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Pops Incorporated Managerial Accounting as a strategic




POP?S, INCORPORATED;MANAGERIAL ACCOUNTING AS A STRATEGIC DECISION TOOL;XXXXX XXXXXX;Assistant Professor of Accounting;Cedarville University, Cedarville, Ohio;Jon Austin;Associate Professor of Marketing;Cedarville University, Cedarville, Ohio;Kenneth Schappell;Finance Group Manager;The Procter & Gamble Company, Cincinnati, Ohio;BACKGROUND;Paulo ?Pops? Gigliotti emigrated from Italy and settled in Dayton, Ohio. In Italy, Mr. Gigliotti;had earned both a bachelors and masters degree in food chemistry and worked for several food;processing companies. Pops came to the United States when his cousin, Guiseppe Manganaro;offered him the position of senior food chemist at Manganaro Foods, a growing producer of;Italian cuisine for the American market. Although he enjoyed working with family members, he;did not feel challenged by his new job and therefore began tinkering with various ?experiments?;at home.;Mr. Gigliotti was fascinated by the variety of carbonated beverages available in America. He;enjoyed the refreshing sensation caused by carbonation, but felt all of the American soda pops;were too sweet and none of them provided the depth of flavor to which he had been accustomed;with non-carbonated beverages in Italy. After much experimentation, Mr. Gigliotti developed a;formula for a semi-sweet, multiple-fruit-flavored carbonated beverage. After sampling his;creation, friends and family alike responded in an overwhelmingly positive manner. Many of;them encouraged him to bottle the beverage and sell it locally. Indeed, Mr. Manganaro was so;excited about the beverage that he offered to provide the necessary production equipment;facilities, and capital.;After much discussion, Mr. Gigliotti and Mr. Manganaro decided to call the beverage Pop?s;Punch and began marketing it in the Dayton area. Consumer response was very strong. Within;AICPA Professor/Practitioner Case Development Program Case No. 2003-04: Pop?s, Incorporated? 2;five years Pop?s Punch was selling well throughout the Midwest region. To keep up with;demand, and to develop a more focused marketing strategy, the cousins detached the beverage;operations from Manganaro Foods and established Pop?s, Incorporated. To compete more;directly in the non-cola carbonated soft drink market, Mr. Gigliotti developed several individual;fruit-flavored sodas, which were marketed under the Pop?s (Orange / Grape / Strawberry /;Cherry) Soda brand name. This strategy proved to be highly successful and after five years;Pop?s, Inc. began selling its beverages on a nation-wide basis.;Over the next 20 years, Pop?s, Inc. failed to introduce any new products, but experienced steady;growth in both sales and profits from the base line-up. During this time period, the company;achieved a respectable 4.7% share of the non-cola market and subsequently made its first public;offering. After nearly 35 years in business Mr. Gigliotti and Mr. Manganaro both retired and;sold all of their holdings. For the next eight years Mr. Gigliotti?s son, Paulo, Jr., served as chief;executive officer, but was recently forced to resign after failing to achieve unit and dollar sales;growth. Michael Newberg, formerly the firm?s chief financial officer, has been appointed CEO;and charged with growing the company.;CURRENT SITUATION;Upon assuming his new responsibilities, Mr. Newberg and his management team performed a;thorough S.W.O.T. analysis. The corporate history and culture had long emphasized slow;gradual change. They concluded the company possessed neither the core competencies nor the;capacity to change that would be necessary to diversify into an entirely new industry.;Accordingly, Pop?s, Inc. would need to devise a new strategy by which to achieve growth within;the soft drink industry.;The team carefully considered several alternative ways of revamping its strategy within the noncola;market, but none of them seemed to have the potential for the magnitude of growth the team;desired. The team then began to consider the ?unthinkable? ? the possibility of entering the cola;market. Although the risks were high, so were the possible rewards with each market share;percentage point in the domestic soda market worth approximately $500 Million in annual retail;sales. Under Mr. Newberg?s leadership, Pop?s, Inc. began the process of developing a strategy;with which to compete directly with the giants of the Cola industry.;The research


Paper#19457 | Written in 18-Jul-2015

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