- 10 Marks
Question
b) The traditional methods of measuring performance of sub-units to achieve goal congruence include divisional profit, Return on Investment, Residual Income and Transfer pricing. These profit based measures do not reveal all about the long term survival of corporate institutions.
Required: Identify and explain FIVE areas of relevance that should engage the attention of management to ensure both short and long term profitability and survival.
(10 marks)
Answer
Factors that will ensure both short and long term profitability and survival:
- Customer satisfaction; meeting the short and long term needs of the customer will create loyalty that will translate into increased sales.
- Product improvement and innovation; as the products go through their life cycle there is the need to add new features to bring them at par with changing needs of customers.
- Constant improvement in the internal processes to achieve efficient and cost effective production.
- Loyal workforce; this will reduce labour turnover rate, leading to the building of experienced workforce that will produce quality goods at less cost.
- Use of ICT; the use of ICT will not only help in product design but will also help in solving complex decision models that will improve decision making at all levels of management.
- Partnership and collaboration; the new concept in competition is not to see the competitor as an enemy but a partner to look for areas of collaboration.
(5 points @ 2 marks = 10 marks)
- Topic: Performance analysis
- Series: NOV 2017
- Uploader: Dotse