African Nasal Hospital & Pizza Gourmet Restaurant essay.

Case Study 1

This assignment consists of two case study scenarios.

You have recently taken a 12-month leave of absence from your job in Australia and have accepted an AusAid sponsored position as the financial controller of the African Nasal Hospital (ANH) group.

The ANH group was established in 1965 by Sir John Packard and his wife, Lady Julia Packard, with the purpose of providing aid to people suffering from severe nasal issues. While initially this aid was provided from one location, today there are 20 hospitals throughout Africa.

The Packards started ANH in response to a heartfelt need. While this issue was resolved in America as far back as 1890, today more than 300,000 people in Africa suffer from severe nasal issues due to limited access to medical treatment. Based on available resources, ANH is able to treat approximately 25,000 patients per annum.

As patients receive free treatment at ANH, all funding for the organisation is based on donations received from overseas organisations, as well as through aid programs run by developed nations such as Australia and New Zealand.

The two main causes of nasal issues are a lack of access to medical treatment, and poor education. Patients suffering from severe nasal issues normally undergo a small surgical procedure (with an 85% success rate), and then spend 14 days as an in-patient at the hospital. Below provides a typical in-patient treatment program.

ANH has recently been approached by a major US-based charity which has proposed to fund ANH $1,125 for each patient treated at Abuja Hospital (one of ANH’s largest hospitals).

Assuming that ANH accepts this proposal, You will need to:

Calculate the break-even number of patients for Abuja Hospital, assuming that no other funding will be received.

To address the requirement, follow the steps below:

classify costs into variable and fixed
calculate the variable costs per patient,

calculate the contribution per patient
calculate the fixed costs (to the nearest dollar)
calculate the break-even number of patients for Abuja Hospital
calculate the current hospital capacity

Comment on the break-even point compared to the hospital’s capacity.

Jet Santiago is the management accountant for the Pizza Gourmet chain of restaurants.

Pizza Gourmet is a successful pizza business focused on providing authentic, quality

It is a popular brand that enjoys a strong reputation for quality food and the restaurants are known for their authentic Italian ambience.

Pizza Gourmet restaurants are popular dining venues and can command a premium price for their pizzas. Service is either dine-in or take-away (pick-up and home delivery).

The following factors are relevant to Pizza Gourmet.

Business model

The original Pizza Gourmet restaurant is still proprietor-owned, plus there are 150 franchise outlets. The business was expanded to include franchisees in July 2000 and further expansion is planned.

Quality control systems

In order to maintain quality and ensure the brand promise is delivered, strong control is maintained over franchisees. Key ingredients are received into a central hub and premixed to the Pizza Gourmet recipe, then transported to restaurants for final processing. An integrated stock control system is used, with all stock levels being centrally monitored and all orders for ingredients originating only from Head Office.

Staff recruitment and training

Staff recruitment and training is controlled from Head Office. Pizza Gourmet manages its staff in line with its slogan, ‘Treat your staff the way you would your best customer’. The business uses an internally developed e-recruiting system to source staff and has achieved significant cost savings this way. A centrally controlled enterprise resource planning (ERP) system is used to administer all financial and operational aspects of the business.

The changing economic situation

Pizza Gourmet’s business is operating well and has consistently earned high returns over the past five years. However, with tight economic conditions many consumers are moving from fine dining to mid-range restaurants, which means that competition in the sector is increasing. Management is assessing options to maintain Pizza Gourmet’s competitive advantage.

Jet has been asked to prepare an analysis using Porter’s value chain to assist management in assessing Pizza Gourmet’s competitive advantage.

Specifically, she has been asked to:

Prepare a value chain analysis for Pizza Gourmet and categorise each activity according to Porter’s value chain. (Classify these per the activity types/value chain element provided)

Use the following Activity types/Value chain element for your analysis: Primary activities:

Inbound logistics Operations Outbound logistics Marketing and sales After-sales services

Support activities: Administrative infrastructure HR management Technology development Procurement

Assess whether each activity provided is a key element of Pizza Gourmet’s competitive advantage. (Assess whether each activity is a key element by indicating “Yes”or “No”

Evaluate which activities Pizza Gourmet could outsource to achieve cost reduction. (Indicate whether each activity could be outsourced by indicating “Yes”or “No”and providing a brief explanation)

Case Study 1

Calculation of breakeven number of patients for Abuja Hospital

Segregation of fixed and variable cost

Variable cost	Fixed cost
Meal cost	Cost paid to doctor, nurses and admin staff
Medical supplies	Linen cost
Surgical equipment
Cost paid to Anaesthetists

Particulars	Amount
Meal cost	$225.00
Medical supplies	$250.00
Surgical equipment	$100.00
Cost paid to Anaesthetists	$ 22.50
Total variable cost	$597.50

=Revenue on each patient – Variable co

=$1125-597.5

=$527.5

Particulars	Amount
Administration assistants	$46,800.00
Doctors	$156,000.00
Linen cost	$65,000.00
Nurses	$163,800.00
20% of salary cost	$73,324.50
Total fixed cost	$504924.50

=Fixed cost/ contribution per patient

=$504924.5/527.5

=957 patients

Annual bed capacity

= (365/14 days need to treat patient)*50 beds

1304 patients

By considering present case situation, it can be noticed that breakeven is attainable of 74% of margin of sales which shows that current cost structure will assist in attaining sufficient profit margin that can use for the welfare of patients by providing them better medical services.

