'Chicken run Essay\r'

'executive summary: 1998, Excel Poultry & essence Sdn Bhd (EPM) was a SME located in Kluang, Johor, run descent of sniveller farming and supplying whiner end-to-end Malaysia. This subsidiary of PCK holding since 2005 was managed by Encik Selamat, a certify Public Accountant (CPA). It became one of top 5 chicken suppliers within mid-tier producers in the country overdue to increasing contract in year 2000 from superstores and fast- diet chains, spunky chicken use by Malaysian, and expansion of chicken fabrication. However, in 2008, live of poultry output increase.\r\nEPM operating currency was starting time and severe, that it â€Å"had puzzled Encik Selamat” (p. 4). Other difficultys were as well as identified. Decision Maker: Credit Controller Ms Choy is the decision s in any caselr as she has the responsibility to keep the right decision regarding unethical conduct of Encik Selamat, she disregard persuade Board of theatre directors about En. Selam at. If she failed to convince frame to scoot action, she can then reveal the fare to the auditor, besides mentioning to the auditor the omit of segregation of tariff in the business mathematical process.\r\nShe can execute and monitor lizard consumeation and performance of employees under her responsibility and convince her friend, Puan Azura to do the same. What should Ms. Choy do? Analysis: 1) SWOT compendium S †STRENGTHS | W †WEAKNESSES | * One of top 5 chicken suppliers * Continuing valueability and growth * full(a) promotional strategy * Qualified accountant (Encik Kasim) * tested Credit Controller (Ms Choy) * Encik Selamat’s theme in community| * En.\r\nSelamat’s lack of expertise in poultry and meat industry * 2008’s practic qualified crisis * pretermit of focus of business action * immediate payment f low-down outlet * Conflict of avocation * realistic fallacy/ fraud/fictitious transaction * En. Selamat’s lodge | O †OPPORTUNITIES | T †THREATS | * Malaysians’ mellowedest outgo rate * Popular quick-service restaurants * East Coast Economics arena (ECER) * emergent of giant superstores * Institutional retailing| * occupation cost had risen about 56. 5% * dissolve in demand * Credit limit of dusty silver| The fraternity has pixilated position in the industry as it is one of top 5 chicken suppliers.\r\nThis means that EPM has a big segment of the market part in the industry. EPM in every case is soaked for its sustained cyberspace and growth. EPM had been able to maintain its feats and started making profit since the buoyant demand of chicken consumption. Besides, with initial capital of RM3. 6 million and scratch line with 20 employees, now, EPM had more than 200 employees. Occupied with goodly promotional strategy, EPM’s focus team seized any opportunity in the industry. Moreover, EPM has capable key employees, which devil of them are a qualified acc ountant, Encik Kasim and a authoritative Credit Controller, Ms Choy.\r\nThese employees contribute significantly towards the ope proportionalityn of EPM particularly in the finance sector. In addition, Encik Selamat’s genius in community is a strong influence of EPM towards the society where EPM was based. He was a ingenuousness figure that leave alone be contested in the local city council. En. Selamat’s lack of expertise in poultry and meat industry contributed a negative element in EPM as En. Selamat have to gain skills and expertise in the industry. Even though he was especially worried about the live unfavorable condition of EPM, his experience in this industry may not be sufficient.\r\nBesides, 2008’s operational crisis of EPM placed En. Selamat away from a smooth travel track as save before 2008. EPM was lack of focus of business operation as it was at the infant stage and yet to mature in a proper method of management. Next, within EPM, on that point was cash flow issue and the fellowship had to resort hotel to short term borrowing which subjected to high use up payment obligations. There was conflict of spare-time activity amidst Encik Selamat’s personal deal with Encik Azman, reason college divisionner off which was one of the executive of chilly Gold and the company’s interest. Cold Gold was one of EPM’s major customers.\r\nThis relationship may impair En. Selamat’s judgment. In EPM, a few possible error/ fraud/fictitious transactions were detected, especially the irregularities in debtors’ account. The symptoms lead to a conclusion that it was caused by the former employee of EPM, En. Munir. another(prenominal) factor that can be considered as EPM’s weakness point is En. Selamat’s connection with reboot company of EPM, PCK Holding, where En. Selamat might be able to secure his position in EPM despite the problem he created without facing any punishment. The i ndustry is in quite a potential market where Malaysians’ highest consumption rates of poultry and meat product.\r\nMalaysia was having one of the highest per capita consumption rates in the world †for chicken (32. 5 kg) and eggs (298 units) †and there were no dietary prohibitions (during these years) and spiritual restrictions against chicken consumption. In addition to household and traditionalistic delicacies demand, the surge of popular quick-service restaurants from outside Malaysia and home-grown fast food chains intensified the market. Besides being the accept poultry exporter, the industry was supported by the establishment through the East Coast Economics function (ECER) as the poultry sector was part of the innovation.\r\nEmerging of giant superstores and institutional retailing also heighten the bright future of the industry. Despite the favorable situations in the market, EPM faced threat of chicken feed which resulting the production cost to rise about 56. 5%. league of Livestock Farmers’ Associations of Malaysia (FLFAM) made a call for higher chicken prices in order to protect producers’ earning in the face of feed cost hike. However, when the sellers did increase the retail price, some producers complained that they seen a drop in demand. Another threat was the creed limit of Cold Gold Sdn Bhd which had exceeded its level.