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INDIAN SCHOOL OF BUSINESS MANAGEMENT AND
ADMINISTRATION
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Name : Izharullah Marks : 80 Course : Masters in Business Administration (MBA 4 Sem) Subject : Management Control Systems Answer the following question. Q 1. Explain ideal Management Control in organization and its features. ( 10 marks) Q 2. Describe and illustrate significance of human behavior patterns in management control. ( 10 marks) Q 3. Explain the concept of goal congruence (informal and formal). ( 10 marks) Q 4. What do you mean by budgetary control system? Explain the process of budgetary control In an organization. (^10 marks) Q 5. Describe the need for MIS in a business organization focusing on Management Control System. (^10 marks) Q 6. Explain^ the^ Just^ in^ time^ and^ total^ quality^ management^ techniques^ of^ control.^ Also,^ elaborate^ the^ implication^ of^ these techniques for management control. ( 10 marks) Q 7. Explain^ different^ organizational^ goals.^ Comment^ on^ shareholder^ wealth^ maximization^ Explain^ various^ stages^ of Management process. ( 10 marks) Q 8. What^ do^ you^ understand^ by^ Investment^ Centers?^ Explain^ the^ methods^ used^ for^ measuring^ investment^ centre performance. ( 10 marks)
Management Control Systems Question 1. Explain ideal Management Control in organization and its features. (10marks) Answer 1: A management control system (MCS) is a system which gathers and uses information to evaluate the performance of different organizational resources like human, physical, financial and also the organization as a whole in light of the organizational strategies pursued. Management control system influences the behavior of organizational resources to implement organizational strategies. Management control system might be formal or informal. Organizational control refers to the process by which an organization influences its subunits and members to behave in ways that lead to the attainment of organizational goals and objectives. When properly designed, such controls should lead to better performance because an organization is able to execute its strategy better. Organizational control typically involves four steps: (1) establish standards, (2) measure performance, (3) compare performance to standards, and then (4) take corrective action as needed. Corrective action can include changes made to the performance standards—setting them higher or lower or identifying new or additional standards. Question 2. Describe and illustrate significance of human behavior patterns in management control. (10 marks) Ans. 2: The significance of human behavior patterns in management control system can be explained with the help of Informal Factors that influence Goal Congruence. In the informal forces both internal and external factors play a key role. External Factors External factors are norms of desirable behavior that exist in the society of which the organization is a part. These norms include a set of attitudes, often
organization's individual members should be consistent with the goals of the organization itself. In a Goal Congruence process, the actions people are led to take in accordance with their perceived self- interest are also in the best interest of the organization. Informal factors that influence goal congruence: External factors ´ Work ethics ´ Attitudes ´ Loyalty ´ Pride in doing job ´ Diligence ´ Type of industry Internal factors ´ Organization culture ´ Management style ´ Informal organization ´ Perception and communication Formal system that influence goal congruence: ´ Rule ´ Physical control ´ Manuals ´ System safeguards ´ Task control system Question 4. What do you mean by budgetary control system? Explain the process of budgetary control in an organization. (10 marks) Ans.4: Budgetary control refers to how well managers utilize budgets to monitor and control costs and operations in a given accounting period. In other words, budgetary control is a process for managers to set financial and performance goals with budgets, compare the actual results, and adjust performance, as it is needed. No system of planning can be successful without having an effective and efficient system of control. Budgeting is closely connected with control. The exercise of
control in the organization with the help of budgets is known as budgetary control. The process of budgetary control includes: ´ Preparation of various budgets ´ Continuous comparison of actual performance with budgetary performance and ´ Revision of budgets in the light of changed circumstances. Question 5. Describe the need for MIS in a business organization focusing on Management Control System. (10 marks) Answer 5: It goes without saying that all managerial functions are performed through decision-making; for taking rational decision, timely and reliable information is essential and is procured through a logical and well structured method of information collecting, processing and disseminating to decision makers. Such a method in the field of management is widely known as MIS. In today’s world of ever increasing complexities of business as well as business organization, in order to service and grow, must have a properly planned, analyzed, designed and maintained MIS so that it provides timely, reliable and useful information to enable the management to take speedy and rational decisions. MIS has assumed all the more important role in today’s environment because a manager has to take decisions under two main challenges: First, because of the liberalization and globalization, in which organizations are required to compete not locally but globally, a manager has to take quick decisions, otherwise his business will be taken away by his competitors. This has further enhanced the necessity for such a system. Second, in this information age wherein information is doubling up every two or three years, a manager has to process a large voluminous data; failing which he may end up taking a strong decision that may prove to be very costly to the company. In such a situation, managers must be equipped with some tools or a system, which can assist them in their challenging role of decision-making.
