Mcs Notes Final

7/31/2019 Mcs Notes Final

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1. Management Control is the process by which managers influence othermembers of the organization to implement the organizations strategies. Managementcontrol systems are tools to aid management for steering an organization toward itsstrategic objectives and competitive advantage. Activities in Management control are

(a) Planning activities of an organisation

(b) Coordination activities of an organisation

(c) Communicating information to different hierarchical structure

(d) Evaluation of performance

(e) Initiate activities, direction

(f) Influence people to work towards goals

Management control systems use many techniques such as

(Operational Controls)

2. The Balanced Scorecard (BSC). Proposed by Kaplan and Norton, it is a

strategic performance management tool - a semi-standard structured report, supported

by proven design methods and automation tools, that can be used by managers to

keep track of the execution of activities by the staff within their control and to monitor

the consequences arising from these actions.This approach works on the premise that

What you measure is what you get. To cite an example, a company with accurate

time keeping system will have a better record of timely attendance of employees than

the company without it. Thus, the balanced scorecard approach provides a clear

prescription as to what companies should measure in order to achieve its goals. It is to

be re-emphasized that the balanced scorecard is a future oriented management

system (not a measurement system). Even though it seemingly works through

measurements, real thrust is not on measurement but strategy. It helps organizations to

first formulate their vision and strategy and then to translate them into action. It provides

feedback around both the internal business processes and external outcomes in order

to continuously improve strategic performance and results. The balanced scorecard

suggests that we view the organization from fourperspectives, and to develop metrics,collect data and analyze it relative to each of these perspectives:
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Four steps as being part of the Balanced Scorecard design process:

1. Translating the vision into operational goals;2. Communicating the vision and link it to individual performance;3. Business planning; index setting4. Feedback and learning, and adjusting the strategy accordingly.

3. Total Quality Management orTQM is an integrative philosophy ofmanagementfor continuously improving the quality of products and processes. TQM requires theinvolvement of management, workforce, suppliers, and customers, in order to meet orexceed customer expectations. Nine common TQM practices as:

1. cross-functional product design2. process management3. supplier quality management4. customer involvement5. information and feedback6. committed leadership

7. strategic planning8. cross-functional training9. employee involvement

4. Just in time (JIT) is a production strategy that strives to improve a businessreturn on investment by reducing in-process inventory and associated carrying costs. Tomeet JIT objectives, the process relies on signals orKanban between different points inthe process, which tell production when to make the next part. Kanban are usually
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'tickets' but can be simple visual signals, such as the presence or absence of a part ona shelf. Implemented correctly, JIT focuses on continuous improvement and canimprove a manufacturing organization's return on investment, quality, and efficiency. Toachieve continuous improvement key areas of focus could be flow, employeeinvolvement and quality.

(a)Transaction cost approach. JIT reduces inventory in a firm. However, a firmmay simply be outsourcing their input inventory to suppliers, even if thosesuppliers don't use Just-in-Time

(b) Price volatility. JIT implicitly assumes a level of input price stability thatobviates the need to buy parts in advance of price rises. Where input prices areexpected to rise, storing inventory may be desirable.

(c) Quality volatility. JIT implicitly assumes that input parts quality remainsconstant over time. If not, firms may hoard high-quality inputs.

Benefits

Main benefits of JIT include:

Reduced setup time. The flow of goods from warehouse to shelves improves. Employees with multiple skills are used more efficiently. Production scheduling and work hour consistency synchronized with

demand. Increased emphasis on supplier relationships.

Supplies come in at regular intervals throughout the production day. Minimizes storage space needed. Smaller chance of inventory breaking/expiring.

5. Target costing involves setting a target cost by subtracting a desired profitmargin from a competitive market price. These concepts are supported by the four basicsteps of Target Costing: (1) Define the Product (2) Set the Price and Cost Targets (3)

Achieve the Targets (4) Maintain Competitive Costs.

To compete effectively, organizations must continually redesign their products (orservices) in order to shorten product life cycles. The planning, development and design

stage of a product is therefore critical to an organization's cost management process.Considering possible cost reduction at this stage of a product's life cycle (rather thanduring the production process) is now one of the most important issues facingmanagement accountants in industry.

