SEP/DEC 2019 – DULCE CO

Suggested Answer by Sir Hasan Dossani

1A: The sales director has asked you to provide a set of notes to accompany the
presentation he has prepared for the board, which discuss how the sales
development strategies he has proposed will assist Dulce in achieving its
strategic aim
EXHIBIT 2

NOTES TO ACCOMPANY PRESENTATION

SLIDE 2 – DULCE SHOPS

Dulce’s main sales channel is its own shops (currently 165 nos.) in Northland. However, the revenues
from shop is declining since last 3 years. This can be due to changes in customer tastes and buying
habits, increased competition from online retailers and the economic recession impacting on
customers’ disposable incomes.

These shops require investment in refurbishment and staff training to improve customer experience.
This is important as Dulce reputation and success have been built on the high-quality products. Hence
the look and feel of Dulce shops should as well as customer service needs to be of high quality as
well.

However, we may need to close 20 loss making shops next year so that our profits can be improved.
However we will have to ensure that customers in those locations continue to have access to Dulce’s
products through alternative sales channels such as online website or retail partners.

SLIDE 3 – DULCE WEBSITE

All Dulce products are available our own website. This is important as those customers who do not
prefer physical shopping can buy our products at their own convenience. However, we are now
seeing increased competition from other online retailers.

We an also develop other gift ideas (such as flowers, greeting cards, gifts and food hampers) which
can be sold through our website. This will help in product development as adding new products can
increase our revenues.
Online business plays a key role in international growth as there are no geographical limitations.
Customer from any part of the world can place order through the website and we can deliver it to
them. This option is more effective and cost efficient as compared to opening our own shops in other
countries.

A key area for revenue increase will come from international website sales in the next five years.
Already Dulce product is quite famous in all neighboring countries. We have a strong brand which we
can use to become an international company.

SLIDE 4 – RETAIL PARTNERS

There has been a strong growth in sales from supermarkets in last two years, specially in Dulce’s
boxed chocolates. As people visit supermarket more often, they can easily buy Dulce products from
supermarkets and which will save their time. Hence we can focus on adding more supermarkets on
our list.

Currently we do not sell all our products through retail partners. This may be because we want to
maintain some edge for our own Dulce Shops and Website. However, we may consider increasing
our product range in retail partners in order to create convenience for our customers.

We should also add more retail partners such as more gift shops and department stores so that our
geographical reach increases. This will help us in market development.
1B: Prepare a report for the finance director which:
(i) Evaluates the financial and non-financial implications of Dulce prioritising one
order over the other; and
(ii) Recommends, with justification, which order should be prioritized.
EXHIBIT 3

REPORT
TO: FINANCE DIRECTOR
FROM: SENIOR BUSINESS MANAGER
SUBJECT: TWO ORDERS
DATE: 7 DEC 2021

INTRODUCTION
This report evaluates the financial and non-financial implications of Dulce prioritizing one order over
the other and recommends which order should be prioritized.

NON FINANCIAL IMPLICATIONS

Excelsior Order
Excelsior is a high-class department store, located in the capital city of Northland. It has a reputation
for selling high quality, exclusive products. Also we don’t have any existing business relation with
them, hence this is a good opportunity to add a new retail partner.

However there are certain issues. Our new products will be sold under Excelsior’s own brand. This is
not favourable for us as customers will not know that it is our Dulce product.

Secondly, the order is for 3 months only.

BB’s Order
BB is Northland’s second largest supermarket chain. We have been supplying BB with our products
for over five years.

Sales would initially be for three months and only offered in 10% of its supermarkets. However, BB
is confident that sales would be rolled out to the remaining of its supermarkets across Northland
after the three-month trial period. This shows a promising growth potential.
Lastly, BB will be selling these products under our own brand “Dulce” hence it will give us more brand
visibility.

FINANCIAL IMPLICATIONS
A B C TOTAL
CONTR MARGIN PER HOUR 4 3 2
CONTR MARGIN PER BOX 8 9 6

1. EXCELSIOR
QTY PRODUCED 2000 2000 2000
CONTRIBUTION MARGIN EARNED 16000 18000 12000 46000
HOURS CONSUMED 4000 6000 6000 16000
TOTAL HOURS AVAILABLE 30000
NET REMAINING HOURS 14000

2. BB
QTY PRODUCED 3000 2666 0
HOURS CONSUMED 6000 8000 0 14000
CONTRIBUTION MARGIN EARNED 24000 24000 0 48000

TOTAL PER MONTH 94000

 A B C TOTAL
CONTR MARGIN PER HOUR 4 3 2
CONTR MARGIN PER BOX 8 9 6

1. BB
QTY PRODUCED 3000 3000 3000
CONTRIBUTION MARGIN EARNED 24000 27000 18000 69000
HOURS CONSUMED 6000 9000 9000 24000
TOTAL HOURS AVAILABLE 30000
NET REMAINING HOURS 6000

2. EXCELSIOR
QTY PRODUCED 2000 666 0
HOURS CONSUMED 4000 8000 0 14000
CONTRIBUTION MARGIN EARNED 16000 6000 0 22000

TOTAL PER MONTH 91000

RECOMMENDATION
In terms of financials, the contribution margin of supplying to Excelsior fully is higher ($94k), however
the second option of supplying to BB first is also very close ($91k).