ranked at bottom in competitiveness including industrial efficiencies, human resource management, product- quality, and employee productivity. In such conditions, there is urgent need for implementing JIT practices in India. But, some state governments in India regulate the relationships of firms, labor, supplier and financial institutions. These relationships have great effect in determining whether JIT can be implemented in India with existing economic structures, culture and social system, attitudes and inclinations or not. By implementing the JIT in Indian industries, an enormous saving can be generated and a new productivity ethics can be created that may be helpful to strengthen the Indian economy. In addition, JIT practices can help the Indian industries to become more competitive by enhancing their export in world market. But, it is observed that social, cultural and political matters have a significant impact on JIT practices in different parts of world. In India, suppliers of several raw materials (imported and domestic) are subjected under government control through supply agencies, which translates into high uncertainty. Government control prices of key resources and taxation rates; all creates obstructions in way of implementing the JIT. In addition, Indian labor is usually uneducated, lacking in motivation and more concerned with monetary benefits and job security than carrier progress and development of their potential. Labor unions and their reluctances are also unfavorable for implementing the JIT. Therefore, specific cultural changes are required for successfully implementing the JIT. Training can play a decisive role in this direction. On this issue, some researchers stated that Japanese training models are not very successful in India. Therefore, some specific time bound training programs should be organized for Indian workforce after carefully studying their behavior patterns, personal traits, attitudes and social values. Question 7. Explain different organizational goals. Comment on shareholder wealth maximization Explain various stages of Management process.^ (10 marks) Ans. 7: Organizations set many different types of goals. These goals are most commonly classified into two broad categories. a. level-wise (top, middle and operational), b. time-wise (short-term, medium-term, and long-term).
- Level Wise Goals:
Organizations are generally divided into three levels-top, middle and bottom. Generally, organization goals are formulated at the top of the pyramid and filter down. In some cases, the reverse is also true. Based on this classification of organizational levels, four types of goals can be identified. a. mission, b, strategic goals, c. tactical goals and operational goals. a) Mission: The organization’s mission, describes the vision of its top leadership, is the organization’s purpose and philosophy. The organizations must first visualize what they aim to become. They develop and formulate inspiring statements of the core purposes of their work. These mission statements, thus, reflect the focus, image, philosophy, and aspirations of the organization. b) Strategic Goals: Strategic goals are stated in general terms. They are developed in view of the mission of the organization. They outline overall organizations goals relating to different dimensions of their business like profit making, product development, resources allocation, human resource development, research priorities, and so on. c) Tactical or Intermediate Goals: Tactical or intermediate goals are set to translate the strategic goals into action. These goals involve the middle level managers. Compared with strategic goals, these goals have a somewhat shorter time span, and more specific and concrete focus. The focus of tactical goals is on how to operationalize actions necessary to achieve the strategic goals. d) Operational Goals: Operational goals are set for lower-level management. The main concern here is with shorter term issues associated with intermediate or tactical goals. The supervisory level staff members are responsible for developing and implementing operational goals that will meet the tactical goals.
- Time Span Organizational goals are also set across different time span. It is a common practice divide goals into three time frames-long term, medium and short term. Missions have infinite time horizon. Strategic goals are long term and cover many years, perhaps even decade. Intermediate or tactical goals are medium term and usually cover periods from one to five years. Operational goals are short term and have a time frame of one year or less. Shareholder Wealth Maximization:
- Strategy Implementation Successful strategy implementation is critical to the success of the business venture. This is the action stage of the strategic management process. Evaluation and Control Strategy evaluation and control actions include performance measurements, consistent review of internal and external issues and making corrective actions when necessary. Question 8. What do you understand by Investment Centers? Explain the methods used for measuring investment center performance. (10 marks) Answer 8: An investment center is a business unit within an entity that has responsibility for its own revenue, expenses, and assets, and whose financial results are based on all three factors. It is considered to be any aspect of a business that can be segregated for reporting purposes as a separate operating entity. An investment center typically has its own financial statements, comprised of at least an income statement and balance sheet. Management evaluates an investment center based on its return on those assets (and offsetting liabilities) invested specifically in the investment center. The investment center is the most sophisticated of the various methods of reporting the results of a business, since it encompasses all financial measures of performance. The three reporting methods are:
- Cost center: A business unit is judged based on the costs it incurs. The focus is on minimizing costs.
- Profit center: A business unit is judged based on the profits it generates. The focus is on increasing profits, which can be achieved through a combination of increasing sales and reducing expenses.
- Investment center: A business unit is judged based on its return on investment. The focus is on increasing this return, both in total dollars and as percentage of sales. This can be achieved with a combination of increasing sales, reducing expenses, and reducing the investment in assets.