Here are some examples of decisions made at the design stage which impact on thecost of a product.
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1. The number of different components2. Whether the components are standard or not3. The ease of changing over tools

Japanese companies have developed target costing as a response to the problem of

controlling and reducing costs over the product life cycle.

6. Activity-based costing (ABC) is a costing methodology that identifies activitiesin an organization and assigns the cost of each activity with resources to all productsand services according to the actual consumption by each. Methodology of ABCfocuses on cost allocation in operational management. ABC helps to segregate

Fixed cost Variable cost Overhead cost

Steps to implement Activity-Based costing

Identify and assess ABC needs - Determine viability of ABC method withinan organization.

Training requirements - Basic training for all employees and workshopsessions for senior managers.

Define the project scope - Evaluate mission and objectives for the project. Identify activities and drivers - Determine what drives what activity. Create a cost and operational flow diagram How resources and activities

are related to products and services. Collect data Collecting data where the diagram shows operational

relationship. Build a software model, validate and reconcile. Interpret results and prepare management reports. Integrate data collection and reporting.

7. Business Process Re-engineering is a business management strategy,originally pioneered in the early 1990s, focusing on the analysis and design ofworkflows and processes within an organization. BPR aimed to help organizationsfundamentally rethink how they do their work in order to dramatically improve customerservice, cut operational costs, and become world-class competitors. Business processre-engineering is also known as business process redesign, business transformation, orbusiness process change management.. Some important BPR success factors, includefollowing:

1. Organization wide commitment.2. BPR team composition.3. Business needs analysis.4. Adequate IT infrastructure.
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5. Effective change management.6. Ongoing continuous improvement

8. Product life-cycle management (or PLCM) is the succession of strategies usedby business management as a product goes through its life-cycle. The conditions in

which a product is sold (advertising, saturation) changes over time and must bemanaged as it moves through its succession of stages. The goals of PLC managementare to reduce time to market, improve product quality, reduce prototyping costs, identifypotential sales opportunities and revenue contributions, and reduce environmentalimpacts. Characteristics of PLC stages

The four main stages of a product's life cycle and the accompanying characteristics are:

(a) Market introduction stage

(b) Growth stage

(c) Maturity stage

(d) Saturation and decline stage

13. Budget. A budget is a forecast of all income and expenses, and helps abusiness identify future financial needs and plan based on expected profit, expensesand cash flow. If a business doesn't have the budget to support its strategic plan, thebusiness needs to either modify its plan or find the financial means to support the plan.

Budgeting Process. Budgets cover a certain period of time. Most businesses develop

monthly, quarterly and annual budgets. Budgets can be periodically updated based oncurrent information; steps involved are as follows:-

(a) Creating a budget department or appointing a budget controller(b) Developing guidelines for budget preparation(c) Developing guidelines for budget preparation(d) Developing budget for entire organisation(e) Determining the budget period and key budget factors(f) Benchmarking the budget(g) Budget review and approval(h) Monitoring progress and revising the budgets

11. Master Budget. It is a summary of company's plans that sets specific targets

for sales, production, distribution and financing activities. It generally culminates in a

cash budget, a budgeted income statement, and a budgeted balance sheet. In short,

this budget represents a comprehensive expression of management's plans for future

and how these plans are to be accomplished. One budget may be necessary before the

other can be initiated. More one budget estimate effects other budget estimates
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because the figures of one budget is usually used in the preparation of other budget.

This is the reason why these budgets are called interdependent budgets. It usually

consists of a number of separate but interdependent budgets. Following are the major

components ofmaster budget.

OPERATING BUDGETFINANCIAL BUDGET

Budget P/L Account Cash budget

Production budget Balance sheet

Materials budget Funds statement

Labour budget

Admin. Budget

Stocks budget

9. Variance Analysis, in budgeting (or management accounting in general), is a

tool of budgetary control by evaluation of performance by means of variances betweenbudgeted amount, planned amount or standard amount and the actual amountincurred/sold. Variance analysis can be carried out for both costs and revenues.Variances are normally calculated for all the cost components such as Materials, Labourand Overheads. There are two types of variances:

When actual results are better than expected results given variance is describedas favorable variance (F).