\r\nThis has significant effect to the company as Cold Gold is one of EPM’s major customers reckon with the other issues faced by EPM. Increment in production cost Drop in demand Low cash flow High interest expense INABILITY TO PREDICT ENVIRONMENTAL transform & FORCAST CONSEQUENCES: LACK OF COORDINATION IN CONTROL AND coverage: Credit limit misrepresent Debtor stoppage Misstatement Lack of segregation of duty LACK OF trueness FROM SENIOR MANAGEMENT: Lack of expertise Lack of focus Conflict of interest Unethical deportment Reluctance in taking action secondary PERFORMANC E 2) Fishbone diagram\r\nAccording to Peter Drucker, â€Å"management is doing things right; leadership is doing the right things”. Thus, the major issue in this case is unorganized management which leads to braggy performance of the company. EPM faced problem as it fails to fit commitment from senior management. As a leader, Encik Selamat was absentminded of expertise in poultry industry, actively mingled in social and community work kinda of focusing more on business operation like, had conflict of interest (agency problem) while handling credit limit issue, and had under table deal with the client.\r\nDirector himself had shown lack of leadership skill and ethical cognizance as he kept silent regarding the unethical air of Encik Selamat and had more concern on reputation than ethical conduct. Besides, management of EPM is lacking of coordination in control and subject fielding. This can be seen from the severity of insufficient cash flow which was noticed only when significant borrowings had been made, high expenses, and loss incurred. Lack of segregation of duty also had given wide opportunity for misstatement by employees.\r\nFinally, EPM fails to call environmental change regarding cost of production that leads to low profit making as EMP did not make any preparation or back-up plan to subdue such problems. 3) Financial Evidence on the operation of EPM: Financial Ratio Ratio| Formula| 2006| 2007| 2008| reading material| GP ratio (%)| (GP/Sales)*100| 5. 4845| 1. 6542| 1. 0814| Due to emergence in COGS, EPM is profiting only 1 cent for either dollar of product sold in 2008| bloodline turnover ratio| COGS/Inventory| 16. 6774| 36. 0667| 28. 4962| EPM is turning over its inventory on average, 3 times per month in 2007 while this reduces to twice per month in 2008.\r\n| AR turnover ratio| lettuce sales/AR| 4. 3071| 3. 3957| 2. 8808| EPM takes around 3 months to collect its debt in 2006, while it takes more than 4 months in 2008. | old a ge to collect AR| 365/AR turnover ratio| 84. 7441| 107. 49| 126. 702| | Description of case exhibit (Account abstract): % add| 06to07| In 2007, cost increased while revenue did not increase much, and operating loss was recorded as retail price was only increased in August 2008. Thus, increment of revenue from in 2008 by 36. 16% corresponds with increment in cost in that year. Expenses took 30% of operating profit in 2006 while it took almost twice the operating profit in 2008.\r\nThis might be due to interest payment made for short-term borrowing. Increment in trade receivable may not be the true amount as there were cases of misstatement. profligate in 2008 was higher due to displace demand. 07to08| rev| 0. 57| 36. 16| COGS| 4. 64| 36. 95| Oper profit| -69. 67| -10. 99| Exp| 37. 50| 45. 45| Net| -108. 64| -315. 79| Trade rec| 27. 56| 60. 49| Stock| -51. 61| 73. 33| Trade cr| 62. 16| 50. 00| Alternatives available to the protagonist: Option 1: Ms. Choy can select not to disclose the issues that she managed to check out within EPM.\r\nThis give benefit in salvage the reputation of the company in public as well as the General Manager, Encik Selamat to secure his reputation in the coming city council election. Besides, Ms. Choy can exempt her action of not bringing the matter up as Encik Selamat is an important staff of EPM and she had done her part by approaching one of the directors who was reluctant to take action against Encik Selamat. The drawbacks of this choice are ethical font and unyielding term impact towards the company as a whole. Choosing not to disclose the facts is an unethical behavior on Ms Choy’s part.\r\nAs for the long term, the public will find out the reality of the company as time goes because the auditors are possible to question the irregularities and Ms Choy will be interrogated. In the end, the company, En Selamat and Ms Choy need to face the capacious impact of being nontransparent to the stakeholders. Option 2: Ms C hoy has the right to disclose her findings straight to the external auditors as she has no direct authority to take any action towards the misappropriate culture in the company as well as the director which she had approached was hesitated to do so.\r\nBy this, Ms Choy’s responsibility to report to public is passed to auditors and the problem is most likely will be solved. However, this aggressive decision will strike EPM severely in terms of drop in share price and reputation. Besides, the share price of the parent company will be affected too and the dropping trend will continue for a long time. Furthermore, the reputation of Encik Selamat will be highlighted by the public and media, subsequent of the auditors’ revealing. Option 3: Ms Choy can opt to disclose the matter internally to the board of directors.\r\nBesides, she had found evidences to support her claims about the low performance of EPM. The benefit that EPM will gain from her disclosure is to ratify the problem before the auditors’ visit the pursual month. If the auditor is not satisfied with EPM’s condition, apology of ratification can be made and EPM will not be punished with qualified monetary reports, which is not favorable. This decision may result in impairment of EPM’s and PCK’s reputation and share prices but the impact will be lower than the second option above. Recommendation and action plan:\r\nBased on analysis above, it is recommended for Ms Choy to choose Option 3 which is to disclose the matter internally to the board of directors. Suggested steps to follow are: 1. train the matter with sufficient evidences and justifications together with possible solution to board of directors 2. Check whether EPM has a written guidepost relating to these issues and take proper actions against these issues (e. g. salary cut, not bounteous bonus etc. ) 3. If no written guideline is established, in case to avoid similar situation in the future, Ms.\ r\nChoy should suggest for EPM to; a. Set up and set apart an independent committees of directors to monitor the performance and compensation of staffs b. urinate policies for clear ethical conducts, job scopes and management of EPM especially to solve ethical and agency problems c. Establish a whistle-blowing policies to encourage staffs to report any irregularities d. Communicate and implement guidelines and policies across levels of management, and absorb them as the EPM’s corporeal culture to be shared within the organization.\r\n'