MPC Task 1c PDF

Preview

Summary

Mock final question answer submission....

Description

Phuong Uyen Le | 12827465 Question 1 1. Identify two key contingency factors (as discussed in seminar 2,7 and 10) that are relevant to the determination of MCS choices at Houston Fearless, 76. Inc., and briefly describe the control problems the factors cause. 1. The traditional film-product market was shrunk as customers moved toward digital production. Previously the firm made sales primarily through network of dealers and representatives who were largely independent from the company. That caused problem as they would not do what was in the best interest of the company (i.e., market development) if that had not led to their commission. 2. Some of the main markets of the firm reached maturity. That required a more proactive sales and marketing effort which the network of dealers could not have satisfied.

2. Choose the most relevant / important contingency factor you identified in Q1, briefly explain how and why the factor has influenced the current MCS at Houston Fearless. The changing in market demand required a proactive sale force which does not only make sales, but actively look for new potential markets where profit margin would be higher. This led to the decision of Houston Fearless to build its internal sale force and a different incentive system which ties sale effort closely to the right performance measure (gross margin, not sales growth). That guides the sale force to the direction that the managers want which is to discover and exploit new markets with higher gross margins.

Question 2 What are the key advantages and disadvantages of individual incentive versus group incentive schemes? use examples from our lectures or cases to make your points Advantage s

Individual Incentive Expectancy Theory: direct link between effort and reward Retain Talents Equity theory: Perceived as equitable & fair

Group Incentive Enhance organizational performance Easier to develop (use corporate measurement) Can be used as personnel control (people in a group will held one another

Disadvanta ges

Lower costs of supervision (employees are selfmotivated) Over-emphasis on ‘measured’ result and overlook other factors Time spent on establising measurements and actually measuring Conflict with managers Demotivation if standards are too high

accountable) Allow employees to participate in decisionmaking Lack stability

Free Rider problem

Effort is not linked closely with reward Retain talents

Sandelin (2008) is a case study that elaborated quite comprehensively the effect of group incentive. In the few first year of its merger, Mobitel Ltd control system and incentive system was built around ownership through share options and group rewards. It makes its employees willing to work 7 days a week, readily explore new technologies to grow the company. The culture of ownership is the primary mode of control that drives the firm forward to profitability and entrepreneurship.

Sandelin, M. 2008, 'Operation of management control practices as a package—A case study on control system variety in a growth firm context', Management Accounting Research, vol. 19, pp. 324–43.

Question 3 For each of the statements below relating to our seminar 8 in-class exercise, explain why they are not logical. Explain the logical fallacy and the reasons why the statements below fit into the logical fallacy(ies) you chose. The last three times I have had a cold I took large doses of vitamin C. On each occasion, the cold cleared up within a few days. So vitamin C helped me recover from colds. Post hoc, ergo propter hoc (after this, there fore because of this): the cold cleared up within a few days after taking large doses of vitamin C does not prove casual link. It might be that the cold was a mild one so it was naturally cleared up within a few days. The union's case for more funding for higher education can be ignored. For it is put forward by the very people ‐ university staff ‐ who would benefit from the increased money.

Ad homenem: There is no factual evidence to oppose the request for more funding. The only reason is put forward is the staff member who might benefit from it. This is not a valid reason. Your best course of action is to invest in investment A, as it will earning a higher return than investment B. False Dilemma: there might be more options that just A and B Smoking causes cancer because my father was a smoker and he died of lung cancer. Non sequiter: one case of the father died because of smoking does not prove that smoking is the cause Post hoc, ergo propter hoc: the death was followed by the smoking does not mean the latter is the cause of the former.

Question 4 Reflect on the business model for an R&D department in an IT organisation. a. Choose one key control problem which you think is typical of an R&D department in this setting, describe the control problem and explain why you think it is important to address. Result control is not effective because R&D is not a controllable factor. Spending a large amount on R&D does not necessarily warrant a new technology or new profitable application. The expenses need to be on budget. Yet still for a company to grow in a competitive market, it is of utmost importance to always reinvent and innovate to develop new markets with higher profit margins. That means the IT organization has to find a way to adhere to budgeted expenses while still accomplish the tasks. b. What are typical control solutions for your identified control problem, and how do they address the control problem? Setting scope for each R&D project and personal supervision. This control mechanism allows manager to make sure every activity in the R&D department falls within the defined scope thus the expenses is not wasted on irrelevant activity.

Question 5 Consider the Bank of the Desert Case (A) and (B). Comment on the effectiveness of the new market opportunity metric, and the extent to which it adequately reflects the performance of bank branches?

In the case of Bank of the Desert (A) and (B), the new market opportunity metric is effective to the extent that it accounts for the difference in size, economic factors, different types of products in each branch by the mean of grouping similar branch together into a cluster. By doing this and by comparing the performance of the branch with the average in its cluster only not the entire bank, managers have a more accurate view of the branch performance and construct a more realistic target. Besides, the new market opportunity metric measured based on customer value mix and market penetration opportunity points branches’ managers to the right ‘means’ to achieve the ‘end’ objective of the bank (i.e., customer retention and increasing value per each household). This directs managers to the right actions to take instead of blindly trying to sell products agressively....