- Part 2 20 Meaton Ltd A Fictitious Company Is An Australian Public Company With A Market Capitalisation Of About 12 1 (87.82 KiB) Viewed 25 times
- Part 2 20 Meaton Ltd A Fictitious Company Is An Australian Public Company With A Market Capitalisation Of About 12 2 (57.05 KiB) Viewed 25 times
- Part 2 20 Meaton Ltd A Fictitious Company Is An Australian Public Company With A Market Capitalisation Of About 12 3 (43.71 KiB) Viewed 25 times
Part 2 [20%] Meaton Ltd [a fictitious company] is an Australian public company with a market capitalisation of about $120 million. The company was established 50 years ago and is well known for its patronage of the arts - donating $500 000 every year to the performing arts sector. It is a diversified business with several product divisions. Its core but least profitable division is its leather- goods business which specialises in high-end leather jackets and handbags for both the domestic and export markets under the Snowy River® brand and its associated famous tagline, 'Always hundred percent Australian'. An insider once revealed that there is an implied expectation that cast members in certain theatre shows that benefitted from Meaton's donations adorn the latest-designed Snowy River apparels & accessories during the plays. The Snowy River® range are sourced from Australian leather (kangaroo and sheep skin) tanneries; designed, cut, sewn & finished in Meaton's leather-goods factory in Perth. Direct production costs have gradually increased over the years squeezing the profit margin of the leather- goods division. In 2020 it recorded its first loss and had to be supported by Meaton's other product divisions. According to analysts the loss was partly responsible for the fall of 7% in Meaton's share price in 2021. No dividends were paid in that period as well. Sales revenue has been stable but increasing the price is not an option given the highly competitive markets. Disgruntled shareholders put pressure on the Board of Directors to address the negative return on their investment and even to replace the current CEO, James Meaton - who is the founder of the company. The company's 3-year profit forecast is even more dire with a projected loss in the third year amid tough competitive environment. Clearly a major restructuring [of operations] is required especially involving cost reduction.
Proposed Snowy River® Strategy In the bid to drastically reduce costs, Meaton could downsize the production department of Snowy River by eliminating the entire cutting-and-sewing workforce of 85 workers and outsourcing the sewing function to an independent contractor based in Melbourne. The contractor is more efficient because it relies on state-of-the-art sewing machineries that only require minimum-waged employees to operate them. The cut-and-sew quality is identical to those of Meaton's workers. It's estimated that Meaton could reduce unit production cost by up to 30% The 85 employees will be retrenched since their positions will be redundant following the proposed operational changes. Meaton will pay their legal retrenchment entitlements in full. The building (and machineries] that houses the sewing section will be sold to further boost the cashflow of the company. Proposed SR* brand Introduce a second-line of jackets & handbags under the "SR* by Meaton" brand as a mid-priced range to boost revenue. Mid-market brands are very common in the fashion business, for example, Giorgio Armani's Emporio Armani and A/X (Armani Exchange) brands. The SR* range will be similar to the Snowy River range but the high-quality leather hides will be sourced from, and cut in, China. Meaton's Perth factory will sew and finish the jackets and handbags using newly hired minimum-waged workers working alongside their higher paid colleagues. The SR* range will carry the "Made in Australia' label and the tagline "Tru Blu Australian'. Management is concerned about being silent on the fact that the leather hides will be sourced from China and has consulted: https://acrobat.adobe.com/link/track?uri=urn:aaid seds US-595a18fc-9d52-403d-847b- 39bd6d4b0416 for informal clarification. © Copyright Stratstar/KY Lee 2022 Requirements: Question 2: IN YOUR OWN WORDS, explain and discuss Carroll's Pyramid of Corporate Social Responsibility (CSR) within the context of the above Meaton's case. Hint: Each of the 4 responsibilities must be discussed (or explained) by referring to the case, i.e., as they apply to the case. 2(a). Overall explanation of the concepts [5 marks] 2 (b). Overall discussion with reference to the case [10 marks]
Question 3: June is a home-based hairdresser for the past 25 years. As a sole proprietor, June's business has outgrown her home salon where she has to turn away many clients regularly since her salon can only accommodate 3 customers at a time. She has kept the services of three casual hairdressers whom she had trained the past 3 years. Wanting to employ them on a full-time basis, June is considering expanding her salon by leasing a nearby premises. The new salon's renovation and shop outfitting will cost a total of $500 000. Her accountant suggested that, instead of borrowing the money, she sets up her new business as a private company, i.e., private limited company or Pty Ltd. Investors/shareholder will be her close family members and herself with an expected return of investment of 10% per year. IN YOUR OPINION, is that is good move? Explain. Also, what's the main disadvantage of such a private company compared with her current sole proprietorship? 3. Quality of overall explanation [5 marks]