...the product portfolio was extensively diversified which resulted in lack of focus amongst different product and market niches. 1.2. Effects of legislation-For instance Governement legislation to deregulate the financial sector.Changing competition scenario in UK's financial services market leveraging co-perative service to transform into banks and diversify their product potfolio. 1.3. Customer Expectations:Changing customer expectations and lower switching costs can decrease the existing customer base.Thus the cost structure of the bank has to be leveraged for higher profits at the market costs.This is a perfect competetion case where the markets determine the costs(i.e. price for services) which has to be charged by the banks to sustain. 1.4. Macro-economic factors:High levels of unemployement i.e. recession had pressurised the customer base to remain dormant and thus impacted the banking institutions. 1.5. Functional restructuring:For instance the Personal Customer Service Center was formed.Thus forcing cost restructing in terms layoffs. 1.6. Cost centers:This is the first we are dealing with geographical and departmental...
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...of each customer and each order, enabling the company to fully understand its cost structure thereby providing the base for better business choices (and higher profitability). These are very sensible goals indeed. Even though the company is profitable, implementing a new, activity-based cost accounting system will allow the company to improve its margins and become even more focused and competitive in the future. 2) Drawbacks with the previous system The old system was inadequate because of the following: The system was designed for a more labor-intensive production process (i.e. 1 book-keeper for every 10 blacksmiths vs. 8 book-keepers for every 3 blacksmiths) The system allocates overhead costs on an equal basis between customers and products, which creates discrepancies and hidden profits/costs. Hidden profit and hidden cost customers are created when they are over or under-burdened by the unfair distribution of overhead costs. In extreme cases, these can make unprofitable orders look profitable, and vice versa. For example, let us take a look at a sales account manager who spends 99% of his time one month negotiating an order from a new customer A that will earn a $3,000 profit. During the same month, he spends 1% of his time tending a re-order from an existing customer B for a $10,000. If his $5,000 monthly salary is allocated on an even basis, then customer A will be shown as making a $500 profit (instead of a $2,000 loss), while Customer B will...
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...Activity-based Cost Management --An Executive’s Guide Gary Cokins John Wiley & Sons, Inc. Introduction The concept of Activity-based cost management was born from the belief that traditional costing systems have inherent limitations that do not accurately assign indirect and overhead costs in all situations. Managers that are familiar with their organization’s operations know that different products and services consume these costs in varying proportion, but traditional costing systems tend to spread these costs evenly over all products and services offered. Assignment of overhead costs based on direct labor hours or square footage occupied by facility do not always serve as accurate means of allocation. Costing accuracy enables decision-making that is less likely to result in poor performance, and provide organizations with competitive advantages. Activity-based cost management is a means to solve this problem. In its early years, Activity-based cost management (ABC/M) gained popularity rapidly in the management consulting community. It was oversold as the “magic pill” to solve almost every problem within an organization, and the expectations of management were raised too high. As a result, many early implementations of ABC/M were viewed as failures. Some of these perceived failures were resultant from design misunderstandings and others from an inability to interpret the data produced. Management didn’t understand that ABC/M is meant to act as an enabler...
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...Name___________________________________ TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) Companies can use configuration tables provided by the enterprise software to tailor a particular aspect of the system to the way it does business. Answer: True False 2) Enterprise systems are typically built around one or two major business workflows. Answer: True False 3) Enterprise systems are designed primarily to allow communication between an organization and outside partners and suppliers. Answer: True False 4) The upstream portion of the supply chain consists of the organizations and processes for distributing and delivering products to the final customers. Answer: True False 5) Supply chain inefficiencies can waste as much as 25 percent of a company’s operating costs. Answer: True False 6) Safety stock acts as an inexpensive buffer for the lack of flexibility in the supply chain. Answer: True False 7) The bullwhip effect is the distortion of information about the demand for a product as it passes from one entity to the next across the supply chain. Answer: True False 8) Supply chain execution systems enable the firm to generate demand forecasts for a product and to develop sourcing and manufacturing plans for that product. Answer: True False 9) To minimize the expense of implementing an enterprise system...
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...in Padini. The proposed system conceptual framework including Customer Relationship Management (CRM), Information system strategies for dealing with competitive forces and Supply Chain Management System 1) Customer Relationship Management (CRM) Based on the problems faced by Padini, our information system team had decided to apply customer relationship management system to solve the problem that Padini had failed to build a strong relationship between its products and customers. In addition, modules that including in CRM system can helps Padini increasing their sales. Customer relationship management system is a strategy used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. Good customer relationships are at the heart of business success. This strategy depends on bringing together lots of pieces of information about customers and market trends so enterprise can sell and market their products and services more effectively. Customer Relationship Management system examine customers from a multifaceted perspective. These system use a set of integrated applications to address all aspects of the customer relationship, including customer service, sales and marketing. Customer Service Padini is a large brand clothing store in Asian countries. Padini might face the myriad of phone call from the customers for asking problems and inquiries in every day. Customer service modules in CRM system provides information and tools...