When actual results are worse than expected results given variance is describedas adverse variance, or unfavourable variance (A).

10. Zero-based budgeting In zero-based budgeting, every line item of the budgetmust be approved, rather than only changes. During the review process, no reference ismade to the previous level of expenditure. Zero-based budgeting requires the budgetrequest be re-evaluated thoroughly, starting from the zero-base. This process isindependent of whether the total budget or specific line items are increasing ordecreasing. In general there are three components that make up public sector ZBB:

1. Identify three alternate funding levels for each decision unit ( zero-base level, acurrent funding level and an enhanced service level.)

2. Determine the impact of these funding levels on program (decision unit)operations using program performance metrics; and

3. Rank the program decision packages for the three funding levels.

Advantages

1. Efficient allocation of resources, as it is based on needs and benefits rather thanhistory.

2. Drives managers to find cost effective ways to improve operations.3. Detects inflated budgets.
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4. Increases staff motivation by providing greater initiative and responsibility indecision-making.

5. Increases communication and coordination within the organization.6. Identifies and eliminates wasteful and obsolete operations.7. Identifies opportunities for outsourcing.

8. Forces cost centers to identify their mission and their relationship to overallgoals.9. Helps in identifying areas of wasteful expenditure, and if desired, can also be

used for suggesting alternative courses of action.

Disadvantages

1. More time-consuming than incremental budgeting.2. Justifying every line item can be problematic for departments with intangible

outputs.3. Requires specific training, due to increased complexity vs. incremental

budgeting.4. In a large organization, the amount of information backing up the budgetingprocess may be overwhelming.

5. its implement on big scale not on small scale industries

12. Participative or Self-imposed budgeting. The budgeting approach in whichmanagers prepare their own budget estimates is called self-imposed budgeting orparticipatory budgeting. Managers at all levels participate and coordinate with eachother in budgeting process. However, most companies deviate from this idealbudgetary process. Typically top managers initiate the budget process by issuing broadguidelines in terms of overall target profits or sales. Lower level managers are desired

to prepare budgets that meet those targets.

A number of advantages or benefits are cited for such self-imposed budgets.

1. Individuals at all level of organization are recognized as members of the teamwhose review and judgments are valued by top management.

2. Budget estimates prepared by front line managers can be more accurate andreliable than estimates prepared by top managers

3. Motivation is generally higher when an individual participates in setting his or herown goal then when the goals are imposed from above.

4. If a manager is not able to meet the budget and it has been imposed from above,

the manager can always say that the budget was unreasonable or unrealistic tostart and, therefore, was impossible to meet. With a self-imposed budget thisexcuse is not available.
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Participative budget has following main disadvantages:

1. Time consuming and costly.2. May foster budgetary gaming through budgetary slack

14.Strategic Planning. It is the process of deciding on programmes that theorganisation will undertake and on the approx amount of resources that will beallocated to each programme over next several years. Many approaches to strategicplanning are available. (a) Start with a strategic analysis of where the organization isnow, including its strengths and weaknesses and the economic, social, political andtechnical environment in which the business operates. (b) next step is to decidewhat direction the business wants to head; this process may involve developing amission statement or strategic philosophy and setting goals. (c) The next step is toidentify tactics or action steps for achieving strategic goals.

Types of Strategic planning Vision-based or goals-based, Issues-based

planning, The alignment model, Scenario planning, Self-organizingplanningand Real-time planning

Diff between Budget and Strategic planning. A business needs to have both a

strategic plan and a budget. The strategic plan lays out the direction and goals of the

business and guidelines for actions to achieve those goals, while the budget looks at

the money needed to support achieving those goals. Budgeting is only one part of the

strategic planning process.

13. Budget Control One generally accepted guideline for effective budgeting is to

establish goals that are difficult but attainable. Therefore, skilled managers whounderstand budgets and how to use them have a powerful control tool with which toattain departmental and organizational goal

Advantages. Some of these are:

(a) The major strength of budgeting is that it coordinates activities across departments.

