Features of Blackmore’s

Describe about the Accounting for Managers for Global Reporting Initiative.

The Global Reporting initiative is a widely used global reporting framework that provides direction to the companies. The companies by applying these guidelines improve their disclosure relating to sustainability. The Blackmore is the largest health care business of Australia. In this report an attempt is made to analyze the environmental and social impact of the Blackmore’s operations (Hahn & Kühnen, 2013). The GRI guidelines and the changes in the annual reports that are required in annual report are also discussed. The report highlights the benefits that the potential investors, shareholders and other stakeholders will have on implementing of the GRI guidelines by the Blackmore’s.  

Maurice Blackmore 1932 established the company Blackmore’s and since then the company has come long way to become the Australia leading health care company. The company has combined traditional methods with the scientific methods for providing optimal well being and health (Junior et al., 2014). The company uses ingredients from around the world for producing extensive range of products that includes herbal supplements, mineral supplements, vitamins and nutritional foods. The products made comply with the rules laid down in Australian Manufacturing Standards and quality checks are conducted at regular intervals.

The Blackmore’s is a publicly listed ASX100 company with $2.3 billion market capitalization. The company was unable to maintain stock for the growing demands in the Asian market. As a result, the company has entered into number of partnership arrangements and invested heavily in the capacity building of the company. The company also maintained inventory of critical scare raw materials so that the company could maintain the stock of the products in the vulnerable markets (Fernandez-Feijoo et al., 2014).

The company has seen a 52% increase in sales during the year 2016. The company has incurred total expenses of $454.00 million in operation during 2016, which is a 43% increase in expenses from the previous year. The sales related expenses has incased by 46% to become $225.00 million during the year. The increase in expenditure and growth of sales related expenses along with sales growth figure shows that the company is focused on product innovations and sales (Gherardi et al., 2014). The positive effect of the heavy expenses is that the company in just last 12months has managed to produce 43 million capsules and 486 million tablets and has shipped them to around 25000 retail partners across the globe. This also reflects the unprecedented demand of the products of the Blackmore’s (Islam et al., 2016).

Environmental and Social Impact of the Blackmore’s operation

The company has undertaken various capacity building initiative to meet the customers demand and maintain the quality standard. The company has increased its staff and has shifted the packaging facility. The company has audited suppliers to find most secured suppliers that maintains high standard of quality (Fonseca et al., 2014). It has increased its warehouse facility across Australia. The company in order to carter to the demands of the domestic and international market has invested in plant equipment that will increase the production capacity from 4000 tablets per minute to 13000 tablets per minute.

The company heavily relies on natural environment for its wide range of products. Therefore, the company is committed in practicing environment sustainable operation. The term sustainable development means economic progress or development without damaging or depleting the environment (Adams et al., 2014). The company not only focuses on environmental protection but also incorporates corporate governance, responsibility to the community and workplace practice into sustainable development.

Environmental Impact

The company is continuously engaged in exploring alternative ways so that the environmental impact of its operation could be minimized. In order to reduce its environmental impact from packaging operation the company has signed the Australian packaging covenant. This is changing the operating culture of the business by combing the efforts of government, business and community to find a sustainable packaging solution of the business. The company uses glass for packaging its product to reduce its waste (Higgins et al., 2015). The company in the year 214 has initiated a process called close loop for bulk deliveries in packaging facility. This initiative has reduced the waste and cost thereby increasing the operating efficiency of the company. The company’s other environmental friendly initiative is that it has adopted a paperless order picking. The headquarters of the company also has numerous environmental sustainable features as it has own electricity generation plant that runs in parallel with local grid. The company also promotes bio diversity in the local environment.

Social impact

The company is committed for long-term social responsibility. The company always held the firm believes that if the peoples are taken care off then people will take care of other issues. The company in order to promote its corporate values positively influences society through its education, research and social participation initiatives. The company is dedicated in building local and global partnership so that a culture of health and wellbeing could be established.  The primary aim of the company is to build marketplace, community and supportive work force. The company has supported more than 50 charitable institutions and numerous individual for creating brighter future (Farneti & Rammal, 2013).

