...the first quarter of 2003, Prestige Data Services (PDS), a strategic subsidiary of Prestige Telephone, is showing a net loss of $75K. Their monthly revenues for the quarter have varied from $189K to $212K and their expenses have remained relatively flat around $222K each month. Table 1: High Level Q1 2003 Financials It might appear that the data subsidiary is continuing to lose money and should be considered as a candidate for elimination. However, that is NOT the case. The financials don’t show the true value of PDS to Prestige Telephone as a whole. First of all, the data processing services that PDS provides are necessary for Prestige Telephone’s operation and if they don’t buy them from PDS they will buy them from another third party. Those costs are estimated to be around $82K per month, much more than the data subsidiary’s monthly losses in Q1 2003. Second, there is significant strategic value in PDS to Prestige Telephone. Based on current regulatory restrictions, the telephone operation is unable to change rates charged to customers for its telephone services. At PDS, however, rates to external commercial customers can be changed. As the potential market for data processing still is believed to exist, this gives PDS the opportunity to better exploit that opportunity and turn the current losses into profits in the future. Lastly, the opening of the PDS subsidiary is viewed by the Public Utilities Commission as a step for Prestige Telephone towards deregulation...
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...Prestige Telephone Company En su análisis del caso, asumir lo siguiente: 1. Los gastos de promoción para los próximos meses están programados para $8,000. 2. Los valores de las cuentas: “Ventas por otros conceptos” y “Gastos de materiales y suministros” se compensarán aproxima Cuestiones 1. Valorar el resultado de las operaciones de Prestige Data Services. ¿Es realmente la subsidiaria un problema para Prestige Telephone Company? Considerar detenidamente las diferencias entre los costes que figuran en los informes y los costes que serían significativos para las decisiones que está considerando Daniel Rowe. 2. Suponiendo que la demanda de Prestige Telephone Company sea de 205 horas/mes, ¿cuál debería ser el volumen de horas vendidas a clientes externos para alcanzar el punto muerto? Supuesto Demanda PTC Tarifa PTC Demanda externos Tarifas externos Costos: Fijo Variale 400 - 28x205 + 76260 Punto equilibrio Ingresos PTC + Ingresos clientes externos 205 400 (205 * (400 - 28)) + (Q * (800 - 28)) - 19 ?? 800 (76,260) + (772Q) - 197,800 = 197,800 28 800xQ + 772Q + 772Q + 772Q Q -28xQ - 197,800 197,800 121,540 = = 3. Calcular el efecto que tendrían en el resultado las distintas opciones sugeridas por Rowe, dadas las siguientes estimaciones de Bradley: a) Aumentar el precio a los clientes externos a 1.000 dólares/hora disminuiría su demanda en un 30%. b) Reducir el precio a los clientes externos a 600 dólares/hora...
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...Prestige Telephone Company Question 1: Appraise the results of operations of Prestige Data Services (PDS). Is the subsidiary really a problem to Prestige Telephone Company (PTC)? Consider carefully the differences between the reported costs and costs relevant for decisions that Daniel Rowe is considering. The current data indicate that the PDS is in operating loss. And going by the presented data, yes, PDS is a problem to PTC at this point of time. And this in spite of many major costs being absorbed by PTC while charging a sum towards corporate services to PDS. However the way data was collected, costs calculated and presented could be different from the actual reality. And moreover the trend in the 3 months is that the commercial sales is going up (marginally though) and losses are reducing. Also it is reported that PDS is operating with un-used capacity (which might be another reason for the projected loss). Though PDS is in loss currently, (a) a re-structuring of the cost accounting methods, (b) more marketing activities to increase sales and thereby using the free capacity available, (c) reducing the staff count by reducing the number of shifts, could see PDS being profitable in the long run. Shutting down vs. restructuring PDS The decision has to be based on the ROI and the opportunity cost. By closing down PDS, the lost (customer) sales are the opportunity cost. But the short term benefits could be from the sale of equipment, savings from resource cost, rental...
