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MGMT1020 / BUS3001 1803

MGMT1020 / BUS3001 Case Exam- 9B18M105 Comfort Remote Site Services Ltd

Name: Student Number: Due Date:

Etaferaw Yemataw 101132137 August 06, 2019

Name: Student Number: Due Date:

Danitza Zanabria R. 100491938 August 06, 2019

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1. Background: Who, When, What 1.1 W ho is the central stakeholder in the case? 

The center stakeholder in the case is Thomas Young, chief executive officer (CEO) and chairman of Comfort Remote Site Services Ltd.

1.2 W hen is the case taking place and are there any considerations of note because of when it is taking place?  

The case-taking place in Whitehorse, Yukon. On April 29, 2016 The considerations of note when the case taking place is, the Gregory Mine, owned by Yellowstone Mining is under construction until December 2016, and operations will start in May 2016. In order that, Yellowstone Mining is soliciting bids for catering, housekeeping and janitorial services for The Gregory Mine

1.3 W hat is the key decision (or problem or opportunity) that the stakeholder is considering in the case?   

The key decision that the stakeholder considering in the case is, whether to bid the proposal on the Gregory Mine RFP The key problem that the stakeholder considering in the case is, the lack of financial position improvement due to RFP proposal The key opportunity that the stakeholder considering in the case is, company profitability due to RFP proposal

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2. Industry Analysis 2.1 Name the specific industry that Comfort operates in. W hat is the growth in the industry that Comfort operates in?  The specific industry that Comfort operates in is catering, housekeeping, and janitorial services for remote mine sites  The growth in the industry that Comfort operates in has negative outcome. For instance, in 2015. The demand for catering services had declined by 30 percent approximately; in addition, in the year 2016. The industry is expected to decrease by extra 7 present

2.2 Identify trends in the Canadian mining industry and assess if it is a threat or opportunity for the industry Comfort operates in.

Driver

Assess: Opportunity or Threat?

 Ferrous Mining (iron ore);

 Even though, some factors can be seen as a threat for Canadian mining industry as result to Comfort threat, most of those factors are an opportunity. For instance, the percentage of the market been declared by 10.7 approximately for Canadian iron ore industry, however, the number of demand for steel, the need for use by other manufacturing industry, the high quality, the buy and sell value evaluation by U.S. dollar, and rapid urbanization and demand for the iron ore can indicate the long run existence of the ferrous mining company; in order that, the positive aspect of the market and the 90 percent export revenue can be an opportunity for the Canadian mining industry as well as Comfort

 Iron ore is primary raw material for steel production  Price dependent on global demand for steel  Iron ore use by cement production, lead refining, and paint manufacturing industries  High-quality drive to high demand in the international market  90 percent exported revenue  Bought and sold in U.S. dollars and the dollar’s value fallen over 20 percent in 2014.  Uncertain global economy decreases the price of the iron ore  Chines rapid urbanization and demand are the high factor in the demand for iron ore  China responsibility for the 65 percent iron ore imports for global  Canadian iron ore annual contracted 10.7 percent 

Non-ferrous Mining (gold, silver, copper, and zinc);

 The material used in jeweler, alloys, and other industrial application  The price is depending on global demand and economic growth  Canadian rich precious metal deposits, due to high profit

 Event though, the uncertainty of the global market, and the weak Chinese demand, and other aspect can affect and be the threat for the Canadian mining industry as well as Comfort, the use of ability in different industrial application, the undeclared price for the goods, and Canadian rich precious metal deposit will be an opportunity for Comfort and Canadian mining industry

 Global economy uncertainty  Weak Chinese demand for precious metals  Strong U.S. dollar lowered metal price  Gold and silver are precious metals  The price of the basket of precious metals fall by 18 percent approximately between 2011 and 2016

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 The benefit of non-decrease price (price worthiness)  The increase of its production, and the 0.9 percent grew in the mining industry can be an opportunity for Comfort; because when there is a grew in the industry, the opportunity of demand for the comfort will increase or will remain the same

 Minerals (diamond, potash, salt, peat, and gypsum);  Numerous industrial and commercial applications  Growth of 0.9 percent in 2015.  Despite weakness in other industry and the weaker Canadian dollar, increased its production and downstream manufacturing demand to offset mineral price

2.3 W ho are the customers in remote -site Food service industry and what do they want from a provider?  The customers for remote-site food service industry is, Canadian mining and exploration sectors  The customers need from the remote-site rood service the option of renewal contract; because the renewal contract will eliminate the risk of potential problem during transaction period. In Addition, the customers need from the provider catering, housekeeping, janitorial services, and cut the costs of their service

2.4 W ho are Comfort’s competitors in this industry? Assess the level of threat from each of these customers and justify your assessment.

