Management Control Systems 4-6

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Management Control group 1|
Main Case Study 4-6|
Mini case study 5-2|
Tom Breteler – 930228 |
Max Leigh Norman – 910904
Hanway Tran – 831226 16/11/2012|
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Main Case Study 4-6: Grand Jean Company

Introduction

This case study covers case 4-6 of ‘Management Control Systems’, written by Robert N. Anthony and Vijay Govindarajan (2007, 12th edition). The case discusses Grand Jean Company, a jeans manufacturing company, and describes several processes and issues in their organisation and management. In this report, we will we review and discuss the main problems that Grand Jean Company faces, analyse and propose solutions to these problems.

During the course of this report, we will often refer to theory from the aforementioned literature, as well as external sources where needed. Explanations of concepts, theories and jargon will be given where necessary, but references will be provided in the end of the report easy reference.

Lastly, we realise our solutions have their limitations and are unlikely to be implemented easily, or immediately effective. But we believe that our proposed changes will allow the company to reap the benefits from knowledge sharing and increased efficiency, as both plant managers and contractors can cooperate to find the best practice to accomplish their tasks at hand.

Background

Grand Jean is a clothing company with a long history, having been founded in the mid 18th century it has survived several great economic crises such as two world wars, the great depression in the late 1920s and the 1970s oil crisis. Having survived so many economic shocks and still be working as a profitable company, it is possible that this has caused top management in Grand Jean to believe that the business model they are employing is a sturdy model that always works. The scientific management model that was developed in the 1910s where cost efficiency and cost analysis was prevalent then; is something that we perceive is still prevalent now in Grand Jean (Anthony & Govindarajan, 2007).

Their usage of key metrics is very old fashioned:
* Focus on production quota for the factories.
* Budget estimating a plant’s future production by looking at historic production and add a little more for the following year * Using historic supervisor:employee ratio

There seems to be a lot of territorial mentality between the different departments in that each department focus on their own performance, and are willing to intervene in another department to satisfy their own goal. The company also seemed to treat the management and employees at the headquarters more favourably than management and employees at production plants.

Problems

In this section, we shall further discuss the processes and circumstances at Grand Jean Company and lay out the problems, and more importantly we will explain why they are problems.

Firstly, we feel that the company in overall is overly traditional and outdated, resulting in a general lack of flexibility. The company’s processes and regulations are often strict and overly simplified, which has a negative effect on the realistic day-to-day operations.

One of these regulations is the relationships Grand Jean Company has with its independent contractors. Grand Jean has 25 company-owned manufacturing plants, which are responsible for about two thirds of the total production; the rest is done by roughly 20 independent manufacturers. Some of these contractors have long-standing relationships with Grand Jean, whereas some are very new and short-term. Contract agreements are made by the production operations’ vice president, Tom Wicks, and a ceiling price is set for each individual type of pants. If a contractor complies with Grand Jean’s quality and reliability standards, they get paid the full ceiling price, but if Grand Jean is unsure, a lower price is paid until the contractor has proven himself. This leads to a high turnover rate for...
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