However in terms of non financials, I feel that we should go with BB even though the contribution
margin is slightly lower. This is because Excelsior will not allow us to use our own label, whereas in
BB we can supply under our own brand.

Also Excelsior order is for 3 months only whereas BB is confident that sales would be rolled out to
the remaining of its supermarkets across Northland after the three-month trial period, hence better
growth potential.

SINCERELY
SENIOR BUSINESS MANAGER
Q2A: Compile a table for the chairman of the audit and risk committee
which:
(i) Analyses how the risks identified in the current risk register could have
an impact on the achievement of Dulce’s strategic aims; and
(ii) Recommends mitigating activities for each of these risks.
EXHIBIT 4

Following is the analysis of how the risks identified in the current risk register could have an impact
on the achievement of our strategic aims and recommends mitigating activities for each of these
risks:

Risk identified Impact Mitigation Activities

Competitive The global confectionery market has
marketplace many strong players. We are facing
increased challenges from online
retailers who are emerging in the
market. Also customer tastes and
buying habits are changing.
In case our market share starts
reducing, that will adversely impact
our revenues and hence our
profitability.
Dulce should continually focus on
maintaining or increasing its market
share. This can be done by
maintaining high quality of our
existing products supported with
good marketing and customer
service.
We also need to focus on product
development as customer needs are
changing. We can carry out
customer surveys to identify the
changing needs and trends.

We also need to focus on market

development. Focusing on online /
website and signing up with more
retail partners (such as Excelsior,
more supermarkets, etc.) will help
us protect our market share.
 Risk identified Impact
Key input prices Adverse changes in certain
driven by commodity prices (particularly
commodity markets cocoa supplies) could affect our
liquidity and profitability.
Any increase in raw material prices
will increase our cost of production.
If are unable to increase our selling
prices due to increased competition,
then our profit margins will reduce.
Also, increase cost of raw materials
will mean a higher amount of
payment / cash outflow to
suppliers, hence it will put a strain
on our liquidity position.
Our products must If our product is not of highest
have highest quality and contains impurities, it
integrity could be harmful to customers.
We can lose customers and hence
revenues and market share. We
may also face fines and litigations.
Unethical sourcing of raw materials
will lead to reputational loss. We
are a household name in Northland
and we cannot afford any risk to our
brand and image.
Mitigation Activities
We can buy key cocoa supplies with
forward contracts to reduce, as
much as possible, the uncertainty in
the cocoa buying process and work
with suppliers to choose the optimal
time and quantity for purchases.
We can do long term price contracts
with our suppliers to remove the
uncertainty in raw material prices.
We can adopt hedging techniques
to reduce the risk of exposure to
foreign currencies.
There should be proper policies and
procedures and controls during the
manufacturing process to maintain
strict hygiene conditions so that the
risk of contamination is minimized.
There should be a Quality Control
procedure whereby finished
products are tested on a sample
basis in order to detect any faulty
product / batch.
We must ensure that we maintain
highest level of ethical sourcing by
dealing with suppliers of good
reputation only.
 Risk identified Impact
We depend on Poor staff management or lack of
skills, enthusiasm skills will result in loss of the
and well being of competitive advantage. This is
our staff because we are dependent on
highly skilled staff, specially for
hand made chocolates.
Also, if our staff join our
competitors, our techniques will be
disclosed and competitors will be
able to produce similar quality of
cholates.
Mitigation Activities
We must ensure that our staff are
highly motivated and loyal. This can
be done through various things such
as:
• Good working environment
• Attractive salaries and bonuses
• Regular staff development
We should also focus on succession
planning and having contractual
clauses such as sufficient notice
period and non-competitor clauses.
Q2B: You have been asked by the chairman of the audit and risk committee to
prepare three presentation slides, with accompanying notes, for presentation at the
next board meeting, which:
(i) Identify how each risk response suggested by the three directors would be
categorised using an appropriate risk management framework;

RISK RESPONSES
OPERATIONS DIRECTOR RESPONSE: ACCEPT

HR DIRECTORS: AVOID

FINANCE DIRECTOR: MITIGATE

Accompanying notes
Operations Director:
The operations director is suggesting that no response is needed, hence accepting the risk

HR Director:
The HR director is suggesting director insisted that this risk must be removed at all costs and that
Dulce must stop using all cocoa farmers who use child-labour immediately; hence avoiding the risk
altogether.