Competitor

Threat (H. M, L)

Justification/Rationale

 Compass Group PLC

 M

 Provide the same even more service as Comfort’s do to constriction, mining, oil and gas, and defense sectors Provide services over 50 countries; well known internationally and mix industry  50% of its sales come from North American, and its Canadian remotesite food service operation. The same geographic area as Comfort’s, but bigger and well stabled  2013 acquisition of product; bad reputation in the market will reduce the threat level of the company, due to Comfort’s good reputation in Canada industry  500,000 employees vs. 700 employees; the high difference number of employee will help the company to accomplish its goal and opportunity in the market; as result to medium threat to Comfort’s

 Aramark Corporation

 L

 Provide service to education, health care, business, sports, and correctional industries in 21 countries. The target of the market is different than Comfort; as result to low threat to be for the comfort’s  The wrongdoing of the corporation result to the number of prisoners become sick in Ohio and Michigan, will make the Aramark Corporation low threat to Comfort’s

 Sodexo SA

 L

 Provide service in local schools, hospitals, and restaurant to 80 countries; and its 41 percept come from North America. Different customers target than Comfort’s, due to low threat

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MGMT1020 / BUS3001 1803

 Even though, the percentage of the North American operation looks a medium threat for the comforts due to geographical area, Sodexo SA horse meat scandal will make the specific competition to be low threat to Comfort  Civeo Corporation

 H

 The company geographical location, the 67 percent revenue from Canadian market, being similar service provider for the same customers, and Canadian corporation to be will make it high threat to Comfort’s. In addition, they do not have any bad reputation, as result to high threat to Comfort’s

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MGMT1020 / BUS3001 1803

3. Firm Analysis 3.1 W hat are Comfort’s strengths and weaknesses?

Strengths



The ability to helped the organization to diversify revenue streams



Its offers extensive products that helped the company to penetrate in the remote mining industry



Experienced employees; the average managers had over 20 years’ experience in the food service industry, and its financial control had 15 years’ experience in the industry



25 remote locations across four Canadian provinces and territories



Its policy that oversee operations across the country; such as satellite offices, and its supervisors check operations an average of seven times a year



The long time experience in the industry since 1953.



Good reputation in the market



The positive outcome to support local community where the project was established, and dispatch system for its employees. For instance, community in joint ventures; partnerships to Aboriginal communities that create local job



The CEO in charge of doing an efficient work for the company since 1983, and his strong working relationship with its client base, as well as his knowledge from completing master of business administration at the Ivey Business school in London, Ontario



Its decision to building relationship and expertise in the remote mining sector

Weaknesses



   

Inventory Management – Based on the details provided in the Comfort Remote Site Services Ltd. case study, we could conclude that Comfort Remote is not efficiently managing the inventory. For instance, Comfort days in inventory is 100. However, its competitors such as Compass: 6 days, Aramark: 16 days, Civeo: 3 days is The limitation of its service for remote mine sites The decisions to exited the highway restaurant business, and education cafeteria service sector The CEO poor wellness to take a risk for expand the business Geographical limitation

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3.2 Using the data from the Exhibits. Calculate the ratios for Comfort in 2014 and 2015. Show your work and the result.

Ratio

Compass

Aramark

Sodexo

Civeo

Comfort 2014

Comfort 2015

Operating Profit Margin

7.07%

4.38%

5.77%

(29.6%)

22%

18%

Net Profit

4.92%

1.65%

3.65%

(26.9%)

11%

15%

Sales growth

4.6%

(3.4%)

10%

(45.1%)

n/a

-8.45% [($52,108-56,917)/56,917] *100

Profit Growth

0.7%

58.4%

42%

30.3%

n/a

19.48%

Margin

[(7,819-6,544)/6,544] *100

OPERATING PROFIT MARGIN Operating expenses 2014 2015

Operating Profit Margin Operating Profit Margin

Calculations

Percent

56,917- 44,438

$ 12,479

12,479/56,917

22%

52,108- 42,714

$ 9,394

9,394/52,108

18%

NET PROFIT MARGIN Net Income

Calculations

Percent

2014

Profit Margin

6,544

6,544/56,917

11%

2015

Profit Margin

7,819

7,819/52,108

15%

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MGMT1020 / BUS3001 1803

3.3

W hat insights does this analysis highlight?



Operating margin profit has decreased, which means company is expending more in cost of sales and general overhead expenses in 2015 than 2014. However, the net profit has increased in 2015. Which means that, despite the expending more in cost of sales and general overhead expenses, they have reduced other expenses



Sales growth has reduced in 2015, but profit has growth. This is possible because they have reduced expenses, especially other expenses

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4. Opportunity Analysis: Qualitative 4.1 Assess the Gregory Mine Bid opportunity qualitatively using a pro-con analysis.

