ADVANCED STRATEGIC MANAGEMENT WORKSHOP ASSESSMENT Workshop Assessment Guidelines: Associated British Foods, PLC (ABF) For Group Assessment 30% of Course Grade (one grade for each Group) George Weston (CEO) has assembled the senior executive team (you) to: 1. Consider ABF's approach, management style, portfolio options going forward 2. Consider key insights from three divisions: - Sugar - Retail - Grocery 3. Consider key issues for the company and individual divisions (including Ingredients and Agriculture) To make the meeting productive the CEO has circulated general briefings as a prompt to guide presentations and discussions – the guidelines are subsequently outlined. (Note: in the SM Course we gave you detailed guidelines for Unilever and Ice-Cream; for ABF the guidelines are more general to allow you to focus on the areas you feel are managerially more important and useful/interesting for the class) ABF Information Sources Note: Sources like Euromonitor update reports frequently. You should focus on the latest reports. In familiarising yourself with ABF we would recommend: 1. You initially read the Associated British Foods, PLC case 9-912-042 - Start with Appendix A: 'The making of a company' - Review exhibits 1a to 1c (overall ABF performance), then 1d-1h (divisional performance) - Read the case noting management style/culture and content on the food system, Sugar and Primark plus supporting appendix data (exhibits 3 to 8) 2. Listen to the ASM Introductory Tutorial 3. Go to the ABF site: www.abf.co.uk Particularly of note: Investor Relations - Annual reports and interims About Us - Provides an overview of ABF's history, an overview of the divisions with links to divisional and brand sites To: ABF Senior Executive Team From: George Weston Subject:Meeting topic: Applying Advanced Strategic Management Approaches - How to add value, innovate, grow, build business Our decentralised style of operation promotes focus on performance in an area. Our style on the other hand does not fully encourage divisions developing a holistic view of ABF operations or sharing ideas/best practice. To help us broaden and learn from each other I am introducing a bi-annual senior executive meeting. The theme for the initial meeting will be: 'Applying Advanced Strategic Management Approaches': Could I stress this is not a decision-making meeting – it is for us to share best practice and discuss the issues/challenges/and opportunities that face us with the focus on how to accelerate top line growth. Meeting Agenda I have asked three of our divisions (Sugar, Retail and Grocery) to review their performance and share with us how they apply strategic management approaches to improve decision making and future performance. A team, led by myself, will review ABF performance and our organisational approach – is there a better way for us to add value to the whole? To close our meeting I have asked a team made up of head office and divisional executives to outline what they consider to be the key issues, challenges and opportunities ABF and the divisions face and how we should address them. I have asked the team to focus in on at least two key areas. To give you additional background for the meeting I attach the Brief each team has been working to. I look forward to meeting you all and to a stimulating day on Applying Advanced Strategic Management Approaches – how to add value, innovate, grow, build business. Kind Regards, George Workshop Briefs Introduction Each Group will have an hour at the meeting. The hour is for the Group to organise as they see fit – but we recommend a formal input followed by at least 15 minutes of discussion and comment (there is a Class Participation grade to consider). The main aim of each presentation is to managerially apply the contents of the SM and ASM Courses providing your audience with insights and ideas (with the stress on ASM content). NOTE: Each Brief has prompts which you do not have to adhere to – you are the leaders/managers in charge of your Brief. In delivering your hour you can draw on any of the materials of the combined SM and ASM Courses, other MBA courses and your own managerial experience. Presentation Style/Protocol • Naturally introduce yourselves, the purpose of the presentation and your agenda initially • We are managers so the presentations should stress the managerial • Avoid generalisations, stress quantification • We want you to use the concepts to illustrate to the class how they can be used managerially (remember the class are other ABF senior executives) • You can assume the audience is familiar with the concepts, there is no need to explain them, just managerially apply them • You do not all have to present – but the Group should all be together at the front of the class Your presentation should show managerial mastery of the 'tool kit' and understanding of