
d) A detailed and fully evaluated conclusion with clear recommendations for the board to
For assessment purposes marks will be awarded for style, layout and structure
In developing your revised proposal you are encouraged to review all aspects such as pricing, operational costs, financing, cost of capital.
Using the information in the scenario
Create a Management report of 4,000 words (excluding appendices).
The report must demonstrate critical analysis and application of appropriate, concepts, models & techniques from the module materials.
Create a business case for the Board clearing stating and justifying your recommendations
The analysis must be supported by academic theories and concepts and the paper must comply with the format stated above and Harvard referencing guidelines. The reflection must not be descriptive in nature; it should provide clear evidence of understanding of the issues under consideration with an applied review of the business provided in the task scenario. IT IS ESSENTIAL YOU APPLY THEORIES
AND CONCEPTS AND NOT JUST EXPLAIN THEM.
There is no correct number of academic references to be utilised as the student must draw as many references as required to provide a high quality answer. However, a minimum of 12 academic sources are expected, and a majority of these should be current, internationally peer reviewed articles/journals or accredited textbook references. Sources such as Wikipedia and the like are not accepted. Sources available only online should be avoided.
You must be mindful of how marks are allocated based on your ability to define, analyse and apply the key concepts. The chart below demonstrates how the marks (in percentages) will be allocated according to the criteria shown.
Mark Distribution for
0 Understanding Applying Analysing Evaluating
You will notice that without any analysis or evaluation you may struggle to pass the module and note that the majority of the weighting in the marks is on analysis. Similarly, if you only demonstrated understanding and application the highest mark that you could achieve is 35%. These marks are distributed across the following criteria. 100%
A basic answer (40 – 49%) will identify main issues and demonstrate knowledge of the issue but at a superficial level. It may demonstrate difficulties with structure. Expression may lack maturity. Answers in this category will often adopt a write-all-you-know-about-the-topic approach and may include little or no application.
A satisfactory answer (50-59%) will identify majority of issues and demonstrate knowledge of the relevant issues but with some omissions in content as well as some inconsistencies in application and inaccuracies in expression. Structure will be largely logical with a broad analysis of the financial options and operational factors. Arguements will be supported byu some use of contemporary sources.
A good answer (60-69%) will adopt a logical structure and identify almost all of the factors in developing a coherent business proposal. Knowledge will be strong and evaluations will be supported by references contemporary sources Omissions and inaccuracies in the analysis will be minor and operational factors, including measureable performance indicators will be well developed
An excellent answer (70%+) will provide a comprehensive analysis of all finance and operational factors, fully referenced.