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Hazlewood Sandwiches - The Times 100 - Teaching business

By Ann Simpson,2014-03-18 16:34
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Hazlewood Sandwiches - The Times 100 - Teaching businessThe,Times,the,times

Hazlewood Sandwiches Lesson Plan from The Times 100 website: www.tt100.biz

    Hazlewood Sandwiches

Decision making

http://www.thetimes100.co.uk/case_study.php?cID=59&csID=113

    Objectives: this case study considers the issues involved in a decision to develop a new state of the art factory. It includes a study of investment appraisal.

Learning objectives

    ; to distinguish between market value and market volume

    ; to analyse the sandwich market

    ; to understand the issues facing Hazelwood when investing in a new factory at Worksop.

Introduction ( 10 minutes)

    Introduce the lesson: you will be looking at the decision by Hazelwood Sandwiches to invest in a new factory thinking about the factors that the firm would have taken into account before going ahead with the project.

    Hazelwood Sandwiches is the largest company within Greencore’s Chilled Foods Division. It employs 3,000 people of whom 2,000 work at Manton Wood. Its mission is “to lead the UK chilled sandwich market”

    Hazelwood Sandwiches has developed a new state of the art factory at Manton Wood, Worksop. It has invested ?25 million in this factory. It is a huge operation using 7 million loaves and 244 million prawns.

    Identify a key decision that was made by the Greencore Group, and a key decision that was made by Hazlewood Foods?

    How did the decisions that you have outlined involve major investments in resources?

To what extent do such decisions involve an element of risk?

Markets (5 minutes)

    Before investing in this factory the company would have looked at a number of factors including the market and likely demand. So it is important to understand the market.

    Student task: Ask students to read section 3 and then write answers to the following questions: ; state two ways in which market size can be measured (e.g. volume; value

    ; how big is the UK sandwich market? (?3bn)

    ; what are the major segments of the sandwich market? (café/sandwich bar; major multiples;

    bakers)

    ; explain why demand for sandwiches is growing (e.g. lifestyles, working patterns, quality of

    sandwiches).

Investment (19 minutes)

    All firms have to make decisions about where to invest. Recent investments by Hazlewood include the purchase of Breadwinner Sandwiches in London in 1998 and a ?25m investment in the Manton Wood factory in Worksop with a weekly production capacity of 3 million sandwiches.

    Visit www.tt100.biz for Downloads - Theory - Quizzes - Company Info - Current and Previous Case Studies

Hazlewood Sandwiches Lesson Plan from The Times 100 website: www.tt100.biz

    How does making the decision to invest ?25 million in the Manton Wood factory help Hazlewood Foods to lead the UK chilled sandwich market?

    In making the investment decision to develop the new factory at Manton Wood what sorts of investment considerations would Hazlewood have examined?

    In making the decision to invest in Manton Wood why would the payback period be important?

Profit and loss forecast (10 minutes)

    A decision to invest will depend a great deal on the expected profits.

    Student task: Students to read section 5 and explain the difference between sales and profit.

    ; explain the ways in which the new factory might reduce the average cost of a sandwich (e.g.

    volume produced, reduce wastage)

    ; explain the factors that might have influenced the Board of Director’s decision to proceed with

    the investment. (e.g. expected profits, expected levels of demand, expected rates of return).

    Using the profit and loss chart shown in the case study explain how this would lead to greater profits for Hazlewood Foods?

Investing in products ( 5 minutes)

    To stay ahead of the competition a firm has to know what its customers want. Hazlewood Sandwiches used customer research to find out the needs of retailers and suppliers.

    Student task: read section 7 and identify the retailers that Hazelwood sells to.

Review (1 minutes)

    You have examined the decision by Hazelwood Sandwiches to invest in a new factory taking into account factors such as the cost and the people issues. The case highlights the importance if understanding the market and its trends and highlights various segments within the sandwich market.

Homework

    1. Complete the worksheet on this case study.

    2. Explain two ways in which Hazlewood Sandwiches might have raised the finance to invest in its

    new factory (e.g. profits, loans, shares, debentures).

    3. Examine two ways in which Hazlewood Sandwiches might increase its profits on its sandwiches

    (e.g. charge higher price or cut costs).

    Visit www.tt100.biz for Downloads - Theory - Quizzes - Company Info - Current and Previous Case Studies

Hazlewood Sandwiches Lesson Plan from The Times 100 website: www.tt100.biz

    Hazlewood Sandwiches

Decision making

Questions and Answers

    Identify a key decision that was made by the Greencore Group, and a key decision that was made by Hazlewood Foods?

    A major decision made by Greencore was to purchase Hazlewood Foods, and a major decision by Hazlewood Foods was to expand into the Manton Wood factory.

    How did the decisions that you have outlined involve major investments in resources?

    In order to purchase Hazlewood, Greencore would have had to make a strong bid to buy a majority shareholding in the company. This would not have been possible unless Greencore had generated profits over a number of years. The Manton Wood factory involved a major capital investment in the latest technology, requiring millions of pounds of investment.

To what extent do such decisions involve an element of risk?

    All investment decisions involve an element of risk. There is always an alternative investment that should be considered, and investments typically take a number of years to pay back. In the meantime the market may alter, competitors come in with new products, and demand may change for other reasons.

    How does making the decision to invest ?25 million in the Manton Wood factory help Hazlewood Foods to lead the UK chilled sandwich market?

    It is an extremely large plant, which triples production for Hazlewood. It is also a very modern and up-to-date factory enabling high quality production methods.

    In making the investment decision to develop the new factory at Manton Wood what sorts of investment considerations would Hazlewood have examined?

    Hazlewood would examine the size of the investment (i.e. ?25m). what the return would be on the investment, how long the investment would take to pay back and whether the investment meets targets for returns, etc.

    In making the decision to invest in Manton Wood why would the payback period be important?

    The longer a project takes to payback the bigger risk the investor is taking. The longer you have to wait to make a profit, the less valuable that profit is in terms of what you can do with the money now

    because the investment is tied up. The quicker profits flow in, the sooner they can be used to make further profits.

    Using the profit and loss chart shown in the case study explain how this would lead to greater profits for Hazlewood Foods?

    Visit www.tt100.biz for Downloads - Theory - Quizzes - Company Info - Current and Previous Case Studies

Hazlewood Sandwiches Lesson Plan from The Times 100 website: www.tt100.biz

    A substantial rise in sales brings in more sales revenue. Costs would then need to be taken away from this. The factory would lead to a fall in costs so this would be beneficial, the overall result is an increase in profit which is worked out by:

Sales revenue Costs = Profit.

    Visit www.tt100.biz for Downloads - Theory - Quizzes - Company Info - Current and Previous Case Studies

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