the division/company/issue. In addition you should leave the audience with ideas/approaches they can use elsewhere – especially how to add value/innovate/grow/build business. Reflection Many argue that Reflection is the most important part of the Manchester Method. Reflection is best after the event (but still whilst it is fresh in your mind). However, could we ask all groups to prepare for a short Reflection session (5-10 minutes or so) after their formal one hour presentation/Q&A/discussion has come to an end. We will then ask for your initial Reflection: - What did you learn; what could you now apply in your own organisation/new business ideas? - What lessons would you like to share? - Insights from the learning and work process? - How well did you do, where could it have gone better? (a good manager/consultant always knows where it could have been better). The stress of Reflection is always to learn from your own experience and share those learnings with others. "What I do, I understand" – Confucius "Fools learn from experience. I prefer to learn from the experience of others." – Bismarck Divisional Briefs: Sugar, Retail, Grocery Could all divisional presentations consider applying: - Space - The Environments Matrix - At least some aspects of the Industry/Market Fact Sheet (typically drip fed into the presentation) - The Business Model Canvas – Osterwalder - A review of structural profile of the Division, or part of the division on the 18 PIMS factors, in words (covered in Workshop input) - All presentations should consider how to add value/innovate/grow/build business The Briefs pull primarily on Manual Section 5: the Competitive Environment and Business Strategy covered in the SM and ASM Workshops with supporting readings – but you can leverage other parts of the SM/ASM Courses and other MBA courses. Brief 1: Sugar Division "Sugar may be sweet but the business is characterised as being a 'heavy asset commodity'" – and sugar in our diet is increasingly viewed negatively. Presentation Prompts: 1. Divisional performance review – vs. ABF and vs. the industry  Include Space 2. External environment evaluation:  Manual Section 5, especially: Activity Chain; aspects of the Industry/Market Fact Sheet (especially supply/demand/price); the Environments Matrix (stress on describing and how to manage the Stalemate); Megatrends/PESTER (especially regulation; Scenarios ) 3. Imperatives and Key Success Factors for ABF Sugar 4. Implications for the Business Model Canvas and insights from PIMS 5. The way forward for Sugar – how to add value, innovate, grow, build business (initial stress should be on Horizon 1, how to build a firm foundation before progressing to Horizons 2 and 3)? 6. Lessons, insights for the audience Sugar Information Sources ABF • Review the annual report • ABF Case pages 6-8 and 18-19 • www.absugar.com (timeline, news archives etc.) • www.britishsugargroup.com • www.abfchina.com Euromonitor • Has articles under 'Sugar and Sweeteners' United States Department of Agriculture Publishes reports on a regular basis on: - Sugar: World Markets and Trade - Sugar and Sweeteners Outlook (This is a good site but not easy to navigate) OECD – FAO Agricultural Outlook 2015-2024 links to 'Commodity Snapshot on Sugar' - predicts raw and white sugar prices, production, consumption and exports up to 2024 and overviews world sugar markets, Brazilian agriculture etc European Commission: AGRI C5, 24th Oct 2013: - Sugar Trade Statistics - Sugar Price Reporting - Sugar Market Situation European Commisson: AGRI C4, 26th November 2015 -Sugar Market Situation European Commission CIRABC provides EU white sugar prices by month ISJ's World Sugar Outlook 2015 provides several useful articles F.O. Lichts provides latest news on sugar, ethanol etc – BUT most of their content requires an expensive subscription Czarikow.com has some useful updates on sugar and ethanol + latest news Mintel Consumer Attitudes towards Sugar and Sweeteners (released January 2015) Sudzucker Group is the world volume leader with a strong European beet position. The company's Investor Relations section has useful presentations and they provide a useful benchmark. Leading Brazilian suppliers of sugar include: Acucar Guarani S.A., Cosan Limited and Sao Martinho S.A. Additional Notes on Sugar Main Sources for the following notes: • Wilmar International Limited. Case 311-047-5 Wee Beng Geok et al • GLG Life tech (A): Sweetener Industry Note. Case IMD-3-2278 P. Bochukova Sugar Cane and Sugar Beet • Edible sugar is produced from sugar cane, sugar beet or corn. Sugar manufacturing is seasonal, with season lengths of 6-18 weeks for beet and 20-32 weeks for cane. • In 1900 beet accounted for 60% of world production. Today cane accounts for some 80% of global production. The cane plant thrives best in tropical, hot, sunny areas. Sugar cane needs