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    Euro Land

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    Ankit
    Euroland case solution

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    © All Rights Reserved
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    Euro Land

    Uploaded by

    Ankit
    16 views3 pages
    Euroland case solution

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    Euro-Land

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    Euroland case solution

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    16 views3 pages

    Euro Land

    Uploaded by

    Ankit
    Euroland case solution

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Euroland

    ExecutiveSummary:

    Eurolandfoodsisastablenameinthemarket,ithasgrownwellinthe

    marketovertheyears,butnowitisplanningtoallocatethebudgetfor

    thenewlyplannedactivitieswhicharecostingitmorethan300Million

    Eurosbutthecompanyhastoinvestonly120MillionEuros.Various

    peoplefromtheuppermanagementhavecomeupwiththeirsuggestionsfor

    investment,fewofthemareverygoodandareacceptableinjustablink

    oftheeyebutmanyofthemrequiregreatersearchandevaluationfor

    theirvalidity.Itissuggestibletofirstevaluatethealternativesand

    thenrankthemsothatbestoftheactivitiescouldtakeplacewithin

    theallocatedbudget.

    StrengthsWeaknesses:

    Inreplacementandexpansionofthetruckfleet,thecompanycan

    increasethenumberofgoodshauledonthetruckandthiscouldreduce

    thetransportationcostsinthelongrun,furtheritcouldpossiblyhave

    agreatermarketcoveragebutitisverycostlytogoforthisoptionas

    Klinkisnotdoinganyexperimentandgoingdirectlyfor100newtrucks.

    TheInternalRateofReturn7.8percentiscomparativelylowtothe

    minimumsetforthecompanywhichis8percent.Foraninvestmentof30

    millionandaprojectedgainof11.6millioninthenextsevenyearsis

    ratherlowascomparedtowhatotherprojectscanbring.

    Theacquisitionofnewplantisalthoughagoodoptionbutyetitisnot

    veryusefuloptionastheinvestmentintheentireplantcanberisky
    andcanputalotofburdenontheentirecompany'sbudget,itis

    suggestedthatthecompanyshouldbuyawarehousetosupportthegrowing

    needsofthecustomersforicecreamandyogurt.Anotherproblemwould

    berelatedtothelaborhiringwhichwouldresultinmorecosts.The

    InternalRateofReturnof11.3percentishigherthantheminimumvalue

    theyhavetomeet.Paybackforthewholeplantitselfwouldtakeover10

    years,eventhoughitwillbeyielding35.6millionaftertaxcashflow.

    Theexpansionoftheplantisagoodideaasthemarketneedsare

    completelygrowingandcannotbesupportedbyanyotherplant,theplant

    capacitywouldincreaseby20butthedrawbackisthatitissupporting

    thoseproductsthatarenothavingthehighestshareiemineralwater

    andfruitjuices.TheInternalRateofReturnwouldbe11.2percent,

    whichcouldresulttoanadditionalproductionof2.25millionperyear.

    Morinhascomeupwithagoodsuggestionastheprocessingofdried

    fruitanditslaunchwouldenhancethecompany'sportfolioandalsoit

    wouldbeabrandextension,ithasgotafairpossibilityofgrowthas

    Europeisacoldregion,theIRRisalsoexpectedtobehigherthanthe

    requiredbutthen...

    EurolandFoodsS.A.

    Outofthe11capitalprojectsconsideredfortheupcomingyearourteamhasdevelopedastrategy
    whichwillpropelEurolandfoodsintothenextlevelofglobalbusiness.Undertheboardofdirectors
    spendinglimitofEUR120millionEUR119.25millionwouldbeinvestedinourproposedprojects.Our
    allocationoffundsthatbestsuitsEurolandfoodsarebasedonNPV,economics,sharevalue,andpayback
    period.Thevariouscapitalprojectswerealsoconsideredonthetrackrecordofthemanagersupporting
    eachprojectandtheprobabilityofmarketsharegain,brandimage,andsharevaluegrowth.Thecapital
    projectsproposedaretheexpansionofaplant,effluentwatertreatmentatfourplants,marketexpansion
    southward,acquisitionofaleadingschnappsbrandandassociatedfacilities,andapartialreplacementand
    expansionofthetruckfleet.

    ExpansionofPlant
    TheNuremburgplantisexperiencingsomedifficultiesinreachingdeadlinesandschedulingproduction.It
    isatfullcapacityandisinneedofexpansion.ThisplantsuppliesbothcentralandWesternEuropeso
    meetingitsrequiredproductionisatmuchimportance.Mr.MaartenLaydenbacksthisprojectonhis
    knowledgeoncostcontrol.Schedulingneedsmustbeaccurateinordertomeetbudgets.Thiswillreduce
    costandalsomeetconsumerdemandbysupplyingatitsfullestyieldinganIRRof11.2%itexceedsthe
    minimumRORof10%.

    Effluentwatertreatmentatfourplants

    Thefouryeardeadlinetomeetmandatorycompliancetotreatwastewaterwillbehereinnotime.If
    EurolandFoodspurchasesthenecessaryequipmenttodayatEUR6millionratherthaninfouryearsat
    EUR15millionthesavingswillbeEUR9million.Europeanregulatoryagenciesarealreadyonthe
    forefrontofwastewaterpollutionandhavebeenknowntoshortencompliancetime.EurolandFoodsmust
    addressthisenvironmentalissue...

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