GRI guidelines

The G4 sustainability reporting launched by The Global reporting initiative has improved sustainability reporting and it has helped the reporters and the shareholders. The GRI guideline offers description of the reporting process that is applicable to all the organizations that are preparing sustainability report. In accordance with this guideline, the reporting organization is required to disclose the critical impacts the business operation has on society, economy and environment (Lee & Vachon, 2016). The impact whether positive or negative both are to be disclosed as per the requirement. This generates standardized relevant information’s that is reliable and is useful in assessing the opportunities and risks. This guideline has enabled both the stakeholders and the business to make a more informed decision. These guidelines have been designed so that they can be implemented in any type of organization across the globe. The GRI in 2000 has recommended a structure of the report with six key elements of CEO Statement, Profile of reporting organization, executive summary and key indicators, strategy and vision, policies, management system and performance. In 2002, separate executive summary statement was removed and the CEO statement was removed to vision and strategy section.  The GRI requires the company to consult with the stakeholders and to report the outcomes of such consultations (Bhaduri & Selarka, 2016). The primary aim of the sustainability report is to provide new opportunities for positive change, doing business with the sustainable development for better social development and to provide long-term sustainable financial performance of the company. The Blackmore’s in 2016 has prepared its first sustainability report. This report provides the basis for future reporting. The report has been prepared with the extensive consultation of stakeholders as per the requirements of the GRI guidelines.

The G4 sustainability guideline must be applied in preparing the sustainability report by the organizations.  The content of the sustainability report prepared by the company should:

Identify relevant areas and the effects on the activities, service, product and relationship should be assessed;

It should be identified whether the impact occurs within the organization or outside the organization;

The identified aspects should be prioritize according to the materiality and it should be decided how much coverage to be given to the various aspects;

The managements approach should be disclosed;

The indicators that are related to the material aspects should be disclosed;

The Blackmore’s has started the sustainability report on 2016 so the annual reports prior to these periods are analyzed. This analysis is conducted to find the gap in the information presented in the annual report. The G4 sustainability guideline has given more emphasis on materiality. According to the GRI guideline, the contents of the report should be focused and the issues that are most critical to the business should be reported in details. The report therefore should focus on material issue that is known as “Material Aspect” and the focus should be maintained throughout the report (Lee 2015). The report should also mention the initiative taken by the management in order to manage the material aspects. This is provided in the report under the heading “Disclosure on management approach”. The report should highlight the impact of the material aspects identified. The report must explain the process of identifying the material aspects and hoe the stakeholders are involved in the process (Ong et al., 2016). The Blackmore’s in 2015 has not prepared the annual report in accordance with the GRI guidelines. As a result, the annual report does not include the identification of material aspects and there is no disclosure on management approach. If the guideline had followed then the annual report of the company would include the above-mentioned requirements. The implementation of this guideline will help the company to shorter the organization report as the disclosure of material aspects will be in the form of lists.

GAP Analysis

The company is required to assess the impact of each of the material aspects. This is known as the boundary. In order to comply with the GRI guidelines the Blackmore’s in its annual report is required to disclose the process that is applied to define the impact of the material aspects (Goswami & Lodhia 2014). The companies will be required to document and report on the process in the annual report.

The GRI guideline provides that the company can prepare a report using any of the two in accordance level. This two reporting methods are preparing the report meeting the in accordance criteria and preparing the report without meeting the in accordance criteria. The Blackmore’s can choose to follow the criteria’s to achieve the in accordance level or it should prepare the report without using in accordance and simply following the GRI guidelines (Boiral & Henri 2015).

The GRI guideline gives importance to the supply chain issue. It requires that the company must disclose how the social and environmental issues relating to the supply chain are managed. The guideline requires the company to disclose the followings:

The procedures for screening the suppliers in accordance with the social and environmental impacts;

The identification of the actual and potential negative impact related to the supply chain;

The actions taken to reduce or mitigate the impact should be disclosed;

The grievance related to supply chain management should be identified and the steps that are taken to mitigate such grievances should be disclosed;

The Blackmore’s is required to design and implement a process for evaluating the impacts of the supply chain. This will require new process to identify the suppliers that have negative social and environmental impact. 