plenty of moisture during the growing period. The cane grows for 10-18 months before being harvested. • In many developing countries cane is harvested by hand. Harvesting machines are used in developed countries and increasingly in developing countries. • Cane contains 70% water, 14% fibre, 13% saccharose and 3% soluble impurities. After extraction the juice is evaporated to syrup and then centrifuged to separate molasses from the crystals. The crystals are then dried, and may be further refined, before being bagged for shipment. • Beet is produced in colder climates. The EU produces around 50% of the World's beet sugar, mostly in the Northern regions of France, Germany, Poland and the UK. • After washing sugar beet is sliced and the slices drawn into a slowly rotating diffuser were water is used to remove sugar from beet slices. About 15 cubic metres of water and 28 kilowatt/hour of energy are needed for each metric tonne of beet processed. • Sugar cane production costs are typically lower than sugar beet per tonne of output. USDA "Sugar and Sweeteners Outlook" reports indicate: Costs of producing Raw Sugar Cane and White Sugar Cane per metric tonne are on average considerably lower than the average cost of producing Beet Sugar. However, high cost Raw and White Sugar Cane producers are not competitive with low cost producers of Beet Sugar. Low cost cane producers include: Argentina, Brazil, El Salvador, Ethiopia, Malawi, Nicaragua, Sudan, Swaziland, Thailand, Zambia, Zimbabwe  Other exporters include: Australia, Columbia, Guatemala, South Africa,  Low cost beet producers include: Belgium, Chile, Czech Republic, Denmark, Egypt, Northern France, Germany, Netherlands, Poland, UK, U.S.A. • You may be interested in viewing YouTube: - How is sugar cane processed? (1 min 52) - Sugar manufacturing from cane (Costa Rica video) (9 min 36) - How it is Made – Beet Sugar (2 min 12) YouTube has many more videos Bio fuels Biofuels are derived from the biomass of plant material. Ethanol: obtained from the fermentation of sugar or converted starch contained in grains and other agricultural feedstock. Brazil is the world leader in ethanol production. Regulatory Considerations The sugar industry is affected by a significant amount of regulation around the world. It is a commodity; raw sugar cane and sugar beets are perishable; processing is capital intensive. Regulators frequently support their local producers: The US has historically used policy tools such as price supports, tariff-rate quotas, loans to processors. The EU set up a sugar common market in 1967 to stabilise the industry. EU countries were allocated quotas which could be sold (€631.9 tonne for white, €523.7 for raw sugar) at significantly higher prices than world prices. The WTO in 2005 obliged the EU to cap its annual exports of subsidised white sugar to 1.37m tonnes (historically 6m tonnes). In 2006 EU reforms included: - Reduction of the production quota by 6 million tonnes (approximately 30%) - Introduction of additional quota of 1.5 million tonnes which producers could purchase if they saw themselves to be competitive - Reduction of intervention price for white sugar to €404.4 per tonne from 2009/10 (a 36% reduction) - Reduction of minimum price per tonne paid to sugar beet growers to €26.29 (a 40% reduction) - Partial compensation to sugar beet growers for the effect of price reductions - A temporary restructuring fund of €6.2 billion - The EU sugar market is regulated by production quotas, a minimum beet price and trade mechanisms. The EU reference price for white sugar has reduced from €632 a tonne to €541 a tonne in 2008 and €404 a tonne in 2010. A further reduction is scheduled for 2017. Brazil the world's largest sugar producer and exporter completely deregulated sugar prices in 1999 Other Countries: in most other countries sugar remains largely locally produced and consumed with deregulation stalled. Environmental Implications of Sugar Sugar cultivation and processing has considerable environmental impact: - Land clearing leading to loss of rain forest, savannah etc. - Sugar cane is a water-intensive crop using some one million litres of water to produce 12.5 tonnes of commercial cane. The crop frequently affects river flow by drawing heavily on underground water supplies - Most cane mills burn bagasse (fibrous waste from milling) which leads to air pollution - Burning cane prior to harvesting causes air pollution and soil erosion - In European beet studies less than 50% of fertiliser is absorbed by the crop resulting in significant run-off and water pollution - Processing of cane and beet results in polluted effluents Brief 2: Retail Division – Primark/Penney's 'Retail is Detail' – but here we want you to stand back with the mindset of a retailer. Presentation Prompts 1. Divisional performance review vs. ABF vs. other retailers – include Space 2. Global, Regional trends 3. Market Positioning (UK focus)  Manual Section 5 (especially extracts from the Industry/Market Fact Sheet, Environments Matrix/Strategic Groups) and SM/ASM business positioning concepts (stress unit economics - i.e.: per square foot, per store, per employee etc.) 4. The Global/U.S.A./European expansion opportunity (implies regional/country screening) 5. Business Model Canvas 6. Opportunities to add value, innovate, grow, build business 7. Staircase for expansion plus financial implications 8. Lessons, insights for the audience Retail Information Sources: Primark/Penneys • Review the annual report • Case: ABF 9-912-402 pages 10-12 and 20-21 • ABF Media section has videos on: - Primark – Store openings - Primark – There is nothing like us - www.primark.co.uk Euromonitor • Associated British Foods PLC (ABF) in Apparel (World), July 2015 • Footwear in Western Europe: Market Trends and Performance, Nov 2015 • What Men Want: Getting to Know the Male Consumer in Apparel and Footwear, Nov 2015 • Millennials: Impact on their Behaviour on Global Consumer Markets, Oct 2015 • Top 10 Apparel and Footwear Markets: Growth Strategies When the Good Times Stall, Sep 2015 • Micro Fashion: Trends in Childrenswear, July 2015 • Apparel and Footwear in 2015: Trends, Developments and Prospects, May 2015 • Apparel and Footwear 2014: New Insights and System Refresher, Dec 2014 • Apparel and Footwear Retailing in the Digital Era (Part 1): Exploring Innovation, May 2014, (Part 2): Regional Trends, June 2014 Mintel • Online vs. offline in European clothing retailing – Feb 2014 • The Consumer – Where Do 15-24's Shop for Clothes? – Dec 2014 • Clothing Retailing – UK – Oct 2015 • Primark hits the jackpot in Spain – August 2014 • Fashion: Impact of the Recession – June 2010 • Text: A retail text may also be worth dipping into. Peter McGoldrick's 'Retail Marketing' is an old classic, now updated: Retail Marketing Management, H. Goworek & P. McGoldrick Brief 3: Grocery Division (UK focus) We have good market data on the UK – after a holistic overview of divisional issues, challenges and opportunities you may want to focus on one area of the Grocery portfolio to illustrate Business Strategy approaches. 1. Divisional performance review  Include Space and at least one portfolio matrix – categorise brands in the Grocery portfolio (i.e. degree of differentiation, type of economics, price per kg. etc.)  Imperatives to add value, innovate, grow, build business in the brand portfolio 2. Positioning imperatives versus the giants of the Arena 3. Criteria for Mergers & Acquisitions 4. The business approach in a selected brand - Competitive environment background - Business Model Canvas 5. Growth imperatives – how to add value, innovate, grow, build business (roll out into adjacencies, internationalise etc.)? 6. Lessons, insights for the audience. Grocery Information Sources • Review the annual report Euromonitor Has numerous relevant 'Briefings' and 'Opinions' on ABF brand categories. For example for Hot Drinks /Tea there are: • Associated British Foods (ABF) in Packaged Food – World – Feb 2014 • Associated British Foods in Hot Drinks (World) – August 2015 • Tea Global Corporate Strategy: Diversity and Tea Experience, Oct 2015 • Global Hot Tea: Growth Strategies and Opportunities, June 2015 • Hot Drinks in 2014: New Occasions, New Consumers, New Opportunities, August 2014 • Hot Drinks 2014: New Insights and System Refresher, April 2014 Mintel Has several UK reports on markets ABF is active in: • Bread and Baked Goods – Oct 2015 • Cooking Sauces, Pasta Sauces and Stocks – Jan 2015 • Tea, July 2015 • Hot Chocolate and Malted Drinks – March 2010 • Breakfast Cereals – Sept 2015 Note: in previous semesters Groups have selected: Hot beverages; Twinings Tea; Ovaltine; UK bread/Kingsmill; Jordons cereal; Jordons cereal bars; Rivita as the brand of focus – but there are many other choices. Brief 4: ABF Company Strategy "Our overall aim is to achieve strong, sustainable leadership positions in markets that offer potential for profitable growth. We look to achieve this through a combination of growth of existing businesses, acquisition of complementary new businesses and achievement of high levels of operating efficiency ... our watch words are efficiency, quality, shareholder value and growth" – ABF "ABF stayed away from internally attaching labels to its companies, such as identifying "stars" or "cash generators", either internally or externally." (ABF case 9-912-402) For the purposes of this presentation we want you to use the labels/terminology. 1. How well is ABF performing against its overall aim? 2. What role, if any, is there for Vision, Mission, Value statements at company or divisional level? (Manual Section 6) 3. Is the Style and Parent-Fit approach of ABF appropriate going forward? (Manual Section 7) 4. How will the centre help the divisions add value, innovate, grow, build business? 