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...PRESTIGE TELEPHONE COMPANY In deciding whether to continue, discontinue or sell a subsidiary company, we should consider the benefits and disadvantages of each option. We gauge the contribution of a subsidiary not only by looking at its profitability but also the advantage it can give to the parent company particularly in reducing its costs. Having a low profitability or even a net loss does not necessarily mean that the decision of retaining the subsidiary is wrong. Separating the relevant costs from the irrelevant costs helps the parent company determine how the subsidiary can be a factor in its overall operation. We may not know, but continuing could most likely be the best decision. Identifying cost objects and cost drivers are essential in determining the price, profit and breakeven levels of a firm. Differentiating fixed costs from the variable costs is also very important. Subtracting the variable cost from the selling price (or total revenues minus total variable costs) will give us the contribution margin which “contributes” to recovering the fixed costs, and the excess of which will increase the operating income of the company. Cost-Volume-Profit (CVP) analysis is very helpful in making sound business decisions for the short term, as well as for long-range planning, particularly in this case for product features and pricing. For a company to avoid operating losses, like in the case of Prestige Data Services, the managers should be interested in looking...
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...Case Analysis: Prestige Telephone Company Liam Hennessy, Xinyi Zhang, Yuan Chai, and Anthony Saba 1. Reasons for Continuing Losses Prestige Data Services’ main problem is that they have too many available hours that are not generating any revenue. In the first quarter of 2003, they have an average of 176 available hours per month of available hours. Its operations exact a huge amount of fixed costs to cover. If they could find more commercial customers for the available capacity, they could increase their commercial sales revenue by as much as $140,880 (176*800). In addition, they are also creating unnecessary expenses by having to pay all kinds of expenses during these unprofitable hours. 2. Breakeven Point of Commercial Sales & Evaluation of the Suggested Options (Questions #2 and #3 attached to the case) Before starting to answer these two questions, it is more than necessary that we get the formula for Prestige Data Services’ net income (loss), even they will not be very exact. If we combine the data in each category in Exhibit 2 (such as Intercompany sales, Rent, and Operations, etc.) as a whole, and let a = Intercompany revenue hours, and b = Commercial revenue hours, then we can derive the following revenue and cost formulae of Prestige Data Service in each month: i. Revenues Intercompany revenues = $400a Commercial revenues = $800b Total revenues = $400a+$800b+$0.055(400a+800b) Other revenues = $0.055(400a+800b) ...
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...Prestige Data Services Cost Volume Profit Analysis The following equation has been used for the purpose of this analysis: (Intra-company sales + commercial sales) = Fixed Cost + Variable Cost/hour * time (in hours) To work out only the contribution of intra-company and commercial computer use, “Other commercial sales” has been removed from the revenue. To counter that, “Materials cost” has been removed from the costs; three month average for these parameters is approximately equal. Fixed Costs = $212939 Rent ($8000), Custodial Services ($1240), Computer Leases ($95000), Maintenance ($5400), Computer Equipment Depreciation ($25500), Office Equipment and Fixtures ($680), Fixed component of Operations (6*$3600 = $21600), System development and maintenance ($12000), Admin ($9000), Sales ($11200), Sales Promotion ($8083), and Corporate Services ($15236). Variable Costs = $29/hour Variable component of Operations ($24 per hour), Power ($5/hour) – calculate from March power cost divided by March computer use, assuming only billable computer use is to be used for this variable cost. Revenue = $82000 + N* $800/hr (where N is number of commercial sales hours) Intra-company sale of $82000 per month at $400/hour translates to 205 intra-company sales hours per month. Hence, for breaking even: $82000 + $800 * N = $212939 + (205 hours + N) * $29 This gives us N = 177.54 hours, and gives us Break even revenue of $142032.68. Thus, to be run as a viable business...
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...discontinue or sell a subsidiary company, we should consider the benefits and disadvantages of each option. We gauge the contribution of a subsidiary not only by looking at its profitability but also the advantage it can give to the parent company particularly in reducing its costs. Having a low profitability or even a net loss does not necessarily mean that the decision of retaining the subsidiary is wrong. Separating the relevant costs from the irrelevant costs helps the parent company determine how the subsidiary can be a factor in its overall operation. We may not know, but continuing could most likely be the best decision. Identifying cost objects and cost drivers are essential in determining the price, profit and breakeven levels of a firm. Differentiating fixed costs from the variable costs is also very important. Subtracting the variable cost from the selling price (or total revenues minus total variable costs) will give us the contribution margin which “contributes” to recovering the fixed costs, and the excess of which will increase the operating income of the company. Cost-Volume-Profit (CVP) analysis is very helpful in making sound business decisions for the short term, as well as for long-range planning, particularly in this case for product features and pricing. For a company to avoid operating losses, like in the case of Prestige Data Services, the managers should be interested in looking at the breakeven point of the company. By doing this, they would...
