Case Teaching Package
A case teaching package is available for this case. It includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into your course.

Length
This case is 32 pages in length and its case teaching package is 12 pages.

Abstract

This case is set in 1988 in a consumer goods packaging division of a major forest products company. The product is the polyethylene coated paper carton for milk or orange juice.

This case is a fairly simple, straightforward exercise in creating a value chain (for the paper milk carton industry) and in using it to facilitate managerial decision making (product emphasis, customer emphasis, capital expenditure analysis, make/buy analysis).

Linkages to Textbooks or Journal Articles/Fit Within a Course

I use this case to introduce value chain analysis in the required course on managerial accounting. I assign it with the value chain technical note as background for the students.

The case can be covered in one class period. In class I go through the assignment questions in order, using the suggested analysis from this commentary.

The value chain concept has been discussed in the strategy literature since at least 1980. As a generic concept for organizing our thinking about strategic positioning, its significance is widely accepted. But empirical examples of the power of the concept for shaping cost analysis are not plentiful. This case reports a field study in which a value chain is constructed. The insights for cost management which emerge are contrasted with those which are suggested by two traditional analysis techniques—a 2×2 growth/share matrix and conventional cost analysis. The objective of the case is to extend our knowledge about how to construct and use value chains in managerial accounting. I believe the concept is powerful and deserves far more empirical study as a way to make the strategic perspective more explicit in managerial cost analysis.

Study Questions

1. Can you construct a "value chain" (see Exhibit 6 in the case) of costs and profits from the pulp mill all the way through to the supermarket for milk, for dairy orange juice, and for Minute Maid orange juice? Present all the calculations on the basis of one ton of board. Use the format outlined in Exhibit 7 (of the case).
2. What insights for the business does the "value chain" provide? For example, of the total profit earned per ton of board, how much is earned by the supermarket, by the processor, and by Champion? (Use a format like Exhibit 8 of the case). So what?
3. When asset data (as shown here) is included, what inferences do you draw about ROA for Champion, the dairy, the juice processor and the retailer? (Use a format like Exhibit 9 in the case.)

   Assets in the Process Flow

   Assets	Current Market Value ($)	Per Ton of Board
   Pulp Mill	400,000,000	$1,600
   Paper Machine	300,000,000	1,200
   Extruder	42,000,000	190
   Converting Plants	141,000,000	830
   Juice Processor	55,000,000	2,890
   Small Dairy	2,100,000	5,400
   Supermarket—space and display cases (dairy section)	103,500	1,800

4. Note that unless a major expansion were undertaken, Champion's output is limited to about 250,000 tons per year of coated board. Which segment(s) do you believe should be targeted?

The downloadable file for this case is in Microsoft® Word 7.0 for Windows®.

If you do not have Microsoft Word, you can download the free Microsoft® Word Viewer 97 right here:   For Windows 3.x   For Windows 95

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