Pro

Con

 Expend the growth of the company

 Weak commodity price, risk for its profitability

 New customer, as result to additional income and relationship

 The pressure on to cut costs from its service, due to less revenue

 Popularity in the industry

 Renegotiation due to market condition

 The ability to control the market in the specific area  Profit for its segment  Will increase the number of employee; due to more work opportunity for Canadians  The opportunity of three to five years’ contract, with the option for renewal  Future bids at other locations  Future opportunity to work with its company in over 30 countries  Guaranteed two years contract for all service

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5. Opportunity Analysis: Quantitative 5.1 Conduct a differential analysis of the bid opportunity for the low (400 employee) scenario. Show your work and explain your calculations.

SALES

Catering

Catering $32.5 per employee*365 days* 400 mine employees

$

Housekeeping $7.5 per employee*365 days* 400 mine employees

Housekeeping

4,745,000

$

Janitorial $0.05*100.000 Sq *365 days $ $

One time Expense: Transportation once

4,745,000 $ 7,665,000

1,095,000 $ 1,825,000

4,500

Uniforms cost = $50 each total 53 employees $50*53

$

2,650

Linens Each =$250 Number of employees =400 $250*400

$

100,000

Total One Time Expense

1,095,000

$ 1,825,000

Total Total of the segments

Smallware and equipment

Janitorial

$38,000 145,150

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DIFFERENTIAL ANALYSIS EXPENSES

$

CATERING 2 Employees - Cheff 2 Employees- Bakers 12- Line of Cooks 2 Employees- First Cook 4 employees- Second cook 6 Employees- Third Cook (10 hours daily)

$15 per hour (8 hour) $20 after 8 hours

80,000 $ 75,500 $

160,000 151,000

75,500 $ 62,000 $ $

151,000 248,000 249,600

8 hours * 5 days * 6 third Cooks = 240 hours per week 240 hours * 52 weeks * $15 per hour

$

187,200

Overtime 2 over-time hours *5 days *6 Third cooks = 60 hours per week 60 hours *52 weeks * $20 per hour

$

62,400

FoodCost

$18.42*400 employees*365 days

$

2,689,320

$

80,000

$

69,000

HOUSEKEEPING 16 employees: $51,000 each 16* $ 51,000

$

816,000

cleaning supplies 115,000 every 6 months =115,000*2= $230,000 20% Housekeeping :20% $230,000 =46,000

$

46,000

Trips: Each round ticket= 1,250 First cooks (2 employees)=32 trips Head Chef (2 employees)=32 trips total trips = 32+32=64 cleaning supplies 115,000 every 6 months = $115,000*2 30% Catering: 30% * $230,000 = 69,000

$1,250 each trip *64 employees

= 230,000

JANITORIAL MANAGEMENT 20 janitorial employees :20 employees *$50,000 annually CleaningSupplies 115,000 every 6 months :$115,000*2 = $230,000 50% Janitorial: $230,000*50%= 115,000 Benefit: 15 %of employees earning (Table: calculatingbenefits) $2,875,600 total salaries * 15% $ Catering= 33.4% of $431,340 $ Housekeeping=28.4% of $431,340 $ Janitorial Mang =34.8% of $431,340 $ management benefits =3.5%* $431,340 $

431,340 144,068 122,501 150,106 15,097

Transportationof Supplies (given) Catering:30% Housekeeping:20% Janitorial:50%

$ $ $ $

365,000 109,500 73,000 182,500

Management Expenses Camp manager salary supervisor and camp manager trips: 7+16=23 trips Administration Expenses

$ $ $

100,000 28,750 15,150

Contingency provision (Table Recurrent Expenses) 2% of recurrent expenses

$

1,000,000

$

115,000

$

431,340

$

365,000

$

143,900

$

134,000

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TOTAL SALES TOTALEXPENSES NET INCOME

SUMMARY $ $ $

7,665,000 6,849,160 815,840

Calculating Benefits employees numbers total salary Chefs 2 160,000 Bakers 2 $ 151,000 First Cook 2 $ 151,000 Second Cook 4 $ 248,000 Third Cook 6 $ 249,600 Housekeepers 16 $ 816,000 Janitorial 20 $ 1,000,000 Camp manager 1 $ 100,000 TOTAL 53 2,875,600 Catering % $ 959,600 Housekeeping $ 816,000 Janitorial Manag $ 1,000,000 Management $ 100,000 TOTAL $ 2,875,600 BENEFITS: 15%OF 2,875,600 $

33.4% 28.4% 34.8% 3.5% 100% 431,340.00

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Salaries Food Cost Trips Cleaning Supplies Benefits Transportation Supplies Total Recurrent Expenses Contingency provision 2%

$ $ $ $ $ $

Recurrent Expenses Catering Housekeeping Janitorial 959,600 816,000 1,000,000 2,689,320 80,000 69,000 46000 115000 431,340 109,500 ...