Management Control Systems

Question one: As the controller, would you make any modification in F.T. Electronics’ responsibility‐accounting system? If so, what are the changes you would make

The objective of any managerial control system is to help an organization maximize its ROI by improving efficiency and ensuring that the management control system is designed in a way that its performance management is aligned to the company’s strategy. The management has to ensure that the performance techniques contribute to the organizations effectiveness. Therefore, the management must adopt techniques geared at developing effective performance measurement and control system. It is the understanding of the behavioral implication of the new salary strategy and payment system

According to McNair, &, Carr (1994, pp. 85-117), controllability is the key underlying concept of responsibility accounting. Therefore, in order to reduce operational and labor cost while maximizing the ROI, the controller should consider introducing new control system that will see the organization reduce its $28,659 excess in labor budget is reduced by 60%. This means reducing the billed person-hours, and not the labor force. Right now, the management should be focused on meeting current standards of performance, with the aims of shifting to a process oriented control within the department. Right now, the organization should not emphasize on financial based control system because the company is not operating at optimal. Reducing cost requires cell based control such as appointing a cell leader to be responsible for the budget because the operational control are more important than the financial or results based control measures. In this case, the organization will chose an interim results based control leader to head the new control system and be held accountable for the budget because this is a projectized or timed management control measure

Question Two: Identify two of the most successful companies or organizations today, in your opinion. Explain why they are so successful.

The most successful organization today includes facebook and Google. While facebook core competencies include knowing how to use social graphs ad networks, the company managed to developed a products that enables family members and friends to stay connected while at the same time, developing their operations, while driving growth and revenue,. Facebook has eclipsed Google because they linked strategy, planning as well as the control system. Facebook business strategy is aimed at increasing its market share and improving customer experience. In a bid to achieve this, the company has increasingly acquired startup companies such as Instagram improve their customer experience and increase their market share. Facebook adopt strategies that can improve its core competencies. for example, its desire to acquire Whatssapp was gearing at increasing audience engagements. Their new intelligent algorithm is also geared at leveraging its core competencies for connectivity and this is how the company has realized highest customer share. However, the company should realize that it is loosing on its core customer base as it has focused on few competencies. It should focus on acquiring and maintaining fluid core competencies (Hitt, &, Ireland, 2009, pp. 273-293)

Google is one company that has constantly innovated to improve its service delivery. Part from acquisition, the company has invested in a wide range of industries from robotics to selve driving cars and Google glass. The company’s strategy of growth by acquisition and innovation seems to be bearing fruit. The company has aligned its strategies to its core competencies and has maximized its core competencies to deliver top-notch s products and services. Additionally, the company has R&D lab for products development and innovation. However, it still has to improve its synergy to convert solutions into competent business. Many of the failed projects con tribute to its low bottom line despite being amongst the most profitable companies worldwide (Hilton, 2011).

2. For the participatory budgeting system initiative being considered for Surecut Mowing Services:

1, Identify two behavioral advantages that could arise. (2 marks)

The main behavioral advantage that could arise out of the participatory budgeting system initiative includes attitude, and motivation. For example, the subordinates involved in the budgetary processed would feel appreciated and this boosts their attitude in the company’s budgets and budgetary processed include job satisfaction and

Trust- the participatory budgetary system also helps in improving trust and reducing resistance when it comes to the adoption of the budget because they trust the budgets accuracy and fairness.

Question 4: Identify two potential problems that could arise. (2 marks)

The main potential problems associated with participatory budgeting include slow decision-making. When people are required to participate in budgeting, a lot of time is wasted debating. Some budgetary discourses consume the predictive person-hours.

Additionally, it is difficult to achieve high-level participation in an organization that has always relied on one-way communication. Bidirectional communication can be very difficult and this might lead to skewed or biased decisions (Tunas, 2013),

Question 3: Discuss the likelihood that the new approach will contribute to the alignment of organizational and personal goals. (4 marks)

There are high chances of the new approach contributing to the alignment of the organizational and personal goals. For example, participatory budgeting allows the employees to query, recommend, and even discuss any decision made by the company. Additionally, Surecut (the company) is allowed to operate separately and this means that the span of control will be small making it easy for the management to consider each employee individually. By considering each employee separately, the organizational goals will be aligned with the personal goals to an extent that each employee will feel part of the organization due to the organizations small size. It is easy to motivate subordinates, clarify tasks, reduce any form of role ambiguity, and improve accountability, while considering all the employees.

Question Four: The each of the following independent situations, state whether the company is following a low cost or a differentiated product strategy and explain your answer

a) Jamphones is about to decide whether to launch production and sale of a mobile phone with

Standard features.

Differentiated strategy – differentiation mean producing products that are dissimilar to the products currently available in the market. In this case, the company is focused on non-price factors thereby basing competition on non-price factors. This lowers or eliminates direct competition with the similar products in the market. The resulting products will be different therefore; direct competition in this new category will be low. It is important to note that differentiation strategy might lead to premium prices, as the loyal customers are likely to be insensitive to prices

b) Prestige Computers is trying to decide whether to produce and sell a new home computer

Software package that includes the ability to interface with a sewing machine and a vacuum

Cleaner. There is no such software currently on the market.

Differentiated strategy – this is a differentiation strategy, as the new home computer will have features that most of the existing home computers have. This is a non-price competition strategy as the. However, due to the additional features the company may charge premium prices as compared to the existing products. It is important to note that the new strategy is based on the unique features of the products and not low prices.

c) Arvadam Pharmaceuticals has been asked to provide a ‘store brand’ roll on sunscreen that

Will be sold at discount retail stores.

Cost strategy- is the new strategy to be adopted, as the standard brand will be charged at a low price as the features are not premium and everyone can afford. The discounted prices make the price of the products low meaning that customers will be attracted by the low process and not the quality of the store brand’ roll on sunscreen. The focus is on price competition and not quality or products competition

d) Tim’s Delicatessen is entertaining the idea of developing a special line of gourmet pasta

Sauce made with sundried tomatoes, mushrooms and truffle oil.

This differentiated strategy focuses on developing a unique gourmet past source which is different from the other paste sources in the market. For example, it is made up of sundried tomatoes, mushrooms and truffle oil. Unlike the other pasta sauces, this one has additional chemicals and condiments that differentiate it from the rest. It is important to note the basis of competition- products features

Reference

Hitt A, &, D, Ireland, (2009). Corporate Distinctive Competence, Strategy, Industry and Performance: Strategic Management Journal, Vol. 6, No. 3, pp. 273-293.

Hilton, R, (2011). Managerial Accounting. Creating value in a dynamic business environment, 9th edition, McGraw Hill.

Tănase G, (2013), " An Overall Analysis of Participatory Budgeting Advantages and Essential Factors for an Effective Implementation in Economic Entities,” Journal of Eastern Europe Research in Business and Economics, Vol. 2013 (2013), Article ID 201920, DOI: 10.5171/2013.201920.

Anthony, R, &, Govindarajan, V. (2007) Management Control Systems, 12th edition, McGraw-Hill Irwin. Chapter 2. Understanding Strategies, pp. 53-97.

McNair, C. J. and L. P. Carr. (1994). Responsibility redefined: Changing concepts of accounting-based control. Advances in Management Accounting (3): 85-117.

Hill L, (1988). Differentiation versus Low Cost or Differentiation and Low Cost: A Contingency Framework. The Academy of Management Review. Vol. 13, No. 3 (Jul., 1988), pp. 401-412

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