ACCT 356 Assignment 2: Western Cabinets Case Study Analysis

This document presents a comprehensive analysis of the Western Cabinets case study, addressing key aspects of business strategy and accounting. The analysis begins with a Porter's Value Chain analysis, outlining primary and secondary activities and core competencies. It then examines Dubbledore Industries' operating income, change in operating income, and strategic approach, identifying a cost leadership strategy. The study also applies Porter's Five Forces model to assess the competitive landscape and provides strategic recommendations. Furthermore, the analysis covers topics like competitive strategies, strategic objectives, and the balance scorecard, offering a holistic view of the business challenges and opportunities presented in the case. The case study also includes financial data analysis, recommendations for competitive advantage, and an overview of cost drivers, and strategies for success.

Accounting
6 / 3 0 / 2 0 1 9

Accounting 1
Contents
Question 1........................................................................................................................................2
Porter’s Value Chain Analysis.....................................................................................................2
Primary Activities....................................................................................................................2
Secondary Activities................................................................................................................3
Core and Competencies...............................................................................................................4
Suggestions..................................................................................................................................5
Question 2........................................................................................................................................5
Operating income of Dubbledore for 2015 and 2016..................................................................5
Change in operating income from 2015 to 2016.........................................................................6
Type of strategy...........................................................................................................................8
Question 3........................................................................................................................................9
Porter’s Five Forces Model.........................................................................................................9
Recommendations......................................................................................................................10
Question 4......................................................................................................................................12
Competitive strategy..................................................................................................................12
Strategic objectives....................................................................................................................12
Balance scorecard......................................................................................................................13
References......................................................................................................................................16

Accounting 2
Question 1
Porter’s Value Chain Analysis
Primary Activities
Operations
It has been found that the process of manufacturing of Western Cabinet begins with the
customers who visit a showroom. The company provides many options of the cabinet to
customers with the different price level from low cost to high cost of cabinets. Mr. Smith as the
CEO of the organization feels that Western followed a reactive approach to the product mix that
means it promotes the services in the market by satisfying the consumers (Klassen, and
Kalagnanam, 2011). The organization starts manufacturing as per the requirements after the
approval of the customers for the designs of the cabinet. The company takes less time to
manufacture the product such as two or three hours for basic cabinets and two days for
customized ones (Mudambi, and Puck, 2016).
Inbound Logistics
R&D is also considered as the responsible department in the organization in making designs
adjustments to existing cabinets with the motive to ensure that the high quality of the product
which is manufactured by Western Cabinets. The research and development team contains five
full-time equivalents in the marketplace, and it also conducts surveys on customers to take their
feedbacks, then it develops the design of new cabinet for future selling.
Outbound Logistics

Accounting 3
The company installs the cabinets or delivers them to the customer’s home. As per the report, it
has been seen that the organization installation process is working well and the installers have a
great experience of a long time working (Rawlins, De Lange, and Fraser, 2018).
Marketing and sales
The company has a different department of marketing and sales that helps to promote the
cabinets in the market. The company provides various designs for options to consumers to
choose the cabinet style with the various prices from low cost to high cost.
Services
The company manufactures cabinets for consumers but it also provides the extra services to
consumers such as free installation, and delivery. The maintenance services are also given by the
company to its consumers.
Secondary Activities
Procurement
It has been seen that the finished cabinets are delivered and installed by Western’s 25
experienced installers (Klassen, and Kalagnanam, 2011). The price of the cabinet includes the
cost of installation and delivery.
Human resource management
Human resource is the main asset of the organization that helps to attain a higher level of success
in the business. Western Cabinets have a limited number of employees in an organization
because of changing staff and tight labor market. There are 35 designers located throughout the
showrooms in the Western Canadian cities (Klassen, and Kalagnanam, 2011). The company

