IME(MBA-611)

Case Study: Jacob Suchard; Re-organising for 1992

Klaus J. Jacobs is chairman and chief executive officers of Jacobs Suchard, and its three founders are Philippe Suchard , Johan Jacob Tobler and Johann Jacobs. The tagline of the organisation is Jacobs Suchard is an enterprise of entrepreneurs. Before year 1986:The main corporate principle of Jacobs Suchard is decentralisation both in decision making authority and Klaus Jacobs determination to keep a small corporate staff. One person would manage each core business and would supervise general managers who each had clear profit responsibility for an independent business unit. The general managers had total profit responsibility for their businesses. They had Trade Marketing (Sales), Consumer Marketing (Marketing) and Manufacturing functions reporting directly to them. They sold to their own local markets and they produced what those markets demanded. After year 1989:12 European countries government took step forward to form a single common market and signed the Single European Act which escalates to European Economic Community. Because of European single market globalisation comes and globalization becomes top issues of Jacobs Suchard . The company took major steps to make itself more global, one of these is Vision 2000. VISION 2000:Its goal is to make manufacturing lower. The main recommendation by Mckinsey was to cut the number of primary factories to six. And these six factories would be called International Manufacturing Centres (IMC). The next major step to make the confectionery business more global chief Executive office appointed five global brand sponsors in Austria,Switzerland,France,Belgium & Hongkong i.e., general managers of business unit and would be responsible for the local business and for coordinating the strategy and implementation of of one global brand. Drawbacks: ->No specification about job profile or rules of Global Brand Sponsors. ->Unclear pricing and delivery Procedures ->how the three units IMC,general mangers and global brand sponsors should interact. The Issenann Task Force:To rectify the drawbacks of vision 2000 and to implement it successfully Issenmann Task force cam into picture. 1

IME(MBA-611) ->Main recommendation of Issenmann Task force was to appoint one manufacturing centre sponsor to manage six new manufacturing centres. ->Responsibilities defined: Some responsibilities were mentioned for General managers ,Global Brand Sponsor and Manufacturing Centre sponsors. Before implementing Issenmann task force, a team of three members comprised of Fisher,Carrot and Christian went to Harvard to know how to organise marketing and manufacturing for Europe 1992. Implementation of Vision 2000:Hermann Pohl had appointed to implement the Vision 2000. By May 1989, many of the 19 old factories had been closed. Implementing Vision 2000, some conflicts were aroused. Issues:1Global Brand Sponsor s and General Managers:With no clear directions how Global Brand Sponsors precede their assignments, the GBS began experimenting their work with general Mangers on global brand strategies and on that conflicts starts. The conflicts are: (a) over packaging sizes.- the product has to be sold in 12 different countries and every country has different consumers and every consumers has different tastes. (b) what languages to put on packages : how to advertise the product that would be a magnet for the local market. (c) About advertisement- How to promote the product in international plus local market. (b) About payment on international media:-Advertisements and marketing cost who will bear. (c) Which factory to source from: 12 different countries but six only manufacturing nit. (d) Who would pay for investment. (e) No clear financial structure outlining who would pay for what:-

(a) IMC wanted to standardise of a product line to maximize volumes and reduce costs, and on other side general managers sought distinctive packaging and other requirements to serve their local markets:2

IME(MBA-611) IMC unit would see to optimise the product manufacturing cost keeping the product sizes limited or standardised. But the general managers would see the need of consumers. (b)Compensation of IMC and how much amount IMCs should charge the general managers.: How the IMC centres are compensated doing manufacturing and others major deeds

Core of the problem:How to maximise the profit of organisation keeping of the product globalised.

Diagnosis:-

(a) Over packaging product sizes :There should be some standard sizes to be manufactured as per the needs or tastes of consumer or doing market survey for each country since IMC centre is one for respective product. Doing some standardised product sizes there will be maximization of volumes and reduction of manufacturing cost. And thus the conflict between IMC mangers and general managers get resolved. (b) Over packaging and what languages to put on the wrapper: Minor Packaging of the product had to be done in the factory so that transportation could be done easily and there should be a major out packets. On the wrapper there should advertisement on local language so that it attracts the local people. (b) About advertisement: To promote the product the advertisement should be done in locally. For example if the product had To be advertised in India then in Northern part of India in one language, in southern part respective state languages, the main agenda of doing such advertisement is to attract the main people. (c) About Advertisement on international media:The advertisement of the product on international media would bearded by main corporate office.

(d) No clear Cut definition who would pay for what:Starting from manufacturing coat to marketed price or selling price, there should be always clear cut definition which unit pay for what.

iii. Compensation of IMC and how much IMCs amount should charge the general managers. 3

IME(MBA-611) In what the profit or loss had been distributed between IMCs and Business units. For example: X-Manufacturing cost of product A T-Transportation price form IMC centre to other one country where to be sold. A-Advertising cost , i.e., to be done locally. E-Currency Exchange price. S-Packaging cost. P-Profit Margin.

Cost of the product A in the market, C= X+T+A+E+S+P. It iis the MRP of the product in that market. Distribution of profit between IMC and BU would be as per major percentage of profit should given to BU because major sales and advertisement task are done by BU only. If losses are also there then major impact would be on BU so they would do more effectively. iv. Transfer Pricing:@Neeraj, plz write the issue of transfer pricing here.

Proposed Organisational Structure:Based on our solutions the structure of the organisation would be as per Exihibit1.
Drawbacks:-

i.

ii.

Additional cost involved in localised packaging and advertising:There are only six different IMCs but the product has to be sold in different countries where every country has different cultures, languages, customs and beliefs. As per their language if the advertisements done then it will touch their emotional belief and which enhances the product sell multiplication and conciliate the cost of advertisement and advertising. Transfer Pricing may lead to conflict between IMCS and BU:-

Constant transfer pricing would negate the conflict but as per the time proceeds the ratio should vary based on the market strategy and future growth of the market. 4

IME(MBA-611)

Confectionery G.Zinser

Manufacturing Manager

General Manager Buisness Units

Manufacturing Manager

Sales

Consumer Marketing

Packaging

IMC Managers

Exhibit-1