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...outlet market begun to collapse; prices of raw materials increased sharply; Chinese competitors began to encroach on its low-end and threaten its relationships with key customers together with its pricing pressure from retailers and fabricators. All these factors severely undermined Elkay’s profitability. Since Elkay kept using a traditional standard costing system and analyzed its customer P&Ls within it, managers didn’t take well actions toward the decline in profit for they knew information provided by this system were actually inaccurate and meaningless. Due to Hrudicka’s tireless efforts and successes from two pilot projects, PPD implemented the new Discrete Product Costing by adopting the time-driven ABC system eventually. However, in may 2008, after received report about SKU profitability provided by the new system, the vice president of sales contemplated about taking action towards unprofitable customers. （为20000个顾客提供6000 SKUs products） Problem and issue: The problem that faced by Elkay’s PPD is the severe decline in profit. Issues underlying these problems are stated below: (1) In the past, Elkay’s traditional standard costing system simply ignored its products diversity and cost structure; it did not reflect its actual resources consumed by products; gave inaccurate information about product costs and customer profitability by wrongly allocated...
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...model was the root of the problem with it. To build a traditional ABC model a department would survey employees to estimate the percentage of time they spend on activities and then assign the department's resource expenses according to the average percentages you get from the survey. Armed with figures, known as the cost-driver rates, managers could assign the costs of the department's resources to the customers and products that use its services. This worked well in the limited setting in which it was initially applied, typically a single department, plant, or location. The problem arises when you try to roll out this approach on a large scale for use on a continuous basis. The systems that are put in place are updated infrequently; the model's estimates of process, product, and customer costs soon become inaccurate. What's more, people waste their time arguing about the accuracy of cost-driver rates that are derived from individuals' subjective beliefs rather than addressing the deficiencies the model reveals: inefficient processes, unprofitable products and customers, and excess capacity. Traditional ABC models also often fail to capture the many details of actual operations. As the activity dictionary expands, the demands on the computer programs used to store and process the data escalate....
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...agricultural equipment such as tractors, harvesters, implements etc. The industrial machinery line consisted of industrial tractors, tractor loaders, rough – terrain fork-lifts, utility loaders, log skidders and diesel engines. Diesel Engines were produced by Perkins Engine group in England which were used in Massey Ferguson’s equipment, over 50% of the products were exported to Massey Ferguson’s subsidiaries and affiliates. Market-Product strategy Massey Ferguson was supposed to be in the third position in the worldwide sales of arm equipment in the large North American farm equipment market. Massey Ferguson was well known in North America and Western Europe for producing farm and industrial machinery and had also dealings with governments and public dealings with government and public institutions in developing nations. The regional alignment of the market for Massey’s farm equipment was not in harmony with its sales. At the margin, North America and the United Kingdom were the net...
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...responsibilty, organizational policies and applicable theories. ethics According to the 2000 annual report, the company values are as follows. “We have an obligation to communicate, take the time to talk to one another and listen. We believe that information is meant to move and that information moves people”(Enron, 2000, pg.55). The company had a good ethical philosophy of communication. Still if employees would communicated from the beginning some corrections would have been made and possibly the company would stills stand today. “We treat others as would like to be treated ourselves. We don’t tolerate abusive or disrespectful treatment”(Enron, 2000, pg.55). Typical ethics that to treat others the way you want to be treated. “We work with customers and prospects openly, honestly and sincerely. When we say we would do something, we will do it. When we say that we cannot do something, then we won’t do it”(Enron, 2000, pg.55). Integrity was the biggest problem the...
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...banks continued to strengthen their capital base with average shareholder funds rising by 8.5% in 2012 compared to 2011, so that return on equity (RoE) fell from 16.4% in 2011 to 15.6% in 2012, reinforcing our long-held view that bank RoEs are in transition to an era where 15% will set the upper bound, not the lower bound, for Australian bank average RoEs. This cautious outlook is reinforced by global developments since our last report six months ago, and in particular that global growth expectations have been revised downwards, leading to further monetary policy easing across the globe, including in Australia. At the same time ECB President Draghi’s commitment in July to do “whatever it takes” marked a much more constructive period for dealing with Eurozone concerns and supporting lower risk yields in many markets including wholesale funding markets for our banks over the past few months. The in-principle agreement to create a Eurozone banking union is a tangible sign of meaningful change. Domestically, the main sea-change is vigorous debate about whether “the commodity boom is over?” reinforcing perceptions of the Australian economy’s dependence on China. The fact that (as at the time of writing) the Australian official cash rate sits only 25bp above the all-time (GFC) low of 3.0% emphasises the sombre outlook for domestic demand, including credit. Credit demand shows little sign so far of responding...
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...competitive advantage. "Many small business owners and executives consider themselves at worst victims, and at best observers of what goes on in their industry. They sometimes fail to perceive that understanding your industry directly impacts your ability to succeed. Understanding your industry and anticipating its future trends and directions gives you the knowledge you need to react and control your portion of that industry," Kenneth J. Cook wrote in his bookThe AMA Complete Guide to Strategic Planning for Small Business."However, your analysis of this is significant only in a relative sense. Since both you and your competitors are in the same industry, the key is in finding the differing abilities between you and the competition in dealing with the industry forces that impact you. If you can identify abilities you have that are superior to competitors, you can use that ability to establish a competitive advantage." An industry analysis consists of three major elements: the underlying forces at work in the industry; the overall attractiveness of the industry; and the critical factors that determine a company's success within the industry. The premier model for analyzing the structure of industries was developed by Michael E. Porter in his classic 1980 bookCompetitive Strategy: Techniques for Analyzing Industries and Competitors.Porter's model shows that rivalry among firms in...