Accounting 4
encourages employees by providing those rewards or bonuses on the basis of their performances.
It has been seen that the organization faces the issues in the near future such as lack of
communication, lack of dedication towards the services.
Technological development
The company invests the money in technologies to link customer choice with manufacturing
flexibility. It also uses technological advances in the tools in order to gain competitive
advantages.
Infrastructure
The organization is well divided into different departments as per their assigned duties and
responsibilities. In the administrative department, six types of people are included and these are
president, vice-presidents (VPs) of marketing and finance, information technology manager,
plant manager, human resources manager, and three store managers (Klassen, and Kalagnanam,
2011).
Core and Competencies
• Western Cabinets have the capability of manufacturing the cabinets and delivering to
consumers in a short period of time.
• Human resource is also an asset for the organization as it helps to attain a competitive
advantage.
• Research and development department give the right information about the designs of the
cabinet.
• A higher level of consumer satisfaction

Accounting 5
• Various designs (Klassen, and Kalagnanam, 2011).
Suggestions
As per the analysis, it has been suggested that the organization should implement the strategies
with the core and capabilities to attain the success and these are:
• Technology is the source in which the organization has to invest more to provide the
diversification product and services to consumers.
• As discussed above, it has been evaluated that the organization provides all types of product
with different prices from high cost to low cost to consumers. The company should use this
capability to promote the product in the market.
• It has to organize the events or programs for employees such as parties to retain them for a
long time in the organization or organize a bonus program to encourage them towards the
services.
Question 2
Operating income of Dubbledore for 2015 and 2016
Operating Income
Particular Amount
2015 2016
Revenue $410,550 $544,700
Direct materials 47,500 51,600
Direct conversion cost $115,000 $149,500
Total cost of goods sold $162,500 $201,100
Gross profit $248,050 $343,600
Selling expenses $11,000 $12,600
Advertising costs $24,000 $28,000
Operating Income $213,050 $303,000

Accounting 6
Revenue 2015 2016
Varianc
e
Units of RBK10 produced and
sold 19,000 21,500 -12%
Units returned 1,150 550 109%
Net sales in units 17,850 20,950 -15%
Selling price $23 $26 -12%
Total Revenue $410,550 $544,700 -25%
Direct material 2015 2016 0%
Direct material 47,500 51,600 -8%
Direct material cost per kilogram $1.25 $1.35 -7%
Units
$38,000.0
0
$38,222.2
2 -1%
Change in operating income from 2015 to 2016
The growth component effectively contributes in measuring the change in the quantity of output
sold. This means that it reflects the change in operating income with increase or decline in
revenue as well as in cost due to selling more or less units from the last year (Profitability
analysis, 2019).
Calculation of growth

Accounting 7
Revenue effect of
growth
component
(Actual unit of output sold in current year - Actual unit of output sold in
previous year)*Selling price in last year
2015 2016
Net sales in units 17,850 20,950
Selling price $23 $26
Revenue effect of
growth component $71,300
Cost effect of
growth
component
(Units of input required to produce current year output in last year- Actual units
of input used to produce last year's output)*Input price in last year
Current year Output 21,500 19,000
Direct material required in 2015 to
produce per unit of output 0.4
0.4166
66667
8600
7916.6
66667
Cost effect of
growth component $854.17
Price recovery
The component of price recovery reflects the change in the operating income measures with the
change in the prices of elements linked with revenue and cost.
Price-recovery
Revenue effect of
price recovery
(Selling price of present year-selling price in last year)*Actual unit of output
sold in current year
$64,500
Cost effect of price
recovery
(Input price in current year- Input price in last year)*units of input required to
produce current year's output in last year
$860.00

Accounting 8
Productivity components
It measures the change that took place in operating income due to change in product mix while
comparing it with last year.
Productivity components
Cost effect of
productivity
(Actual Units of input used to produce current
year's output- Units of input required to produce
current year's output in last year)*Input price in
current year
Current unit output 21,500 8600
Unit of input 0.416667
8958.333
Cost effect of
productivity $483.75
Type of strategy
Dubbledore is pursuing Cost leadership strategy under which they are leading the market with
the help of their effective cost that are essential to be maintained by them within the market. In
the competitive environment, the companies are required to implement some or other strategy in
the market that includes the cost leadership strategy (Chernev, 2018). Further, the variance that
has been calculated in the above question depicts the same.
The below table reflects that operating cost and expense has variance that is reflected below: -
Revenue 2015 2016 Variance
Units of RBK10 produced and sold 19,000 21,500 -12%
Units returned 1,150 550 109%
Net sales in units 17,850 20,950 -15%
Selling price $23 $26 -12%
Total Revenue $410,550 $544,700 -25%