The GRI guidelines provides a framework that address the broad performance relating to social, environmental and economic issues and how it is reported to the stakeholders. This guides the organization in proving the impact. It is a widely used method for sustainability reporting so it increases the comparability of the results of different organizations across the globe. The reporting requirements of this guidelines enhances the accountability of the company as a result the more interested in assessing the impact of their operations. This accountability and the assessment of the operation of the business are helping in developing a more cohesive society. The sustainability reporting has also helped in building trust between the company and stakeholders (Adams 2013). There are investors that only invest in a more sustainable way of business. The sustainable business practice is very important for attracting potential investors. The reporting under GRI guidelines provides all the information relating to sustainable business practice in a more systematic manner therefore potential investors give much value to this report. The supply chain management has been given huge focus in GRI guidelines therefore company will provide equal attention to all the stakeholders and not only investors.

Conclusion

The study above has shown that the GRI guidelines of sustainable reporting are an integral part of holistic reporting. The reporting based on GRI guideline helps the company to increase its reputation and efficiency. This reporting also aims to provide numerous benefits to other stakeholders. In conclusion it can be said that sustainable reporting has helped Blackmore to gain more efficiency, effectiveness and transparency in operations. This has in turn positively affected the performance of the business.

Global Therapeutics was established in 1999 by Byron Bay. Theproduct range of the company is the combination of modern scientific medicines and ancient Chinese medicine. In analyzing the financial statement of the company, it is found that major expense is the cost of inventories that are sold, then major expense is the employee benefit related expenses and another significant expenses of operation is operating lease payments.  Therefore the significant costs of the Global Therapeutics related to operations are inventory cost, employee related expenses and lease payment. Another significant cost of the company apart from the current operating costs is the selling and distribution costs (DRURY 2013).

The change in the different type of costs due to change in the production level is referred to as cost behavior. There are primarily three types of costs according to the cost behavior. These costs are fixed costs, variable costs and semi variable costs. The fixed costs are those costs that do not change with the fluctuation in the level of production. These costs are incurred even if no units are produced for example rent. The number of units produced increases then the fixed costs per unit decreases and vice versa (Chen et al., 2012).  The variable costs are those costs that are directly related to productions. The variable costs increases as the number of units produced increases and vice versa. The per unit variable costs always remains constant and does not change with the number of units produced. There is another type of cost that is a mix of variable and fixed costs this is known as semi variable costs. An example of semi variable costs is telephone expense (Hibbard et al., 2013). The mixed costs are spitted in fixed and variable costs with the help of cost behavior analysis technique.

In the case of Global Therapeutics the major costs of operations that were identified are inventory costs, employee related expenses and the lease payment. The inventory costs are variable costs because the inventory costs changes with change in production level. The lease payments are example of fixed costs because the lease payment is not affected by the level of production. The employee related expenses are the example of semi variable costs as there is a component of both fixed salary and variable bonuses and commissions (Armstrong, 2014).

3. In order to ascertain whether the breakeven analysis is an important tool for evaluating the desirability of Global Therapeutic acquisition it is important to have an understanding of breakeven analysis its advantages and disadvantages. The analysis of the relationship between the costs and profit volume at various activity levels is referred to as breakeven analysis. The breakeven point is that level of activity where the business makes neither profit nor loss (Hedman et al., 2012). At this level, the total money received from sales is spent for producing the item of sales. There are certain advantages of break-even analysis this are:

• It helps to measure profit and loss at different levels of productions and sales;
• It helps to predict the change in sales price;
• It is helpful in analyzing the relationship between the fixed and variable costs;

There are certain disadvantages of breakeven analysis and this are:

• It is assumed that sales price are constant at all levels of production;
• It is also assumed that the production and the sales are the same;
• The breakeven analysis chart requires a lot of time to be prepared;
• It is applicable only for single product or single mix products;

The breakeven point indicates the total amount of sales that the business needs before it starts earning profits. The breakeven analysis helps the business to identify the excessive fixed costs and reducing these fixed costs will help the business make more profit. In evaluating a business for acquisition, it is important that the cost behavior should be appropriately analyzed if breakeven analysis is to be used as the decision making tool (Cuganesan et al., 2012). The analysis of costs behavior means the determination of fixed, variable and mixed costs. This will help to identify the inefficiencies that could be reduced by reducing the costs. The decision making using break-even analysis means a project that helps in achieving the breakeven point early will be considered as a suitable project (Nekarda & Ramey, 2013). Therefore reduction in fixed costs and achieving the break even early will be the only factors that would be considered in decision. If the profitability in short term is the primary decision making objective then the breakeven analysis is the suitable method for screening projects.