In accordance with the value chain analysis model by Porters activities of business is mainly bifurcated into two broad categories i.e. primary and secondary activities

Primary activities		Support activities
Inbound logistics	· Cooking and mixing of core ingredients within restaurants. · Developing new products. · Receiving key ingredients into a central hub.	Administrative infrastructure	· Developing strategy · Maintaining restaurant facilities · Performing finance functions · Performing reporting functions
Operations	· Preparing and cooking pizzas. · Taking customer orders · Serving pizzas at customer tables	HR management	· Recruiting staff, including e-recruitment · Providing training programs for staff and franchisees.
Outbound logistics	· Delivering pizza to customer’s residence · Storing key ingredients in central hub · Transferring ingredients to restaurants	Technology development	· Developing advanced tracking system · Developing website and potential mobile applications
Marketing and sales	· Creating brochures · Providing nutritional information of food to customers. · Running TV, newspaper and radio campaigns.	Procurement	· Negotiating access to premises for company and franchise restaurants · Negotiating supply arrangements with ingredient suppliers · Negotiating supply arrangements with packaging suppliers
Service and support	· Taking customer orders · Replenishing store supplies

In accordance with the above categorization, it can be said that primary activities are delivering and preparing products for consumers. Thus activities related to it is considered to be part of inbound logistics, operations and outbound logistics. Marketing and sales activity assist in reaching a large audience for the promotion of products of Pizza Gourmet. Other primary activities are related to service and support in which taking orders from customers and replenishing store supplies is involved. These are basic activities but essential as without this management of business will be significantly affected. Support activities are related to planning and reporting in order to provide back-end support to business. With the support activities, Pizza Gourmet will be able to make better product and service strategies as per their previous experience and market trends. Further, HR management assists them in recruiting qualified staff and enhancing their skills and capabilities through training and development activities. Through Technology development they can create software and website for smooth operations of the business and with procurement, negotiation can be done for better cost management.

Value chain element	Activity	Activity providing competitive advantage or not	Justification
Inbound logistics	Cooking and mixing of core ingredients within restaurants	Yes	This activity will have a direct influence on customer satisfaction and their perception to visit again.
Marketing and sales	Creating brochures	Yes	This activity will attract potential customers to Pizza Gourmet.
Outbound logistics	Delivering pizza to customer’s residence	Yes	This will enhance the convenience of customers which will make an increase in sales of business.
Technology development	Developing advanced tracking system	Yes	It will make improvement in overall management efficacy and reduction in management cost.
Marketing and sales	Developing and setting up new restaurants	Yes	This activity will make an increase in market share and its reach to customers.
Inbound logistics	Developing new products	Yes	To promote innovation and provide better options to customers.
Administrative infrastructure	Developing strategy	Yes	This will provide growth and effective management to business.
Administrative infrastructure	Maintaining restaurant facilities	No	This is a basic activity which will not make any value addition however it is essential to develop better aura.
Procurement	Negotiating access to premises for company and franchise restaurants	Yes	For cost management.
Procurement	Negotiating supply arrangements with ingredient suppliers	Yes	For cost management.
Procurement	Negotiating supply arrangements with packaging suppliers	Yes	For cost management.
Administrative infrastructure	Performing finance functions	Yes	To make optimum use of available funds to enhance profits.
Administrative infrastructure	Performing reporting functions	Yes	For recording business activities this task is essential as it will assist in future planning and making improvement in business.
Operations	Preparing and cooking pizzas	Yes	This activity will have a direct influence on customer satisfaction and their perception to visit again.
Marketing and sales	Providing nutritional information of food to customers	Yes	With this, a business can assure they are delivering healthy and tasty product (Finkler, 2016).
HR management	Providing training programs for staff and franchisees	Yes	It will strengthen human resource to attain competitive advantage.
Inbound logistics	Receiving key ingredients into central hub	Yes	To ensure that all ingredients are available with business.
HR management	Recruiting staff, including e-recruitment	Yes	Qualified staff will be required to strengthen human resources for business (Légaré and Witteman, 2013).
Service and support	Replenishing store supplies	No	This is a basic activity for business it will not make any value addition.
Marketing and sales	Running TV, newspaper and radio campaigns	Yes	With this business will be able to reach a large number of audience.
Operations	Serving pizzas at customer tables	No	This is basic activity for business it will not make any value addition.
Outbound logistics	Storing key ingredients in central hub	Yes	To ensure that all ingredients are available with business (DRURY, 2016).
Operations	Taking customer orders	Yes	Better assistance to customers will make an increase in their satisfaction level.
Outbound logistics	Transferring ingredients to restaurants	Yes	To ensure that all ingredients are available with restaurants in a timely manner.