(b) Budgets translate strategic plans into action. They specify the resources, revenues,and activities required to carry out the strategic plan for the coming year.

(c) Budgets provide an excellent record of organizational activities.

(d) Budgets improve communication with employees.

(e) Budgets improve resources allocation, because all requests are clarified andjustified.

(f) Budgets provide a tool for corrective action through reallocations.


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Disadvantages

(a) The major problem occurs when budgets are applied mechanically and rigidly.

(b) Budgets can demotivate employees because of lack of participation. If the budgetsare arbitrarily imposed top down, employees will not understand the reason for

budgeted expenditures, and will not be committed to them.

Budgets can cause perceptions of unfairness.

(d) Budgets can create competition for resources and politics.

(e)A rigid budget structure reduces initiative and innovation at lower levels, making itimpossible to obtain money for new ideas.

(f) These dysfunctional aspects of budgets systems may interfere with the attainment ofthe organization's goals.

14. Standard Costing. It may be defined basically as a technique of costaccounting which compares the standard cost of each product or service with the

actual cost, to determine the efficiency of the operation, so that any remedial action may

be taken immediately. The standard cost is a predetermined cost which determines

what each product or service should cost under given circumstances. Types of standard

costs are Historical and Industry. Standard costing involves:

(a) The setting of standards(b) Ascertaining actual results(c) Comparing standards and actual costs to determine the variances(d)Investigating the variances and taking appropriate action where necessary.

16. Responsibility Centres A responsibility centre is an organizational subsystemcharged with a well-defined mission and headed by a manager accountable for theperformance of the centre. "Responsibility centres constitute the primary building blocksfor management control." It is also the fundamental unit of analysis of a budget controlsystem. The key consideration in determining the responsibility centre are:-

(a) Ability to control cost and revenue

(b) Determining the question of controllability

Evaluation as per predetermined criteria

There are four major types of

(a) Cost Centre. A cost centre is a responsibility centre in which manager is heldresponsible for controlling cost inputs. There are two general types of costcentres: engineered expense centres and discretionary expense centres.Engineered costs are usually expressed as standard costs. A discretionaryexpense centre is a responsibility centre whose budgetary performance is based


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on achieving its goals by operating within predetermined expense constraints setthrough managerial judgment or discretion.

(b) Revenue Centre. A revenue centre is a responsibility centre whose budgetaryperformance is measured primarily by its ability to generate a specified level ofrevenue. Sales department is a revenue centre. Sales budget are prepared forrevenue centre and the budgeted figures are compared with actual sales.

(c) Profit Centre. Is an organisational unit responsible for both revenues andcosts. Managers are concerned with both production and marketing of theproducts. He has no control over the investment in the centres assets.

(d) Investment Centre. An investment centre is a responsibility centre whosebudgetary performance is based on return on ROI. It is responsible forproduction, marketing and investments in the assets. An investment centremanager decides on aspects such credit and inventory policies.

15. Transfer Pricing. The concept of transfer price started with divisionalisation of

the large businesses. In the process of divisionalisation, each of the sections is treated

as profit centre. The output of each division is priced and profit/loss of the section is

calculated, which becomes the indicator of the performance of the division. Same price

becomes the cost of the next division in the multistep production process. Since there is

no exchange of cash between the divisions and only book entries are made, it is called

transfer price. Profit of each division is thus affected by the transfer price of preceding

division as well as its own. The objectives of TP are Goal congruence, Divisional

Autonomy and Performance Appraisal

Advantages of Transfer Pricing

1. The system enables the top management to evaluate accurately theperformance of each division viewed as independent entity.