4. Then balance scorecard is a strategic management and planning tool that is used by the business to align its activities with the vision statement of the organization. The balance scorecard approach makes a holistic view of the organization. It helps to improve the performance of the organization by measuring that is important (Grant, 2016). The balance score card approach analyses the business with the four perspectives this are financial, internal business process, customer, growth and learning.

In the financial perspective, the first objective is to increase the sales growth and the second objective is to increase the return on capital employed. In order to achieve the objective of sales growth the company is required to spend more on advertising the Chinese medicine and create channels with the established practicetioner of Chinese medicine (Kotas, 2014). The company in order to increase sales can also arrange for workshops promoting the importance and popularity of Chinese medicine. The second objective is to increase return on capital employed. In order to achieve this objective it is important that the company increase its profit. The profit can only be increased by reducing costs and increasing sales (Shephard 2012). The company can achieve both the increase in sales and reduction in costs by achieving optimum and functioning efficiently. This is could be helpful in evaluating the performance of the business.

In the customer perspective, the primary objective is to attain customer satisfaction and another objective is to increase market share. The company can achieve the objective of customer satisfaction if the medicine is authentic and helpful in curing the diseases (Uyar & Kuzey, 2016). The available of the medicine across the medical stores are important for customer satisfaction. In order to achieve the objective of increasing market share the company is required to aggressive marketing for capturing the market, increase the visibility of the product, create new distribution channels etc (Monczka et al., 2015). 

In internal business process, perspective the objective of the company is to increase the modernization of the process and the other objective is to manage inventory appropriately. In order to achieve the objective of modernization it is important to note that the Chinese medicines are ancient techniques so technology should be used prudently. The technology that increase productions and reduces costs should be adopted to attain this objective (Schuster 2015). The objective of proper inventory management can be achieved if the inventories are appropriately accounted in either the FIFO or LIFO basis. The stock levels should be appropriately evaluated and calculated so that there is no shortage of stock and unnecessary funds are not blocked in the stock.

In the learning and growth perspective, the two objectives are job satisfaction of the employees and training and learning opportunities to the employees.  The company can attain the objective of job satisfaction by giving employees the best suitable jobs and by providing best working environment (De Zoysa et al., 2014). The company can attain the other objective by providing educational and learning facility.

1. a)

To: Retail head of Blackmore’s

From: Strategic consultant

Date: 18/09/2016

Subject: suggestion of alternative strategic initiatives

Introduction

In this memo, alternative strategic initiatives are suggested so that the required objectives could be achieved. The required objectives is to attain early breakeven of the company and increase profit of the company.

Strategic initiatives

The breakeven level can be reached early either by increasing contribution or by reducing fixed cost. The increase in contribution involves reducing variable costs or increase in sales price. The increase in sales price will reduce the competitive edge of the company so increasing sales price is not an option (Aoki & Nguyen, 2014). The company can reduce costs but cost reduction involves reduction of excess expenses. If the company is incurring excess expenses then it should be reduced to improve the profit and achieve early breakeven sales.  The other option is to increase the sales. On analyzing the statement of profit after tax, it can be seen that all the products except recharge is making a net profit (Fullerton et al., 2013). The Recharge bar has a positive contribution but it is making a net loss. These situations can be improved by increasing the sales of recharge bar that will increase contribution and eliminate loss. The Recharge bar attains no profit no loss at the level 27181 units. Therefore, the company should at least sell these units to reduce costs and increase profit. 

Conclusion

Based on the above analysis it is suggested that the company should increase its sell to increase the profits. The revised estimates show that the company will increase its overall profit by this strategy.  The calculation is shown in the appendices.

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