Compagnie Du Froid
Case Analysis Report on: Compagnie du Froid
Executive Summary
This case study describes an ice cream manufacturer, Compagnie du Froid S.A., founded by Jacques Truman’s father in 1985. It is a major competitor in the industry during summer and has presence in France, Italy and Spain. Compagnie du Froid practices decentralization in its organization, where each region is managed by a competent manager empowered to make business decisions in the best interest of the company.
Traditionally, the business performance of each regional manager is measured against a set profit plan, with Jacques rewarding his managers a fixed payout of 2% of corporate profits as a bonus. However, the organization is facing many business firsts, which when analysed, raises questions as to whether the fixed 2% payout truly rewards the regional managers for successful effort, or unfairly penalizes for situations out of the managers’ control. Some of the issues discussed in this report include: 1. An apparent poorly performing Spain negatively impacting the overall corporate performance. 2. An apparent outperforming France showing a larger than 20% growth year on year. 3. An Italy that has achieved targets, and expanded its reach. 4. The inter company transfer of products between two regions (France to Spain) based on the cost plus method of transfer pricing. 5. France having ventured into distribution, which is not Compagnie du Froid’s core business.
On further examination, Spain’s poor results was due to a confluence of several negative factors, some of which were out of the regional manager’s control: a lower-than-average temperature change of 1.7ºC, frequent failure of new machinery, stock outs during crucial periods, cost plus 5% transfer arrangement from France and price erosion from fierce competition.
The factors mentioned above call for appropriate methods of performance measurement to be developed to assess each region instead of the current blanket profit plan.
Executive Summary
This case study describes an ice cream manufacturer, Compagnie du Froid S.A., founded by Jacques Truman’s father in 1985. It is a major competitor in the industry during summer and has presence in France, Italy and Spain. Compagnie du Froid practices decentralization in its organization, where each region is managed by a competent manager empowered to make business decisions in the best interest of the company.
Traditionally, the business performance of each regional manager is measured against a set profit plan, with Jacques rewarding his managers a fixed payout of 2% of corporate profits as a bonus. However, the organization is facing many business firsts, which when analysed, raises questions as to whether the fixed 2% payout truly rewards the regional managers for successful effort, or unfairly penalizes for situations out of the managers’ control. Some of the issues discussed in this report include: 1. An apparent poorly performing Spain negatively impacting the overall corporate performance. 2. An apparent outperforming France showing a larger than 20% growth year on year. 3. An Italy that has achieved targets, and expanded its reach. 4. The inter company transfer of products between two regions (France to Spain) based on the cost plus method of transfer pricing. 5. France having ventured into distribution, which is not Compagnie du Froid’s core business.
On further examination, Spain’s poor results was due to a confluence of several negative factors, some of which were out of the regional manager’s control: a lower-than-average temperature change of 1.7ºC, frequent failure of new machinery, stock outs during crucial periods, cost plus 5% transfer arrangement from France and price erosion from fierce competition.
The factors mentioned above call for appropriate methods of performance measurement to be developed to assess each region instead of the current blanket profit plan.