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...McDermott Company Method of Least Squares McDermott Company is developing a cost formula for its packing activity. Discussion with the workers in the packing department has revealed that packing costs are associated with the number of customer orders, the size of the orders, and the relative fragility of the items (more fragile items must be specially wrapped in bubble wrap and Styrofoam). Data for the past 20 months have been gathered: |Month |Packing Cost |Number of Orders |Weight of Orders |Num. of Fragile | | | | | |Orders | |1 |$45,000 |11,200 |24,640 |1,120 | |2 |58,000 |14,000 |31,220 |1,400 | |3 |39,000 |10,500 |18,000 |1,000 | |4 |35,600 |9,000 |19,350 |850 | |5 |90,000 |21,000 |46,200 |4,000 | |6 |126,000 |31,000 |64,000 |5,500 | |7 |90,600 |20,000 |60,000 |1,800 | |8 |63,000 |15,000 |40,000 |750 | |9 |79,000 |16,000 ...
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...Chapitre 2 La diversité dans les organisations Dans ce chapitre , nous observerons de quelle manière les organisations s’efforcent d’exploiter au maximum les contributions potentielles d’un effectif diversifié . Nous montrerons aussi comment les caractéristiques démographiques , telles que l’appartenance ethnique et les différences individuelles en termes de compétences , influencent les performances et la satisfaction de l’employé . 1. La diversité La diversité est devenue en quelques années un enjeu important pour l’entreprise La diversité est un outil de communication pour l’entreprise qui comprend que les pratiques et les attentes de ses clients changent et se diversifient elles aussi . Enfin , les recruteurs et les gestionnaires de carrière mesurent progressivement l’intérêt de jouer la carte de la diversité pour attirer les talents , manager les compétences et optimiser les potentiels . Nous ne sommes pas tous pareils . C’est une évidence .Mais les managers oublient parfois qu’ils doivent reconnaître et exploiter ces différences pour tirer le meilleur de leurs employés . La gestion efficace de la diversité offre à l’organisation une capacité accrue d’accéder au vivier de compétences , d’aptitudes et d’idées le plus large possible . Les managers doivent aussi prendre acte que les différences entre les gens risquent d’entraîner des difficultés de communication , des malentendus et des conflits . Nous découvrirons ici comment les caractéristiques individuelles...
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...I. SUMMARY OF THE CASE Prestige Telephone Company is a public utility business. Since it is operated as a public utility, it is subject to the regulations of the Public Service Commission, as such, the rates charged by Prestige Telephone Company for telephone service could not be changed without the approval of the Public Service Commission. The state Public Service Commission had encouraged all public utilities under its jurisdiction to seek new sources of revenue and profits as a step toward deregulation and to reduce the need for rate increase, which higher costs would otherwise bring. In 1995, The Prestige Data Services started its operation as a subsidiary of Prestige Telephone Company. It is established to perform data processing for the parent company and to sell computer service to other companies and organizations. From the start of its operation, Prestige Data Services experienced several problems, to wit; delayed deliveries of equipment, personnel commanded higher salaries and most importantly, customers were lesser than the earlier estimates. By the end of 1996, the company had a very low income that revealed the lowest Return on Investment in seven years. Because of this, Daniel Rose, the president of Prestige Telephone Company, felt it was time to reassess Prestige Data Services. The reports for the quarter revealed a persistent problem; available hours, which were unprofitable, remained HIGH. Revenue and cost data were summarized in the quarterly report on results...
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...ventures which are not aimed at profit? If this action is morally acceptable (or required) for Merck, then would similar charitable actions be acceptable (or required) for other companies that produce products which would benefit impoverished people? (Ex. food companies, clothing companies, water filtration tech companies, etc) Explain. Answer As a pharmaceutical company, Merck saw an opportunity when the River blindness epidemic first arose and focused their attention on countries most affected by the parasite. At the time of the breakout, Merck had become part of the Fortune 500, giving them credibility and an obligation to reach out to people most affected by River Blindness. As many companies focus on profit, Merck saw an opportunity to earn some prestige instead, by treating patients over seas. To morally justify the companies decision, managers looked back on what the founders of the company believed in. Former president of the company, George Merck, said "medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear...". Through looking at George's values during his time as president, the managers could by definition morally justify their beliefs on if the decision of giving instead of earning would help the company in the long run. Although...