Value chain element	Activity	Activity viable for outsourcing or not	Justification
Inbound logistics	Cooking and mixing of core ingredients within restaurants	No	This is the major operation of Pizza Gourmet and done to be on an immediate basis so it cannot be outsourced.
Marketing and sales	Creating brochures	Yes	Writers and designers can be hired for preparing attractive brochures at minimum charges.
Outbound logistics	Delivering pizza to customer’s residence	No	It is because; delivery has to be done as per customer order which will have significant variation thus outsourcing will not cost beneficial (DRURY, 2016).
Technology development	Developing advanced tracking system	Yes	Hiring expert in this task will assist in developing better software through which effective management can be done to make a reduction in operational costs (Finkler, 2016).
Marketing and sales	Developing and setting up new restaurants	No	This is management planning task which cannot outsource it is to be done by top management of the restaurant.
Inbound logistics	Developing new products	No	Products have to be developed as per the experience of the Pizza Gourmet. Thus it will be done hotel staff as per changing taste and preference of customers.
Administrative infrastructure	Developing strategy	No	The strategy has to be developed by management for increasing efficiency of business. Thus it cannot be outsourced.
Administrative infrastructure	Maintaining restaurant facilities	No	It is to be done in-house as it is to be done on a daily basis and can be easily managed by daily staff.
Procurement	Negotiating access to premises for company and franchise restaurants	No	This will be the major asset for business thus this task is to be done by management it cannot be outsourced.
Procurement	Negotiating supply arrangements with ingredient suppliers	Yes	Ingredients negotiation can be outsourced to suppliers for cost cutting and to take good discounts.
Procurement	Negotiating supply arrangements with packaging suppliers	Yes	Packaging negotiation can be outsourced to suppliers for cost cutting and to take good discounts (Légaré and Witteman, 2013).
Administrative infrastructure	Performing finance functions	No	This information is confidential for business so it cannot be outsourced.
Administrative infrastructure	Performing reporting functions	No	It is to be done in-house as it is to be done on a daily basis and can be easily managed by daily staff.
Operations	Preparing and cooking pizzas	No	It is to be done in-house as it is to be done on a daily basis and can be easily managed by daily staff (Monczka and et. al. 2015).
Marketing and sales	Providing nutritional information of food to customers	Yes	For this nutritionist can be hired on a session basis to save cost.
HR management	Providing training programs for staff and franchisees	Yes	For this experts can be hired on a session basis to save cost (Simatupang Piboonrungroj and Williams, 2017).
Inbound logistics	Receiving key ingredients into central hub	No	This information is confidential for business so it cannot be outsourced.
HR management	Recruiting staff, including e-recruitment	Yes	Recruiting agencies can be hired to get good employees with minimum cost (McIvor, 2016).
Service and support	Replenishing store supplies	No	It is to be done in-house as it is to be done on a daily basis and can be easily managed by daily staff.
Marketing and sales	Running TV, newspaper and radio campaigns	Yes	Advertising agencies can be hired for effective campaigns of the product.
Operations	Serving pizzas at customer tables	No	It is to be done in-house as it is to be done on a daily basis and can be easily managed by daily staff.
Outbound logistics	Storing key ingredients in central hub	No	It is to be done in-house as it is to be done on a daily basis and can be easily managed by daily staff.
Operations	Taking customer orders	No	It is to be done in-house as it is to be done on a daily basis and can be easily managed by daily staff (Schniederjans, Schniederjans and Schniederjans, 2015).
Outbound logistics	Transferring ingredients to restaurants	No	It is to be done in-house as it is to be done on a daily basis and can be easily managed by daily staff.

References

DRURY, C.M., 2013. Management and cost accounting. Springer.

Finkler, S.A., Smith, D.L., Calabrese, T.D. and Purtell, R.M., 2016. Financial management for public, health, and not-for-profit organizations. CQ Press.

Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.

Légaré, F. and Witteman, H.O., 2013. Shared decision making: examining key elements and barriers to adoption into routine clinical practice. Health Affairs, 32(2), pp.276-284.

McIvor, R., 2016. An analysis of the application of process improvement techniques in business process outsourcing. International Journal of Quality & Reliability Management, 33(3), pp.321-343.

Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing and supply chain management. Cengage Learning.

Schniederjans, M.J., Schniederjans, A.M. and Schniederjans, D.G., 2015. Outsourcing and insourcing in an international context. Routledge.

Simatupang, T.M., Piboonrungroj, P. and Williams, S.J., 2017. The emergence of value chain thinking. International Journal of Value Chain Management, 8(1), pp.40-57.

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