Accounting 9
Direct material 2015 2016 0%
Direct material 47,500 51,600 -8%
Direct material cost per kilogram $1.25 $1.35 -7%
Units $38,000.00 $38,222.22 -1%
It is very clear there is tremendous improvement in total revenue of company that is possible
because of effective price that is by 25%. It has been witnessed that revenue has improved with
effective percentage but on the other hand, expenses are not increased with such an improved
percentage.
Further, the calculation of growth with the help of cost reflects that in the last year 2015, the
company’s was high comparing it with 2016 price that is 8600 and 7916.666667 that reflects the
cost variance of $854.17. Thus, this improvement reflects that cost has been declined that
contribute in improving the cost due to which the strategy that has been implemented by
company is cost leadership (David, 2011). Similarly, the production components reflect the
variance of past year and current year with the amount of $483.75. Further, the change in the
price calculated above also reflects that this approach is implemented by the company to win the
market.
Question 3
Porter’s Five Forces Model
The threat of new entrants
It has been seen that the threat of new entrants is low just because of high barriers such as
existing high brand image, high cost, and many others. In the high-end car manufacturing

Accounting 10
industry, the high cost is required to establish a business in the market. The other barrier of new
entrants is the existing companies in the market that have high brand image due to which it faces
the difficulties to grab the market share (Burns, and Dewhurst, 2016)
The threat of substitute
The threat of substitute is moderate because the other vehicles provide similar services to
consumers such as bus or train. However, these vehicles do not have luxuries features that attract
the consumers towards them that is why; the threat of substitute is moderate (Advice-
manufacturing, 2018).
The threat of competitors
In the high-end car manufacturing industry, there are various organizations who manufacture the
cars in order to sell them in the market such as Mercedes-Benz, BMW, Lexus, Audi, and many
others (Advice-manufacturing, 2018). The designs, functions, luxuries and the other technical
feature of these vehicles are different from others due to which the competition among them is
high (Aithal, 2016).
Bargaining power of Suppliers
There are large numbers of suppliers to the high-end car manufacturing industry. It has been
seen that the suppliers are small size and the manufacturer are very large in size due to which the
suppliers are not in the position to negotiate with the companies that’s why the suppliers have
low bargaining power.
Bargaining power of Buyers

Accounting 11
The consumers of the organization have the high bargaining power of buyers just because of a
large number of manufacturers in the high-end car manufacturing industry. The manufacturers
provide similar services with the different features that are so attractive. It is difficult for
consumers to choose the brand among them (Harding, 2017).
Recommendations
Competitive
Force
Strength
1= weak
2= moderately
weak
3=moderate
4=moderately
strong
5=strong
Suggestions to Help Mitigate Force
Threat of New
Entrants 1= weak
It is a beneficial factor for existing companies.
The new entrants have to enter the market with the
high technology that makes their product differ
from others.
Power of Buyers 5=strong The company has to adopt the cost leadership
strategy to attract consumers (Salavou, 2015).
Power of Suppliers 2= moderately It is a beneficial factor for the organization because

Accounting 12
weak the cost of raw material is decreasing.
It has been recommended that the industry has to
deal with the large size of suppliers to improve the
quality of raw material.
Power of Substitutes 3=moderate The organizations have to provide luxurious and
premium services to consumers at affordable prices
so that the threat of substitute will decrease.
Internal Rivalry 5=strong The companies of high-end car industry should
implement the porter’s generic strategies and these
are cost leadership strategy, diversification and
focuses strategy (Lotayif, 2016).
Question 4
Competitive strategy
Wondergardens Ltd. operates amusement parks mission is to offer different kind of experience to
their clients at quite reasonable price while comparing to its competitors. The present market of
the amusement parks is more competitive which affects the goal of Wondergardens. The gaol of
Wondergardens is to offer its product to their customers with high quality service and unique
experience at affordable prices. This reflects that company follow the cost leadership strategy
that reflects the ability of the company to accomplish the lower cost while comparing the same
with the competitors through productivity and efficiency enhancements, removal of waste, and

