Abram's Company
Recommendations
➢ Suggestions to performance measurement system:
1) ROI can be used combination with other performance measures to avoid the limitations of ROI. The company can establish a non-financial performance measurement system such as the balanced scorecard .With a good performance measurement system, the incentive compensation plan will be improved.
(2) EVA ( Economic value added) can be used instead of RO ➢ Suggestions to improve the existing incentive compensation plan. ➢ Suggestions to transfer pricing. ➢ Suggestion to captive customer-AM division ➢ Suggestions about inventories
Executive summary
This report focuses on the case of Abrams Company which manufactured different parts for use in automobiles, trucks, buses and farm equipment.
It has three product divisions and an aftermarket division.
The report analyzes the following issues: • Abrams Company’s internal and external environment • Construct the business’ and industry value chain • Management strategies that the company following • How management control systems help the firm to execute the strategies • Some recommended improvements or changes
In general, Abrams Company adopts the lowest cost, differentiation, market focus and ROI strategies to accomplish the organization’s goal. Furthermore, In order to implement the strategies the firm establishes its own management control systems.
Background
Abrams Company manufactured automobile parts for trucks, buses, and farm equipment. The three major groups’ parts are ignition parts, transmission parts, and engine parts. They sold them both to OEMs (original equipment manufactures) and to AM (aftermarket) which through wholesalers-retailers-customers way. As we can see from the chart 1 (refer to Appendixes) they had a ‘product division’ for distribution to different markets.
What’s more, they conduct a ROI strategy to evaluate the investment centre performance and focus on their product innovation and
➢ Suggestions to performance measurement system:
1) ROI can be used combination with other performance measures to avoid the limitations of ROI. The company can establish a non-financial performance measurement system such as the balanced scorecard .With a good performance measurement system, the incentive compensation plan will be improved.
(2) EVA ( Economic value added) can be used instead of RO ➢ Suggestions to improve the existing incentive compensation plan. ➢ Suggestions to transfer pricing. ➢ Suggestion to captive customer-AM division ➢ Suggestions about inventories
Executive summary
This report focuses on the case of Abrams Company which manufactured different parts for use in automobiles, trucks, buses and farm equipment.
It has three product divisions and an aftermarket division.
The report analyzes the following issues: • Abrams Company’s internal and external environment • Construct the business’ and industry value chain • Management strategies that the company following • How management control systems help the firm to execute the strategies • Some recommended improvements or changes
In general, Abrams Company adopts the lowest cost, differentiation, market focus and ROI strategies to accomplish the organization’s goal. Furthermore, In order to implement the strategies the firm establishes its own management control systems.
Background
Abrams Company manufactured automobile parts for trucks, buses, and farm equipment. The three major groups’ parts are ignition parts, transmission parts, and engine parts. They sold them both to OEMs (original equipment manufactures) and to AM (aftermarket) which through wholesalers-retailers-customers way. As we can see from the chart 1 (refer to Appendixes) they had a ‘product division’ for distribution to different markets.
What’s more, they conduct a ROI strategy to evaluate the investment centre performance and focus on their product innovation and