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...stopwatches and automatic pencil sharpeners. Some of products are sold as sets and others are sold individually. Products are studied as to their sales potential, and then cost estimates are made. The engineering department develops production plans, and then production begins. The company generally had very successful product introductions. So far only two products introduced by the company have been discontinued. One of the products currently sold is a multi-alarm clock. The clock has four alarms that can be programmed to sound at various times and for varying lengths of time. The company has experienced a great deal of difficulty in making the circuit boards for the clocks. The production process has never operated smoothly. The product is unprofitable at present time, primarily because of warranty repairs and product recalls. Two models of the clock were recalled, for example, because they sometimes caused electric shock when the alarms were being shut off…. The engineering department is attempting to revise the manufacturing process, but the revision will take another six months at least. The clocks were very popular when they were introduced. Presently the company has received a very large order for several items from Kmart stores. The order includes 5,000 of the multi-alarm clocks among other items. When maxitech suggested Kmart to purchase the multi-alarm clocks from another manufacturer, Kmart threatened to cancel the entire order unless the clocks were were included. The clocks...
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...THE CUSTOMER PYRAMID: CREATING AND SERVING PROFITABLE CUSTOMERS Zeithaml, Valarie A.; Rust, Roland T.; Lemon, Katherine N. California Management Review Summer2001, Vol. 43 Issue 4, p118 Innovative service companies today recognize that they can supercharge profits by acknowledging that different groups of customers vary widely in their behavior, desires, and responsiveness to marketing. Federal Express Corporation, for example, has revolutionized its marketing philosophy by categorizing its business customers internally as the good, the bad, and the ugly--based on their profitability. Rather than marketing to all customers in a similar manner, the company now puts its efforts into the good, tries to move the bad to the good, and discourages the ugly.(n1) Similarly, the customer service center at First Union, the sixth-largest bank in the U.S., codes customers by color squares on computer screens using a database technology known as "Einstein." Green customers are profitable and receive extra customer service support while red customers lose money for the bank and are not granted special privileges such as waivers for bounced checks. Providing different service to customers depending on their profitability is becoming an effective and profitable service strategy for firms like FedEx, U.S. West, First Union, Hallmark, GE Capital, Bank of America, and The Limited. These firms have discovered that they need not serve all customers equally well--many customers are too costly...
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...Mike Rondesko, KaChun Fung, Daniel Lozano, Jose Romero Professor Pe’er Final Essay 18 December 2012 Market for Trading R&D failures Advancing ones knowledge based on past failures is vital towards furthering intellectual development. Without understanding as to why something doesn’t work, it would be very unlikely that an efficient goal can be reached. This same concept applies to research and development projects in the modern day industry. Using the knowledge of recent failures is what drives progress and technological advancements. However, discovering failures is insensitive to time, resources, and capital in an ever changing world of product innovation. If knowledge of research and development failures were known to firms prior towards their attempt, product growth would be quicker, less risky and more profitable. A market that traded intellectual failures would be beneficial towards the firm and its stakeholders while improving market efficiency. Since understanding failures is so important towards the progression and advancement of a product, there should be a market in which firms can trade R&D failures. However, this market does not exist. Yet, if we can argue that there are advantages for firms to possess more intellectual knowledge, than this market can have hypothetical value. One of the main reasons why there is currently no market for R&D trading is because it can be advantageous towards a firm’s competition even at a cost. If competitors...
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...STARBUCKS HISTORY As with any corporation in America or throughout the world, Starbucks started out as a dream or a vision ready to be delivered to the world. Starbucks was born in the early seventies (Starbucks, 2005). In 1971, three friends, Jerry Baldwin, Zev Siegel, and Gordon Bowker got together on numerous occasions to discuss what type of business would be successful during their time. During the early 1960s coffee was a major success in the US Market; however, overtime the popularity declined due to the dreadful taste of the coffee. Jerry, Zev, and Gordon together had the opportunity to travel to Europe where they had the chance to indulge in the dark, rich coffee made there. It was not until Jerry visited a coffee store in Berkley, California that he was reminded of their trip to Europe and of the luscious coffee there. Moreover, this convinced the three friends that they should embark in opening a gourmet coffee shop. The three friends followed the appropriate procedures for establishing their vision. When asked to for the name of the company they were unsure and deliberated for names. They finally agreed to name the shop after Seattle’s seafaring heritage, Starbucks. However, it was also said that they named it after the coffee loving first mate Herman Melville’s Moby Dick (Starbucks, 2005). Starbucks was no longer a dream or an idea but an organization in the making. By the 1980s, four stores were up and successfully running in Seattle. It was...
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