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...Groupe Danone - issues regarding its policies 1. Company’s background The company has its roots in Spain, where Danone was founded by Isaac Carasso in 1919. Having previously lived in the Balkans where yogurt was a dietary staple, Carasso decided to introduce this healthy product in Barcelona. He opened a small yogurt business named "Danone," meaning "Little Daniel" after his son. Carasso was aware of scientific advances that had been made with fermented milk by Elie Metchnikoff at the Pasteur Institute in Paris. He perfected the first industrial manufacturing process by combining the traditional method of making yogurt with the pure cultures that had been isolated in Paris. In 1923, the first Danone yogurts start to be sold in pharmacies as doctors recommend it for its therapeutic qualities. The younger Carasso, Daniel, learned the family business in Spain and decided to establish Danone in France in 1929. In 1949, the yogurt is almost a dairy product. The porcelain “envase” is substituted by the one made of glass. This innovation makes it easier to popularize the yogurt. In 1968, Danone starts its first TV campaign. In 1985, Danone creates its first “low fat yogurt” called “Danone Desnatado”. In 1992, Danone was the Official Sponsor of Barcelona's Olympic Games. “Danone Institute” is created in 1993. Its main objective is to research and develop healthier and better products for the company. 2. Mission, values and corporate philosophy Danone Group's mission or...
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...1. What does this case imply about the supply of and demand for employees and the implications for businesses? “Attracting and selecting the right talent is critical to a company’s success. For tech companies, the process is even more critical since it’s the knowledge, skills, and abilities of their employees that determines these companies’ efficiency, innovation, and ultimately, financial achievements.” (Ribbons, Coulter, 2014, p. 409) “Businesses around the world are currently experiencing a profound market shift that will impact the supply and demand for skilled talent over the next decade. A race between technology and education as technology fuels demand for highly skilled workers, while emerging economies increase the supply of talent through greater access to education. Rapid globalization and the transformation of business models in virtually every industry will affect workforce needs in the future, and the implications for senior business executives and their HR leaders.” (Retrieved from http://www.towerswatson.com/en/Press/2012/07/Companies-Facing-a-Global-Shift-in-the-Supply-and-Demand-of-Talent 2. What’s the meaning behind the “search for the purple squirrel” in relation to spotting talent? Is this relevant to non-tech companies, as well? Discuss. “A purple squirrel is a metaphor used by recruiters and human relationship managers to describe the perfect job candidate. Because squirrels in the real world are not often purple, the implication is that finding...
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...chapter one © The McGraw−Hill Companies, 2008 1 What Is Strategy and Why Is It Important? Strategy means making clear-cut choices about how to compete. —Jack Welch Former CEO, General Electric A strategy is a commitment to undertake one set of actions rather than another. —Sharon Oster Professor, Yale University The process of developing superior strategies is part planning, part trial and error, until you hit upon something that works. —Costas Markides Professor, London Business School Without a strategy the organization is like a ship without a rudder. —Joel Ross and Michael Kami Authors and Consultants Thompson−Strickland−Gamble: Crafting and Executing Strategy: Concepts and Cases, 16th Edition M I. Concepts and Techniques for Crafting and Executing Strategy 1. What Is Strategy and Why Is It Important? © The McGraw−Hill Companies, 2008 anagers face three central questions in evaluating their company’s business prospects: What’s the company’s present situation? Where does the company need to go from here? How should it get there? Arriving at a probing answer to the question “What’s the company’s present situation?” prompts managers to evaluate industry conditions and competitive pressures, the company’s current performance and market standing, its resource strengths and capabilities, and its competitive weaknesses. The question “Where does the company need to go from here?” pushes managers to make choices about the direction the company should be headed—what new or...
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...of college. She is anticipating a large expense on books but is hoping to save some money on purchasing school supplies by looking at discount retailers instead of the college bookstore. Misty has found two companies, Company A and Company B, with some great back to school deals on school supplies. Company A is offering ten percent off each dollar spent on school supplies with no minimum purchase required. While that sounds like a great deal, Company B is offering twenty-five percent off all school supplies purchased after spending an initial one hundred dollars. While both options offer a great discount, Misty wants to determine which would save her the most money. Before moving any further, Misty must determine what her total bill for school supplies might be by identifying the items she will need to purchase and then totaling the final cost. Once that has been ascertained, she will need to calculate the possible savings on each plan to determine which one will be most cost effective. Task B In order to calculate the savings, Misty is going to let (y) represent to total cost of her school supplies after all discounts have been applied. She will use (d) to represent the discount percent she is going to receive from the company. As prices from each company are comparable, she has calculated the total cost of her school supplies to be $230.00 which will be represented as the variable (x). The following is an...
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