2. The system motivates divisional managers to act in a manner that furthers thelarger interest of the organisation.

Fixing the Transfer Price

Fixing the transfer price of products is a complex issue. While in some cases it is

relatively easy due to availability of market price of the comparable product, it is often

difficult in case of intermediate stages in production process. Various approaches have

been developed to enable fixing of justifiable transfer prices. Main approaches are asfollows:

1. Transfer prices at Market Prices Market based transfer prices are oftenconsidered ideal because the situation is similar to what divisional managerswould face if they were managing independent companies. Here, the transferprice may reflect the price prevailing in an open, competitive market. The

justification for using market prices is that when all divisions maximise their


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profits on the basis of market prices for goods or services transferredbetween divisions, the profits of the company are maximised. The marketprice approach is designed for use in highly decentralised organisations.Following are the guidelines to be followed while using this method for fixingtransfer prices:

(a) The buying division must purchase internally so long as the sellingdivision meets all bonafide outside prices and wants to sell internally.

(b) If the selling division does not meet all the bonafide outside prices, thebuying division should be free to source their requirements fromoutside.

(c) The selling division must have the option of not selling internally if itwants to sell outside.

(d) An impartial board must be established to arbitrate disputes overprices.

2. Transfer at Negotiated Market Price This method is a further refinementof Market Price approach since the price negotiation is the real life feature inany procurement. Most bulk customers are able to negotiate a better pricedue to bulk quantity discounts or other market factors. Thus, while MarketPrice is the upper limit of the price that can be charged between divisions, it ismore often a lower price which may be justified. Take for instance, variousoverheads involved in selling to an outside party like, packing, marketing,transportation, credit period for payment, losses in transit, selling commission,bad debts, administration, duties, etc. Most of these overheads are not therein internal transfers. The benefits of these savings ought to be sharedbetween two divisions. Quantity discount is another justification for lower than

market transfer price. In some isolated cases, selling division may havesubstantial excess capacity, which may justify a price below the prevailingmarket price.In some cases, independent market price may not be available.Take the case of an intermediate product at a stage where it is notmarketable and therefore no market price exists. The other extreme is whenno other producer produces that product and therefore there is almostmonopolistic situation for that division.

3. Cost based transfer Pricing When reliable market prices are not available,then the natural tendency is look at the costs of the seller division to developthe transfer prices. Following are the circumstances when cost based transferpricing is recommended:

(a) No market price exists This happens mostly in case of intermediatestages of a multi-step production process. Products are normally notsold at those stages of production.

(b) Negotiations in market based approach cause disputes and reach adeadlock.


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(c) Where the product contains a secret ingredient or production processwhich the company does not want to disclose to outsiders. So, themarket price cannot be fixed.

Cost based transfer pricing has four variances which depend on the type of

product and the type of accounting system employed by the organisation:

ActualCost

StandardCost

FullCost

1 2

VariableCost

3 4

15. ROI/EVA. ROI a metric that requires you to state projected costs and benefitsexplicitly. It provides a standard of comparison to other demands on the companysresources. It makes you think like a business decision-maker. ROI has a fatal flaw - itassumes that the funds that make up the I are endlessly available. And free. In thereal world, funds are limited. Cash comes with a price-tag - what it costs your companyto borrow the money. Alternatively, the price of money (cost of capital to your CFO)approximates what you could get from investing the funds outside of the company(which youd presumably do if you didnt have better investments inside).Yourcompanys cost of capital is related to how risky investors think it to loan you money,your bond or credit rating, and the availability of investment capital in the economy.

Economic Value Added, EVA for short, is a measure of ROI that takes the cost offunds into account. Unlike ROI, EVA is an absolute amount, not a ratio. EVA is basedon the idea that business must cover both cost of operation as well as cost of capitalemployed.Assume youre making the case for a new program that you expect to return$32,000 for your $200,000 investment in its first year. Your ROI would be32,000/200,000 = 16%.The EVA for this project deducts the cost of using the $200,000 (x 10% = $20,000). Your EVA is based on your return less what you must pay for tyingup the companys capital, $32,000 - $20,000 = $12,000. Your EVA ratio is12,000/200,000 = 6%.

1. EVA may lead you to outsource activities that would otherwise tie up your

resources.2. EVA recognizes that theres no free ride. Projects dont get funded because

they have a hefty ROI. They get funded when they are the best use of fundsavailable.

3. EVA gets everyone thinking like owners. The carrying cost of excess inventorygripes the manager whod like to use those funds for a new project.


