Management Case Studies

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1.1.Leo’s Four-Plex Theater, Wong’s Pharmacy & Private Fitness, Inc.2 1.1.1.Subjects2
1.1.2.Summary Leo’s Four-Plex Theater10
1.1.3.Q&A Leo’s Four-Plex Theater10
What are the control system lacking11
Cashier problem11
Giving away free tickets – the nephew12
Cashiers don’t ring the sales in12
Free let-ins12
1.1.4.Summary Wong’s Pharmacy12
1.1.5.Q&A Wong’s Pharmacy12
1.1.6.Summary Private Fitness, Inc.13
1.1.7.Q&A Private Fitness, Inc.13
1.2.Action, Personnel, and Cultural Controls14
1.3.Bellagio Casino Resort (Chapter 4; Control system tightness)18 1.2.1. Subjects18
1.2.2. Summary Bellagio Casino Resort20
1.2.3. Q&A Bellagio Casino Resort20
1.4.Control system costs (Chapter 5)20
1.5.Air Tex Aviation (Chapter 6)22
1.6.Puente Hills Toyota (Chapter 6)23
1.7.Financial Responsibility Centres (Chapter 7)23
1.8.Planning and budgeting (Chapter 8)30
1.9.Incentive Compensation Systems (Chapter 9)37
1.10.Tsinghua Tongfang (Chapter 9)42
1.11.Financial Performance Measures and Their Effects (Chapter 10)42 1.12.Las Ferreterias de Mexico (Chapter 10)49
1.13.Combinations of Measure and other Remedies to the Myopia Problem (Chapter 11)49 1.14.Domestic Auto Parts (External, chapter 11, HBR2,3,4)56 1.15.Using Financial Results Controls in the Presence of Uncontrollable Factors56 1.16.Olympic Car Wash (Chapter 12)60

1.17.Formosa Plastics Group (Chapter 12)60
1.18.Corporate Governance and Board of Directors (Chapter 13)60 1.19.Controllers and Auditors (Chapter 14)66
1.20.Don Russel: Experience of a Controller/CFO (Chapter 14)70 1.21.Management Control-Related Ethical Issues and Analyses (Chapter 15)70

1.1.Leo’s Four-Plex Theater, Wong’s Pharmacy & Private Fitness, Inc. 1.1.1.Subjects
Section 1: The Control Function of Management
Chapter 1: Management and Control
-Management and control
oThe process by which management: Ensures that employees in the organisation carry out the organizational objectives and strategies & Encourages, enables, or, sometimes ”forces” employees to act in the organization’s best interest.

Management control includes all the devices/mechanisms managers use to ensure that the behaviour of employees is consistent with the organization’s objectives and strategies.

We want that the daily life leads to the result that we desire •Purpose/Function: Get done what management wants to get done & Influence behaviour in desirable ways •Benefit: Increased probability that the organization’s objectives will be achieved oManagement and its components:

Objective setting = Vision
Strategy formulation = How do we do it (Formulating)
Management Control = Implementing the plans

Objective settings:
Financial vs. non financial
Quantified, explicit vs. implicit (To make the goal objective) •Economic, social, environmental, societal
Strategy formulation:
An organization must select any of innumerable ways of seeking to attain its objectives •Strategies define how the organizations should use their ressources to meet their objectives •Hence, strategies put constraints on employees to focus activities on what the organization does best or areas where it has an advantage over competitors •Management control (General question):

Are our employees likely to behave appropriately? (To answer this, 3 under questions) •1. Do our employees understand what we expect of them?
2. Will they work consistently hard and try to do what is expected of them? •3. Are they capable of doing a good job?
-Causes of management control problems
oManagement control is about encouraging PEOPLE to take desirable actions: •It guards against the possibilities that employees will do something the organization does not want them to do, or, fail to do something they should do. oHence, Management control has a BEHAVIORIAL ORIENTATION

oIf all...
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