BOCKSA case study.pdf - BOCKSA case study Variance analysis Francisco Gomez CEO and major shareholder of BOCKSA Company was reviewing the performance of

BOCKSA case study.pdf - BOCKSA case study Variance analysis...

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BOCKSA case study Variance analysis Francisco Gomez, CEO and major shareholder of BOCKSA Company, was reviewing the performance of the three regions of the business: Spain, Italy and Portugal. Francisco had traditionally given each regional manager the same bonus: 2% of corporate profits. Francisco believed that this system avoided arbitrary evaluation criteria and encouraged open and fruitful communication among the regions about new ways of doing business. The results in 2017 challenged the fairness of this evaluation system. The performance of the Portuguese region had been extremely poor and had driven the company’s overall profits to their lowest level in 10 years. Nevertheless, Francisco was not sure how much Afonso Nogueira, the manager of the Portuguese division, was to blame. Founded in 1970 by Francisco Gomez’s father, BOCKSA, had grown steadily over the years to be a major competitor in the beer business. It had a dominant position in Spain, mostly in the coastal tourist areas from Valencia to Malaga. In 2010, Francisco took over the business and re-directed the Company into an aggressive growth strategy. By 2017, the Company was a market leader in the South of Spain, northern Italy and Portugal. Francisco kept an eye on the efforts of the three regional managers to expand the operations to other key tourist areas in their regions. Francisco believed very much in decentralizing decision making as much as possible. Each region had its own manufacturing, marketing, distribution and sales organization. Regional managers chose distinctive names for new products, the level, and mix of advertising, and local suppliers. The central office maintained responsibility for the accounting and financial aspects of the business, development of new products and new types of beers, and the sharing experiences and learning across the regions. Francisco exercised control of the regions through a budgeting system. The budget plan covered the upcoming fiscal year which began on January 1. In November and December, each region prepared and submitted their initial budget to the head office. Francisco used the budget to discuss and supervise the expansion strategy of each region and to make sure that enough cash would be generated to support the company’s new corporate ventures. The final phase of the budgeting process was a top management meeting which bought together Francisco, the three regional managers, and the finance and technical officers to discuss new growth opportunities. A lot of time and face-to- face contact was devoted to the budget and, once approved, it was the guiding tool to monitor and evaluate performance. During the summer months, each region generated a budget statement every two weeks that Francisco reviewed to detect major problems. In addition, Francisco
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