Founded in the 19th century, the Grand Jean Company survived the large economy crises in 1929. It became one of the largest clothing companies in the world around 1989. Its main products are pants for men and boys. But also women pants are produced there. With the “wash-and-wear”, bell-bottom and flare leans and modern casual pants, the company was market leading. The company owns 25 plants for manufacturing with an output capacity of 20.000 pants per week. However, this production is not enough to satisfy the demand on the market. As a result of that, the company decided to employ independent manufacturers. Last year, these contractors produced one third of the total sales. Grand Jean is a functional organization. The plant divisions are considered as expense centers. The plants are wanted to produce a certain amount of pants, which is given by the marketing staff, every year. The quotas depends on the result, the plant has reached in the previous month. Because there are 5 different products, the company has introduced 5 marketing centers considered as revenue centers. At the end of each year, all plant managers are evaluated on a scale from 1 to 5. The bonus they get in addition to their normal wage, depends on the grade, they were given by the Vice President of Production Operations and his two chief assistants. The received grade is multiplied with 10.000 $. That results a maximum extra payment of 50.000 $.
What are the main problems in the management control system?
Grand Jean has a functional organization and it causes several disadvantages: there is no real way to determine the effectiveness of the separate functional divisions (production and marketing). And yet, there are real inequalities in these organizations because the marketing division is higher awarded than the plants managers. Furthermore, the requirements which the plants' manager have to meet are very high. Indeed, the CEO was previously an efficient plant manager...
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