5. What organisational units, Remits and Decision Rights are appropriate? (Manual Section 7) 6. How well is the portfolio performing? 7. What are the portfolio development options going forward? 8. What is the role of each portfolio element? 9. What performance guidelines, if any, do you have for the divisions moving forward? 10. Lessons, insights for the audience The Brief pulls on Manual Sections 6 and 7 Brief 5: ABF Implementation - Divisional Challenges, Issues and Opportunities At many companies the senior executive team meet to discuss a key topic, i.e: - How to boost growth, profitability, cashflow, productivity, innovation etc.? - The role of Mergers & Acquisition and Divestment in shaping the portfolio? - How to strengthen culture/behaviours and the leadership/managerial pipeline? (note: ABF family ownership). - How to aggressively move into rapidly developing countries like China and India? - How to respond to major events, i.e. a financial meltdown, recession, technological discontinuity, change in regulation, a competitor initiative etc? - How to handle the commodity cycle/shocks to the supply-demand balance? - How to share best practice in a particular area? - What ten things did not go well? What can we learn from them? (Unilever CEO forum) - What five things went well, what five things did not go well? (Jagiello Associates client) - Etc, etc, etc Sometimes such sessions are more about opening up executives thinking by considering scenarios, contingencies and the like or simply to build camaraderie and relationships. "In September 2011 top executives at ABF met ... to assess how to capture opportunities in all sectors ... identify global trends and understand how ABF would need to position itself in the global food system" – ABF case 9-912-402. More recent senior executive discussions have included: - What are the implications if the Euro currency falls apart? - What are the implications if Spain leaves the Eurozone/Spanish banks collapse? The CEO has asked a team of senior executives drawn from the centre and all five divisions to identify the key challenges, issues and opportunities faced by ABF as a whole and in each of the divisions. 1. What are the key issues, challenges and opportunities faced by ABF? 2. What are the 1 to 3 key issues, challenges and opportunities faced by each division? (Look for common themes and overview on 1-2 slides) 3. The CEO has asked you to consider four areas he has been reflecting on (but you do not have to address any of these): a. How to pursue all divisional opportunities within our financial constraints? b. b) As retail continues to grow ahead of the portfolio the family is uncomfortable with potentially having 'all of its eggs in one basket'. An IPO or partial divestment of retail would severely impact share price – again something the family is uncomfortable with. How to support retail and keep balance in the portfolio is a key issue. c. Should a component of the portfolio be sold to release funds for other areas? d. Whilst keeping divisional focus can inter-divisional synergies be enhanced? Can ABF's Resource and Capability strength and Hidden Assets be leveraged to create new revenue and profit streams? Could you select at least two topics to address and you may have time to address more. The emphasis should be on how to add value, innovate, grow, build business Note: You can pull on all of the MBA courses and your own managerial experience. The Brief is yours to construct as you 'read' the situation – what would add most value to ABF and the divisions? Authors Note: We have sat in and helped to deliver such sessions. Quite often it is simply a question of identifying a theme and giving ideas. For example: - What are the Traits of an Excellent Company? (Manual Section 7.1). Do we accept these insights? If so, how do we compare? How can we improve? - Let us look at the Paradox of Success (Manual Section 7.2), what is the problem? What Lessons do those who break the Paradox give us? How can these lessons be capitalised on by ABF and the Divisions? - etc., etc, etc. Group Formation for the Workshop 1. We will ask you to self select Groups at the start of the semester 2. When class size is small we will ask you to form less than 5 Groups  When the Workshop has 4 Groups Brief 5 on ABF Implementation will be omitted. Group 4 (ABF Company Strategy) will be asked to touch on Brief 5 in their presentation to prompt class discussion. 3. Workshop student class lists are posted for each Workshop with instructions for how many groups to form and number of students to have per group. 4. Students who are unable to join/form a group will be allocated to one on 18th January, 2016 5. After groups are formed assessment Briefs will be randomly allocated.