Accounting 13
tight cost control (Rothaermel, 2015). There are different competitive strategies that can
implement by company but according to their working, the cost leadership strategy suits the best.
The key that lies here for Wondergardens strategy is to achieve the success with their customers
as well as with it volunteer so that they can achieve the high market share (Wilson and Gilligan,
2012).
Strategic objectives
 Enhance the visibility of organisation
 Training to employees for improving the customer service
 Increase the number of volunteers.
 Enhance Customer retention
 Enhance Customer relations
 Effective resource utilization
 Improving educational recreational programs in the community
Balance scorecard
Perspectives Goals Objectives Measurements
Customer Improving the Market
share
Customer satisfaction
Customer retention rate
The objective is to
increase the product and
service availability in
market by offering
delight experience (Coe
and Letza, 2014)
Wondergardens
measurement of
objectives can be done
with the help of survey
ratings, brand coverage
and by % of self-initiated

Accounting 14
calls to customers.
The success can be
evaluated with volunteers
as well as with the final
consumer
Internal
business
Resource Utilization Improvements in
Resource Utilization are
key drivers of achieving
cost leadership for which
training should be
offered to employees
which makes them to use
the products effectively.
Productivity Indicator of
the employees
Learning
and Growth
Perspective
Employee training
Employee satisfaction
and motivation
Employees are important
for effective customer
service which in turn will
contribute to the
customer satisfaction
levels due to which the
objective include
conducting programs,
enhancing rewards and
Survey helps in
measuring the actual goal
achievement.
Evaluating the skills and
knowledge among the
employees

Accounting 15
recognitions (Gomes,
Romão and Caldeira,
2013)
Financial Increase operating
income by 15%
Revenues per customers
Reducing the expenses is
an primary objective and
also to make the
customers avail different
services
The operating profit can
be calculated every year
with the help of variance.
Further, the increase in
number of customers can
be one of the measures.

Accounting 16
References
Advice-manufacturing. (2018) High-End Automotive Industry. [online] Available from:
http://www.advice-manufacturing.com/High-End-Automotive-Industry.html [Accessed
29/06/19].
Aithal, P.S. (2016) Study on ABCD analysis technique for business models, business strategies,
operating concepts & business systems. International Journal in Management and Social
Science, 4(1).
Burns, P. and Dewhurst, J. (2016) Small business and entrepreneurship. Macmillan International
Higher Education.
Chernev, A. (2018) Strategic marketing management. Chicago:Cerebellum Press.
Coe, N. and Letza, S. (2014) Two decades of the balanced scorecard: A review of developments.
The Poznan University of Economics Review, 14(1), p.63.
David, F.R. (2011) Strategic management: Concepts and cases. India: Pearson/Prentice Hall.
Gomes, J., Romão, M. and Caldeira, M. (2013) The benefits management and Balanced
Scorecard strategy map: how they match. International Journal of IT/Business Alignment and
Governance (IJITBAG), 4(1), pp.44-54.
Harding, S. (2017) MBA management models. Routledge.
Klassen, M. and Kalagnanam, S. (2011) Western Cabinets- Building a Cabinet or Building a
Transformation [Online]. Available from:
https://mail.google.com/mail/u/0/#inbox/FMfcgxwCgpZzGCnBtCjDCKcVrdQSqFMN?
projector=1&messagePartId=0.1 [Accessed 29/06/19].

Accounting 17
Lotayif, M.S. (2016) Selection factors of market segments and porter's generic marketing
strategies: Evidence from an emerging GCC market. International Journal of Business and
Management, 11(1), p.199.
Mudambi, R. and Puck, J. (2016) A global value chain analysis of the ‘regional
strategy’perspective. Journal of Management Studies, 53(6), pp.1076-1093.
Profitability analysis (2019) Profitability analysis [Online]. Available from:
https://resource.cdn.icai.org/18861sm_finalnew_cp9.pdf [Accessed 29/06/19].
Rawlins, J.M., De Lange, W.J. and Fraser, G.C. (2018) An ecosystem service value chain
analysis framework: a conceptual paper. Ecological economics, 147, pp.84-95.
Rothaermel, F.T. (2015) Strategic management. UK: McGraw-Hill Education.
Salavou, H.E. (2015) Competitive strategies and their shift to the future. European Business
Review, 27(1), pp.80-99.
Wilson, R.M. and Gilligan, C. (2012) Strategic marketing management. New York: Routledge.