Abrams Company

finanly, this is the last case study, and also 2 samples

SAMPLE 1

1. Conduct a SWOT analysis

Strength

The company has a clear management structure.

The company has employed a bonus plan for employees.

The AM Marketing division will input products form the other three divisions, and sell it to domestic and foreign market, it helps the company save cost when it input internal.

Weakness

The Abrams Company has three totally independent divisions, and the three divisions are lack of connection. The transactions between the three divisions dispute the transfer pricing.

OEM customers preferred than AM.

Opportunity

Demand is increasing of the product.

New technology was brought into the workplace.

The company can expand this product range for other vehicles

Threat

There are many competitors in the industry.

New technology is also a threat for the company. The company needs to change a lot of things to adapt it.

2. Evaluate the current divisional and plant performance measurement system. (note: your discussion can include but not limited to the following issues of transfer pricing, captive customers and excessive inventories)

Recently, the company has 4 divisions with 3 product division.

The transfer pricing is used when product is transferred from OEM division to AM division. But there is a problem to use this method, when the new product does not have historical prices, therefore it can’t be adjusted easily as other regular products.

AM division customers are treated as captive customers. But the company thinks OEM customers better for the company, so the company always gives preference thoughtful to OEM customers.

The current measurement system of the company is ROI. The ROI target is set based on budget profit divided by actual beginning of the year net assets. Actual ROI is calculating by actual profit divided by actual beginning of the year net asset. The advantage of the Abrams Company ROI system is it does not consider the investment added during the year, because the investments provide little effort to the year, but more benefit to the future. However, the ROI measurement system has some weakness, such as defer asset replacement, short-term focus at the expense of long-term.

3. Outline two suggestions to improve the current divisional and plant performance evaluation system.

To have inventory turnover being part of the evaluation system so that they can reduce stock on hand

ROI can be used combination with other performance measures-balanced set of long-term/short term; financial non-financial

4. Evaluate the existing incentive compensation plan of Abrams.

The incentive compensation plan of Abrams Company is bonus plan, and it calculates accurately based on an equation, and it seems equal for all members. The dollar amount of corporate bonus pool was established by a fixed formula linked to company earning per share. This incentive compensation plan can be considered as a reward system. Using this method the company can increase or maintain motivation.

5. Outline two suggestions to improve the existing incentive compensation plan.

There is no encouragement in the plan so that continues achievement can be achieved.

With the firm top 5% workers that exceed their targets by the highest percentage amount should get special bonus rewards.

6. Can you locate Abrams Company on the World Wide Web? Any other information that you believe is relevant?

Find many companies named “Abrams Company”, but none of them are related to this company. There is a website: www.abramscompany.com , but it is under construction.


SAMPLE 2

1. SWOT analysis:

Strength: The Abrams Company has three different products divisions, and one AM marketing division. The three product divisions are independent to each other, because of they produce different products, and sell to different OEM and this could ensure that when a division makes a loss, other division will not suffer the same thing. The AM Marketing division will input products form the other three divisions, and sell it to domestic and foreign market, it helps the company save cost when it input internal.

Weakness: The Abrams Company has three totally independent divisions, and the three divisions are lack of connection. They purchase their materials separately, and they carried excessive inventories most of the year. Also, inside sales sometimes need a negotiation on price, the may lead to low productivity.

Opportunity: The Abrams Company is focus on their product innovation and cost-effective to satisfy their customers’ needs. It provides a good quality to their customer. However, the Abrams Company should not only be focus on their products, but also focus on their brand name, and provide good services to their customer. Then the company may be more competitive in the future.

Threaten: The Abrams Company use ROI approach, and the incentive compensation plans consider the ROI as well, so it does not encourage managers from investing in projects that will decrease their ROI. As a result, it limited the development of the company. Also, the three product divisions are not treating the MA Marketing division as equal as OEMs, they are taking the order of OEMs first, so it may lead to complains within the company, and cause the MA Marketing division low productivity, and this is a threaten for a company develops as a whole.

2. Evaluation of current divisional and plant measurement system:

The current measurement system of Abrams Company is ROI, each manufacturing plant within the three product divisions have an annual ROI target to meet. The ROI target is set based on budget profit divided by actual beginning of the year net assets. Actual ROI is calculating by actual profit divided by actual beginning of the year net asset. The advantage of the Abrams Company ROI system is it does not consider the investment added during the year, because the investments provide little effort to the year, but more benefit to the future. However, the ROI measurement system has some weakness, such as defer asset replacement, short-term focus at the expense of long-term.

3. Suggestions to improve evaluation system:

⑴ROI can be used combination with other performance measures-balanced set of long-term/short term; financial/non-financial

⑵RI/ EVA can be used instead of ROI.

4. Evaluation of incentive compensation plan:

The incentive compensation plan of Abrams Company is bonus plan, and it calculate accurately based on an equation, and it seems equal for all members. In addition, some adjustments also are made associate with the performance of the managers. The performance is measured by compare of actual profit and budget profit. However, all the measurement is associate with data, sometimes the performance will be influence by variance elements, such as, economic environment, the demand level, material price, cost of labor, and government policy, so the measurement need to improve in some areas.

5. Suggestions: The non-financial performance measurement system should be established. The balanced scorecard is a good choice for company measure performance. With a good performance measurement system, the incentive compensation plan will be improved.

6. The website I located is Abrams and Company, and the website is under construction, so it is hard to get information from the website. Another website I located is an education website also called Abrams & Company.