Finance Director:
The finance director is suggesting to continue to use its cocoa farmers but that DULCE must control
and monitor them more effectively to maintain ethical standards; hence mitigating the risk.
(ii) Evaluate the appropriateness of the risk responses of the operations director
and the human resource director; and

APPROPRIATENESS OF RISK RESPONSES

OPERATIONS DIRECTOR:
• Customers are unaware
• Globally accepted practice
• Unethical

HR DIRECTOR:
• Stop immediately at all cost
• Not practical

Accompanying notes
The operations director stated that no response is needed, as 95% customers are unaware of the
issue, and 90% of chocolate companies purchase cocoa from these farmers. However I disagree with
this approach as it seems unethical and causes doubt over our integrity.

The human resource director insisted that this risk must be removed at all costs and that Dulce must
stop using all cocoa farmers who use child-labour immediately and look for new cocoa farmers.
Although principally I agree with the HR director, it will take time to identify supplier who are not
involved in child labour. We cannot disrupt our production in the meantime.
(iii) Consider the suggestions of the finance director, including recommendations for
TWO control activities which should be implemented to assist in managing this risk.

SUGGESTIONS OF FINANCE DIRECTOR

• Logical solution

• Controls:

• Better wage rates

• Consistent monitoring of supplier

Accompanying notes
The finance director suggested that Dulce should continue to use its cocoa farmers but that it must
control and monitor them more effectively to maintain ethical standards. As most cocoa farmers are
involved in child labour, it seems that in the short term, this is a reasonable option.

Following controls may be implemented:

• We pay better wage rates so that the cocoa formers do not have to resort to child labour.
Currently the wage rate is less than $2 per day and it is significantly below the poverty line

• We must increase monitoring of our suppliers, by more frequents audits, surprise visits, etc.
Q3: Present a set of briefing notes for the finance director which evaluate the extent
to which the criteria for achieving performance excellence are being met by Dulce,
using the findings of the brainstorming meeting.
EXHIBIT 6

BRIEFING NOTES
TO: FINANCE DIRECTOR
FROM: SENIOR BUSINESS MANAGER
SUBJECT: PERFORMANCE EXCELLENCE CRITERIA
DATE: 7 DEC 2021

This briefing note evaluate the extent to which the criteria for achieving performance excellence are
being met by Dulce:

Engagement with our customers:

Regular email and promotional offers
It seems like we are not doing this activity. Email is a easy and effective way of communication with
customers. We may adopt CRM systems to assist us in this activity.

Customer surveys
One of the challenges is that customer tastes and buying habbits are changing. Customer surverys
would help us in identifying the latest customer trends so that we can develop products and markets
accordingly.

Staff training in customer engagement

As Dulce is a high quality brand hence staff training in customer engagement, specially in our 165
shops is important. Sales director is already planning to provide training to sales staff in our high
street shops.

A variety of products to suit all price ranges

We already offer products across a wide price range, optimising its appeal and affordability to
potential customers.
Engagement and development of staff:
Regular staff training and skills updates
As we are replying on highly skilled staff for chocolate manufacturing, regular staff training and skills
updates activity will help us improve our product quality and create succession planning for second
line staff.

Annual performance appraisals

This activity is important as all staff will be provided annual goals and targets and then their actual
performance will be appraised.

Staff surveys
This activity needs to be done as it would identify the current level of staff satisfaction and their
future expectations. This will help us improve our staff retention and increase their loyalty and
commitment.

Leading the business:

Strong leadership team
Dulce has a strong leadership team as it was founded over 100 years ago by the Reece family in
Northland, initially operating from one shop in a small town. Over the years, Dulce has grown steadily
and has been very successful, becoming a household name in Northland and the surrounding
countries.

Supported by strong management team

It is important that Dulce has a strong management team as the management team will be executing
the strategies required by the Board.

Mission and aims regularly reviewed

This is being done regularly as evident from our Annual Report 20X8 which mentions our Mission and
Strategic Aims.

Strong corporate governance

Dulce is listed on the Northland stock market and adheres fully to the government’s corporate
governance guidelines in terms of board and committee structure and operations.
Managing our operations:
Investment in latest production technology
Investment in latest production technology is important to maintain high product quality, reduce risk
of product contamination and higher production efficiencies.

Regular product re-designs

Customer tastes are changing. Regular product re-designs is one of the strategic aim and is important
in order to maintain our market share and competitive position.

E-commerce
We already have a website which is used to sell our whole range of products. Website will enable us
to expand geographically and will play an important role in growth in international sales over next 5
years.

Measuring our operations:

Regular reporting of key performance measures:
KPIs help in measuring the performance of the business. The Board can assess how the operations is
performing and see whether the strategies and targets are being met or not.

Use of big data analytics

Big data is currently not being used at Dulce. Big data provides deeper insight into customer trends
and behaviors. We can develop product, marketing strategies and promotional offers using big data
analytics, which can give is competitive advantage.

SINCERELY
SENIOR BUSINESS MANAGER