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Cup Corporation

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Management Control System Case Assignment Name : Muhammad Kamil 12/341277/PEK/17366 Class : International Class, Batch 60 Chapter 11 Case 11-3. CUP Corporation Case Overview CUP was one of the largest insurance firms based in Europe. They enjoyed growth rate of more than 25% each year for almost past 10 years. They sold various forms of insurance in order to broaden the type of the insurance into health, life, casualty, property, and automotive areas. However, the growth was flat instead of the planned 3 percent by 1996 and 1997. The declining growth rate resulted from several issues, economic climate, higher taxes and social welfare levies, increasing competition, extensive satisfaction of the basic demand for insurance in Germany. In 1996, the number of customer canceling contracts compared to the total amount of contracts, called “lapse rate”, reached DM 900M which is 10% of total premium revenue. They are having customer loyalty problem that has to be solved. One of the issue here is the establishment of CCC (Customer Care Center). This CCC enables the company to provide customer with one telephone number that will answer all of customer questions due to their contract. They need to professionally train people who could effectively answer a variety of questions and increase the service dramatically. The final objective would be to reduce the lapse rate. The “lapse rate” problem for CUP was summarized by the image of leaking bucket, new customers would flow into the bucket while at the same time many leaked out through big holes. Instead of focusing on the “lapse rate”, the problem was restated as a customer loyalty problem that cut across product lines and was considered a corporate problem. Analysis and Discussion CUP decided to create a Customer Care Center to stem defection of customers resulting in part from dissatisfaction with the firm’s service. The

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