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4. The formula for calculating EVA is as follows:

= Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)

5. Shareholders of the company will receive a positive value added when the

return from the capital employed in the business operations is greater than the

cost of that capital

16. Organisational structure. Functional organisation was advocated by F.W.

Taylor. In this form of organisation, all activities of the enterprise are grouped and

divided according to functions like production, marketing, finance and others. Each

department is in the charge of a specialist who is called functional manager. In this

organisation activities of foreman are classified into eight sub-divisions which are again

included in two broad groups. At planning level, the specialists are known as route clerk,

time and cost clerk, instruction card clerk ,a shop disciplinarian. A route clerk is meant

to lay down steps, time, cost clerk calculates time, cost, instruction card clerk prepares

instructions, and the shop disciplinarian is in the charge of observing rules. At the shop

level, the specialists are called gang boss, speed boss, repair boss and the inspector.

The gang boss is the in charge of tools, speed boss cares for the speed of the

machines, repair boss attends break down of the machines and inspector checks the

quality of the products.

17. Matrix Organisation was introduced in USA in the early 1960's. It was used to

solve management problems in the Aerospace industry. Matrix Organisation is a

combination of two or more organisation structures. For example, FunctionalOrganisation and Project Organisation. The matrix organizational structure is one in

which functional and staff personnel are assigned to both a basic functional area and to

a project or product manager .The matrix form is intended to make the best use of

talented people within a firm by combining the advantages of functional specialization

and product-project specialization.The organisation is divided into different functions,

e.g. Purchase, Production, R & D, etc. Each function has a Functional (Departmental)

Manager, e.g. Purchase Manager, Production Manager, etc. The organisation is also

divided on the basis of projects e.g. Project A, Project B, etc. Each project has a Project

Manager e.g. Project A Manager, Project B Manager, etc. The employee has to work

under two authorities (bosses). The authority of the Functional Manager flows

downwards while the authority of the Project Manager flows across (side wards). So,

the authority flows downwards and across. Therefore, it is called "Matrix

Organisation".
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18. Functional organizational structure is one on which the tasks, people, andtechnologies necessary to do the work of the business are divided into separatefunctional groups (such as marketing, operations, and finance) with increasingly formalprocedures for coordinating and integrating their activities to provide the businesss

products and services


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19. A divisional organizational structure is one in which a set of relativelyautonomous units, or divisions, are governed by a central corporate office but whereeach operating division has its own functional specialists who provide products orservices different from those of other divisions

This expedites decision making in response to varied competitive environments The division usually is given profit responsibility

20. The Product Organisation seeks to simplify and amplify the focus of resourceson a narrow but strategically important product, project, market, customer, or innovation.The product-team structure assigns functional managers and specialists to a newproduct, project, or process team that is empowered to make major decisions abouttheir product


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The strategic business unit (SBU) is an adaptation of the divisional structure

whereby various divisions or parts of divisions are grouped together based on


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some common strategic elements, usually linked to distinct product/market

differences

The advantages and disadvantages of the SBU form are very similar to those

identified for divisional structures

21. Organisational structure - Centralisation v Decentralisation. Decision-making is about authority. A key question is whether authority should rest with seniormanagement at the centre of a business (centralised), or whether it should bedelegated further down the hierarchy, away from the centre (decentralised).Centralised structures

Businesses that have a centralised structure keep decision-making firmly at the top ofthe hierarchy (amongst the most senior management).

Fast-food businesses like Burger King, Pizza Hut and McDonalds use a predominantly

centralised structure to ensure that control is maintained over their many thousands ofoutlets. The need to ensure consistency of customer experience and quality at everylocation is the main reason.

The main advantages and disadvantages of centralisation are:

Advantages Disadvantages

Easier to implement common policies andpractices for the business as a whole

More bureaucratic often extra layers in thehierarchy

Prevents other parts of the business frombecoming too independent

Local or junior managers are likely to muchcloser to customer needs

Easier to co-ordinate and control from thecentre e.g. with budgets

Lack of authority down the hierarchy mayreduce manager motivation

Economies of scale and overhead savingseasier to achieve

Customer service does not benefit fromflexibility and speed in local decision-making

Greater use of specialization

Quicker decision-making (usually) easierto show strong leadership


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Decentralisation

In a decentralised structure, decision-making is spread out to include more juniormanagers in the hierarchy, as well as individual business units or trading locations.

