...Case 4-1 Vershire Company Internal Environment Analysis * Vershire is a diversified packaging company * Several major divisions * One of the largest manufacturers of aluminum beverage cans in the United States. * Plants scattered throughout the U.S * Key players include: CEO, divisional GM, vice presidents of marketing and manufacturing External Environment Analysis Industry competitors: * Five beverage container manufacturers accounted for 88% of the market. * Some processors manufacture their own containers. * Alcan, Alcoa, Reynolds all manufacture aluminum cans. The aluminum can manufacturing industry contains several competitors. With almost 90% of the industry divided between 5 producers, competition is high, which could be negative for Vershire, especially since some beverage processors are beginning to manufacture their own cans. Customers: - Most customers had between two and four suppliers. - Some companies were starting to manufacture their own cans. The fact that most customers had several suppliers means that if Vershire failed to keep up with demand or quality standards, customers would turn to other suppliers. Backwards integration was also hurting Vershire’s business as some beverage processing companies were beginning to produce their own containers. Suppliers: * Four global companies supplied aluminum to can producers (Alcoa, Alcan, Reynolds, Kaiser) This shows that there aren’t many suppliers of aluminum...
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...Chapter 4 Case 4-1. Vershire Company Questions: 1. Outline the strengths and weaknesses of Vershire Company’s planning and control system. Vershire’s planning system Strengths: When formulating the sales budget, divisional managers are required to predict market conditions and capital expenditures. The frocasting is done at the corporate level and is then sent to the divisional managers for fine-tuning. Corporate controllers visit each plant for half a day prior to the final submission of the budget. Weakness The initial sales forecast uses assumptions which are entirely derived from corporate headquarters’ analyses. The forcasting method is the same for all product lines. Plant managers do not come up with the sales budgets – the district sales manager do. Vershire’s control system Strengths Divisional managers are given full control over their divisions except in the ares of raising capital and labor relations. There is timely communication between the various hierarchies of the company as there are not that many tiers. There is constant oversight on meeting the budget. Weakness Profit is the main measure for assessing plant managers’ performance and determining bonuses. 2. Trace the profit budgeting process at Vershire, starting in May and ending with the Board of Directors’ meeting in December. Be prepared to describe the activities that took place at each step of the process and present the rationale for each. 3. Should the plant managers...
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...Vershire Company & Aluminum Industry Industry of Aluminum Aluminum. Less spillage or breakage, ease of storage at home or when people travel, maintenance of soft drink carbonation, ease of lithograph and ease of recycling, aluminum production is one of the modern era’s great economic stories. The world’s primary aluminium industry produces over millions ton of aluminium metal per year. The most important markets for aluminium products are the transport, building and packaging sectors, however aluminium also finds application in electrical and mechanical engineering, office equipment, domestic appliances, lighting, chemistry and pharmaceuticals. The United States aluminum industry is the worlds largest, annually producing about $.1 billion in products and exports. U.S. companies are the largest single producer of primary aluminum. The U.S. industry operates over 00 plants in 5 states , produces more than billion pounds of metal annually and employs over 145,000. Aluminum is one of the few products and industries left in America that truly impacts every community in the country, either through physical plants and facilities, recycling, heavy industry, or consumption of consumer goods. The aluminum industrys performance is noteworthy, particularly in light of the proliferation of alternative materials and global competition. Transportation represents the largest market for aluminum in the United States. In 000, transportation accounted for .5 percent of all US...
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...Vershire Case Study Vershire Case Study Case Background Vershire Company was a diversified packaging industry organized with several divisions focused on different product lines. One of these is the Aluminum Can Division, which by far is one of the largest manufacturers of aluminum beverage cans in the United States. The company has a decentralized culture, with the division general managers exercising considerable autonomy in decision-making. Under a general manager were two line managers responsible for production and marketing functions. Over the years, the Aluminum Can Division had built plants scattered throughout the country. Each plant is responsible to serve a geographical area, both for large and small-scale customers. The industry is very competitive, as each manufacturer employs the same technology and everyone was viewed by customers to have the same product quality as anyone in the industry. Thus, customers can readily shift from one supplier to another in cases that delivery schedulesand product qualities were not met. Vershire employs a long-term budgetary control system. Corporate sales budgets are prepared both in a top-down and bottom-up approach. These sales budgets are then translated to sales target per production plants and became the basis of target profits for each plant. Upon the end of the period, managers are then evaluated based on these target profits, even when budgeted sales are not met. Also, other performance measures are at place that...
