Free «Deustche Braurei» Essay Sample


Deustche Braurei is a German beer producing company that is family-owned. Twelve generations have been in charge of the company, with each of them being simple and direct on their management styles as well as the company operations. The company’s main strength is the high quality of their product which has been applauded by their customers and admirers. In 2001, Lukas Schweitzer  hired an expert, Oleg Pinchuk, who was made the marketing manager. Being run by family members, the company has recently admitted Greta Schweitzer in the board of directors. She is Lucas’ and holds a masters degree in Business Administration. Greta is expected to attend a board meeting and some of the issues she is supposed to address are the 2001 financial plan, quarterly dividend and the compensation scheme for the sales and marketing manager, Oleg Pinchuk.  She is expected to make recommendations for each of these issues.

The 2001 financial plan

The company intends, in 2001, to make an investment worth 7 million euro in Ukraine, where it would put up a new plant and add all the required equipment. It would then add another 6.8 million euro in 2002, which will see a new warehouse as well as a Ukrainian centre for distribution. With this high investment, the company needs to be careful before they venture into the plan.

The Company seems to enjoy the Ukranian market and Oleg has showed that it would only cement its market segment in future. While the company makes a borrowing at 6.5% to cater for all receivables in Ukraine, the same market has rough returns of about 130%.  The company has in the past 4 years grown at a pace of 30% and Oleg suggests that it would grow at 50% and 30% in the two years that follow. It is however tricky to expand the company operations into Ukraine.  Currently, the company is using loans and it would be risky to expand with fully dependence on loans. Instead, the company should first rely on their current distribution avenues and hold full expansion until they can pay fully for the expansion, instead of relying on loans. The company should streamline their distribution strategies to ensure that more people pay promptly by offering larger but more profitable discounts.

The Quarterly Dividend

The proposed quarterly dividend was amounting to 698000 euro. This would account for 25% of the total dividends that are projected for the year 2001. However, the dividends would be directly affected by the profitability of the company within the year.

In the past, the company has paid the dividends using 75% of the annual earnings. By paying the dividends using a quarter of 75% of the projected earnings, the company could putting itself in a tight situation because there are many factors that cold bar it from reaching its projected earnings. The dividends should be offered on the actual earnings as opposed to the projected amount. The directors should therefore assume that they would offer a smaller amount of earnings, say 55%, then issue 25% of the projected figure for dividends. If the earnings are higher at the end of the year, the dividends for the final quarter could be increased with a bonus. 

Compensation Scheme for Oleg Pinchuk

The work done by the sales and marketing manager has been commendable since he took over slightly over two years ago. He has been receiving 40000 euro and 5% of total sales. Lukas had proposed that Oleg gets 48000 euro and an addition of 6% of the total sales.

The increment in the base salary is good and should be adopted immediately. It is however not very commendable to increase the commission from 5% to 6% since there are other factors that could affect the performance of the company. Instead of increasing the percentage for commission, the company should offer year-end bonuses for the more productive years. 


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