Good examples of businesses which use a decentralised structure include the majorsupermarket chains like WM Morrison and Tesco. Each supermarket has a storemanager who can make certain decisions concerning areas like staffing, salespromotions. The store manager is responsible to a regional or area manager. Hotelchains are particularly keen on using decentralised structures so that local hotelmanagers are empowered to make on-the-spot decisions to handle customer problemsor complaints.

The main advantages and disadvantages of this approach are:

Advantages Disadvantages

Decisions are made closer to the customer Decision-making is not necessarily strategic

Better able to respond to localcircumstances

More difficult to ensure consistent practicesand policies (customers might preferconsistency from location to location)

Improved level of customer service May be some diseconomies of scale e.g.duplication of roles

Consistent with aiming for a flatterhierarchy Who provides strong leadership when needed(e.g. in a crisis)?

Good way of training and developing juniormanagement

Harder to achieve tight financial control riskof cost-overruns

Should improve staff motivation

22. Formal systems include explicit rules, procedures, performance measures, andincentive plans that guide the behavior of its managers and other employeesInformal systems include shared values, loyalties, and mutual commitments amongmembers of the company, corporate culture, and unwritten norms about acceptablebehavior (read goal congruence and types of control systems from slides)


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23. Design of MCS.(Read from slides)

24. What is a Vision Statement?

A Vision Statement:

Defines the mental picture of what an organization wants to achieve over time of5 to 10 years

Is written succinctly in an inspirational manner that makes it easy for allemployees to repeat it at any given time.

Provide long term direction and give firm identity

Decide WHO we are, WHAT we do and Where we are headed Examples of effective Vision statements include: Alzheimer's Association: "Our Vision is a world without Alzheimer's disease." Avon: "To be the company that best understands and satisfies the product,

service and self-fulfillment needs of women - globally." Microsoft: "Empower people through great software anytime, anyplace, and on

any device."
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What is a Mission Statement?

(a) A Mission statement: Reflects managements vision of what firm seeks to do andbecome

(b) Provides clear view of what firm is trying to accomplish for its customers

(c) Indicates intent to stake out a particular business position

Answers three questions about why an organization exists -

WHAT it does;WHO it does it for; andHOW it does what it does.

Some businesses may refine their Mission statement based on changing economic

realities or unexpected responses from consumers. Understanding the Mission givesemployees a better perspective on how their job contributes to achieving it, which canincrease engagement, retention, and productivity. Having a clearly defined Missionstatement also helps employees better understand things like company-wide decisions,organizational changes, and resource allocation, thereby lessening resistance andworkplace conflicts.

Examples of effective Mission statements include:

Rent-aCar. Our Business is renting cars. Our mission is total customer satisfaction.

Walmartto offer all of the fine customers in our territories all of their household needsin a manner in which they continue to think of us fondly.

25. A Project is a temporary endeavor undertaken to create a unique product orservice. Project Management is the application of knowledge, skills, tools, andtechniques to project activities, in order to meet project requirements, and meet orexceed stakeholder needs and expectations from a project. It involves balancing scope,time, cost and quality. A methodology is a model which project managers employ for thedesign, planning, implementation and achievement of their project objectives. There aredifferent project management methodologies to benefit different projects.For example,there is a specific methodology which NASA uses to build a space station while the

Navy employs a different methodology to build submarines. Hence there are differentproject management methodologies that cater to the needs of different projects, spanacross different business domains. Following are the most frequently used projectmanagement methodologies in the project management practice.

(a)Adaptive Project Framework

(b)Agile software development
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(c) XP Extreme programming

(d) Dynamic systems development model

(e) Waterfall

(f) SDLCSystem development Lifecycle

(g) RAD Rapid Application Development

Documents

Mcs Notes Final