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...escribe the strengths and weaknesses in planning and control systemVershire Company!Settlement:a. Pros:1. In 1972 the industry experienced a revolution since the aluminum maker chosetwo kinds of processes in which a piece of metal inserted into the cupand closed at the top. So in 1996 capable of producing more than2,000 cans per minute, because it has more efficient manufacturing processes.2. Authorization limitation on the general manager of the division. Division general manager hasfull control on their business with two exceptions: the increase incapital and labor relations, because both are centered at the central office.3. The existence of the review by the research staff at headquarters preparation statementssubmitted by each division general manager. This is a reportpreparation to incorporate summaries regarding sales,earnings, and capital requests for next year's budget.4. The making of the budget in the form of gross profit, fixed expenses, andpre-tax income made by the order to each plant. Gain is calculatedas the value of sales budget is smaller than an unexpected expense budgetand the budget you have for sure.5. For a review of variance whose value exceeds the budget made by themanagement company, and ask a local plant manager notmeet the target to explain.6. The existence of the fixed costs of testing to determine whether the factory has beenimplementing programs, whether the factory has met the cost of the budget,and whether the results...
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...4AA3 Case: Vershire Company | | | | | | | | Vershire - Introduction Vershire Company is a diversified packaging company with several major divisions. The case puts its focus on Vershire’s aluminium can division. The division has plants throughout the United States, each serving its geographic region. Its customer ranges from soft drink bottlers to small and large breweries. The Vershire Company holds the largest share in aluminium beverage can market in US and they are growing faster than its industry average. The major issue that the company faces is that customers in the industry are not reluctant to switch to another supplier if certain standards in quality and service are not met. Vershire’s main problems are its planning, internal control, and placing responsibilities on the correct managers. Planning System The first issue in planning system is that initial sales forecast is not made by divisional managers who are responsible for the operation management of each division. Rather, the sale forecast uses assumptions derived entirely from corporate headquarters’ analyses. Such assumptions include inventory carryovers, packing trends, and etc. The forecasting method also lacks a decentralized mindset which is vital when there are different markets and customer preference. By using a centralized system, the company’s decisions do not accommodate for these differences. This would greatly hinder the company’s performance in sensitive markets that...
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...The Vershire Company has to keep tight controls over their plants, budgets, and performance in terms of efficiency and effectiveness, because customers can easily purchase from another manufacturer if cost, quality, and service are not met. The planning strength of the Vershire Company is that a sales budget is formulated at the corporate level and starts with a forecast, which is created and sent to the divisional managers for review. This allows divisional managers to have some input for their budget, which will add to the accuracy. Corporate controllers also visit each plant for additional input before final submission. The company I work also formulates a sales budget; we are actually starting the process in October. We look at our historical sales data, our current sales, and our sales targets for the coming year. The sales budget leads to the development of the other budgets, manufacturing, production, purchasing, inventories, sales and other expenses. Our budgets are usually determined by end of November, no later than mid December for the New Year. All departments have input and are responsible for their budgets. Our forecasting and planning efforts are examined on a monthly basis throughout the year as well as daily inputs from the sales quotation department through their quote follow-up efforts. This allows us to keep tighter controls on inventories to keep us within the set budget as well as keep reasonable lead times for the different product lines. The weakness...
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...Chapter 4 Case 4-1. Vershire Company Questions: 1. Outline the strengths and weaknesses of Vershire Company’s planning and control system. Vershire’s planning system Strengths: When formulating the sales budget, divisional managers are required to predict market conditions and capital expenditures. The frocasting is done at the corporate level and is then sent to the divisional managers for fine-tuning. Corporate controllers visit each plant for half a day prior to the final submission of the budget. Weakness The initial sales forecast uses assumptions which are entirely derived from corporate headquarters’ analyses. The forcasting method is the same for all product lines. Plant managers do not come up with the sales budgets – the district sales manager do. Vershire’s control system Strengths Divisional managers are given full control over their divisions except in the ares of raising capital and labor relations. There is timely communication between the various hierarchies of the company as there are not that many tiers. There is constant oversight on meeting the budget. Weakness Profit is the main measure for assessing plant managers’ performance and determining bonuses. 2. Trace the profit budgeting process at Vershire, starting in May and ending with the Board of Directors’ meeting in December. Be prepared to describe the activities that took place at each step of the process and present the rationale for each. 3. Should the plant managers...
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...|Management Control System | |Ringkasan Kasus 2 : Vershire Company | |Kelas Akhir Pekan 22A | By Kelompok 3 : Dewi Ilmayanti Dina Diana Tambunan Feri Nata Maleakhi Kemal Rusmali Yanti Rakhmayanti [pic] | | Magister Management Universitas Gadjah Mada Vershire Company A. Profil Perusahaan Vershire Company merupakan salah satu perusahaan penghasil kemasan(packaging) terbesar di Amerika Serikat. Struktur organisasi di Vershire Company terbagi menjadi beberapa unit bisnis, dimana di setiap unit bisnis terdiri dari 2 area fungsional yaitu Manufacturing dan Marketing. Berikut adalah truktur organisasi di divisi kemasan aluminium: [pic] Setiap Division General Manager memiliki wewenag penuh untuk mengendalikan unit bisnisnya kecuali yang terkait dengan Sumber Daya Manusia, dan struktur modal. Persaingan pasar industri kemasan di Amerika Serikat sangat tinggi. Pelanggan memiliki banyak pilihan pemasok dalam waktu bersamaan. Sehingga perusahaan...
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...an organization unit in a business headed by a manager. 4 kinds of Responsibility Center * Expense Center – input measured in monetary terms but not the output. Ex: Manufacturing Unit of the company INPUT e.g. materials, labor, indirect labor OUTPUT is the finished goods * Revenue Center – concerned in the sales of the product measured in monetary terms. The expenses cannot be related to output. For example, advertising expense. A company is not assured that in every amount they put into advertising will be translated into sales. Ex: Marketing Department of the company (taking only on sales) * If they reach the quota, it means they are effective * Profit Center – unit concerned both in the revenue and expenses, or the Net Income Ex: Business Unit * Investment Center – unit concerned in the ROI or the Return on Investment. | Effective – doing the right thing | Efficient – doing things right | Revenue Center | Objective: If they reach the quota | If exceeded the quota but with the same expenses | Expense Center | Objective: If they meet the standard output/finished goods | If produced more output but with the same expenses | Two Types of Expenses in the Expense Center 1. Engineered Cost – amount of the cost can be estimated with reliability; costs a company can’t live without. Ex. Direct labor, direct materials 2. Discretionary Cost – costs that whether they want to implore or not. It depends on the judgement of the manager. * Costs that...
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...Vershire also has some issues on the performance measurement report and evaluation system. Besides the inefficient way to measure manufacturing efficiency, performances of plant managers are measured based on the metric that they cannot directly control, i.e. sales. Therefore the related compensation packages and promotions mislead and lack sufficient incentives to motivate plant managers. As illustrated before, it is inappropriate to treat a plant as a profit center, rather than an expense center. Due to the manufacturing nature, plants have fully control on costs and should be motivated to lower the cost to make contributions to the revenue. Monthly performance evaluation report and supporting report for a plant showing both sales and costs in Exhibit 2 and 3 are submitted by each plant and reviewed by corporate management. Items that failed to meet the budgeted targets require explanations from plant managers, no matter it is cost-related or sales-related. Moreover, sales report on plant basis is confusing by itself since products are sold on district basis. The sales department had sole responsibility for the price and delivery schedules, which are not identical in each order because of contingencies such as traffic, weather, and sick staff. Plant managers have no way to explain the detailed decision making process of sales department to provide a sufficient explanation to sales failures without asking sales department. Furthermore, second-hand information tends to be less...
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...CASE STUDY Vershire Company In 1996 Vershire Company was a diversified packaging company with several major divisions, including the Aluminum Can division - one of the largest manufacturers of aluminum beverage cans in the United States. Exhibit 1 shows the organization chart for the Aluminum Can division. Reporting to the divisional general manager were two line managers, vice presidents in charges of manufacturing and marketing. These vice presidents headed all of the division’s activities in their respective functional areas. The Aluminum Can division’s growth in sales slightly outpaced sales growth in the industry at large. The division had plants scattered throughout the United States. Each plant served customers in its own geographic region, often producing several different sizes of cans for a range of customers that included both large and small breweries and soft drink bottlers. Most of these customers had between two and four suppliers and spread purchases among them. If the division failed to meet the customer’s cost and quality specifications or its standards for delivery and customer service, the customer would turn to another supplier. All aluminum can producers employed essentially the same technology, and the division’s product quality was equal to that of its competitors. Industry Background1 Traditionally, containers were made from one of several materials: aluminum, steel, glass, fiber-foil (paper and metal composite), or plastic. The metal container...
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...tobe able to drive from the distribution centre to a store within a day. * Wal-Mart built large discount stores in small rural towns. 2. How do Wal-Mart’s control systems help execute the firm’s strategy? Answer : * Each store constituted an investment center and was evaluated on its profitsrelative to its inventory systems. Data from over 5,300 stores on its such assales, expenses, and profit and loss were collected, analyzed, and transmittedelectronically on a real-time basis, rapidly revealing how a particular region,district, store, department within a store, or item within a department isperforming. Information enables the company to reduce the likelihood of stock-outs and the need for markdowns and slow moving stock, and tomaximize inventory turnover. * Wal-Mart instituted several other policies and programs for its associates:incentive bonuses, a discount stock purchase plan, promotion from within, payraises based on performance not seniority, and an open-door policy. * Wal-Mart had also persuaded its suppliers to have electronic “hook ups” with its store. * Wal-Mart owned its trucks when most competitors outsources trucks. Case 1-3 Xerox Corporation (A) 1. Outline the management control system at Xerox. What are the key elements that make the system work? Xerox's management control system concentrated and focused on the responsibility and performance of 12 units, which...
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