Final Ppt of Mcs

Service Organization

Introduction In the 18th and the early part of the

19th century, the workforce in the United States was predominantly in agriculture.

After that, it was predominantly in manufacturing.

Early in the 20th century, employment in the service sector overtook employment in the manufacturing sector.

By 2003, service sector employment had grown to more than twice that of manufacturing.

Factors That Impact Most Service Industries Essence of Inventory BufferDifficulty in Controlling QualityLabor Intensive Multi- Unit Organizations

Various Service Organization

Professional Service OrganizationsFinancial Services IndustryHealth Care OrganizationsNonprofit Organizations

Professional Service OrganizationsSpecial Characteristics :-

Goals : A dominant goal of a manufacturing company is to earn a satisfactory profit, specifically a satisfactory return on assets employed.

Professionals :Professional organizations are labor intensive, and the labor is of a special type.

Output and Input Measurement :The output of a professional organization cannot be measured in physical terms, such as units, tons, or gallons

Small Size :Professional organizations are relatively small and operate at a single location.

Marketing :In a manufacturing company there is a clear dividing line between marketing activities and production activities; only senior management is concerned with both.

Management Control Systems

PricingProfit Centers and Transfer PricingStrategic Planning and BudgetingControl of Operations Performance Measurement and Appraisal

Transfer PricingValue placed on transfers within an

organization, used as a means of allocating costs to various profit used as a means of allocating costs to various profit centers is transfer pricing.

The price at which divisions of a company transact with each other. Transactions may include the trade of with each other. Transactions may include the trade of supplies or labor between departments.

Transfer prices are used when individual entities of  a larger multi-entity firm are treated and measured as a separately run entities.

Objectives of TPIt should provide each business unit with the

relevant information. It needs to determine optimum trade

off between companies cost and revenue. It should induce the goal congruence decision

to improve units profit.It should help to measure the economic

performance of individual business unit.The system should be simple to understand

and easy to administer.

Cost-Based Transfer Prices If competitive prices are not available

transfer prices may be set on the basis of Cost-Plus a profit.

Two decisions must be made in a cost based TP sys.

1) How to define cost.2) How to compute the profit markup.

The usual basis is standard costs.Actual cost should not be used because

production inefficiencies will be passed on to the buying profit center.

Market Based Transfer PriceIn the presence of competitive and stable external

markets, many firms take the external market price as a benchmark for their internal transfer price. Generally, the external market price provides a ceiling not to be exceeded by the internal transfer price

Negotiated Transfer PricingHere, the firm does not specify rules for the

determination of transfer prices. Divisional managers are encouraged to negotiate a mutually agreeable transfer price. Negotiated transfer pricing is typically combined with free sourcing.

Goal congruenceTerm used when the same goals are shared by

top managers and their subordinates.The system can achieve its goal more

effectively and perform better when organizational goals can be well aligned with the personal and group goals of subordinates and superiors.

Perfect congruence between individual goals and organizational goals does not exist

Two Aspects of MotivationGoal Congruence exists when individuals and

groups work toward achieving the organization’s goals – managers working in their own best interest take actions that align with the overall goals of top management

Effort is exertions toward reaching a goal, including both physical and mental actions

Informal Factors EXTERNAL FACTORSWork EthicsAttitudesLoyaltyPride in doing jobDiligence

Informal Factors INTERNAL FACTORSCultureManagement StyleThe informal organizationPerception and communication

CISCO(A)Q1.Can other corporations benefit from investing in e-business functionality to the same extent that Cisco has?

Yes, other corporations can benefit from investing in e-business functionality to the same extent that Cisco has. The ever-changing and dynamic business environment necessitates use of internet and e-business technologies and therefore, these are going to be the face of business in future. Other corporations can benefit highly by making a calculated investment in this field, just as Cisco has been able to do. But there are certain prerequisites which need to be fulfilled before a company invests in e-business otherwise it might lead to a failure. The most important being the organization should have a web oriented culture. The other requisites are:

The company should have a well integrated system where the internet strategies are in sync with the business strategies.

The company should encourage other businesses to network with them.

The top level management should ensure the application of an internet strategy in all areas or fields.

Implementation of internet strategy and processes should be as minimum as possible.

Employees should be encouraged to develop innovative processes with the help of internet to increase productivity.

Proper evaluation of processes should be done after the implementation and improvement scope should be there.

Proper evaluation of processes should be done after the implementation and improvement scope should be there.

Q2. What can other corporations learn from Cisco’s approach to guiding the e-business transformation?

The following are some of the learning’s that other corporations can take from Cisco’s approach to guiding the e-business transformation:

A single enterprise system embracing contract manufacturers, distributors, logistics partners, development engineers, service engineers, sales representatives and customers into a single information system.

Information sharing in real time.Direct fulfillment of orders whereby most of Cisco’s contract

manufacturing partners ship directly to customers.Automatic testing: to ensure product quality by creating test

cells on supplier production lines.Faster product introduction into the market: reducing the

number of steps required during prototype development.Recognize and forecast the need for a scalable business model

to meet the demand of rapid growth.Using Internet as the foundation of an enterprise and develop

business models to achieve high performance and gain competitive advantage.

CISCO (B) Q1.What do you think of the way Cisco funds new e-business initiatives

Until 1993, Cisco funded new e-business initiatives in a manner similar to what is in place at many corporations today. Funding came through the IT department, which was a cost center that accrued as administrative overhead (G&A). The department was funded at 0.75 percent of Cisco’s revenues.

Cisco took steps to align the objectives of the IT department with the strategic goals of the company as a whole in 1993. The existing funding mechanism meant that e-business initiatives were all evaluated on the basis of cost reduction, often overlooking impacts on sales, customer satisfaction, or employee retention. 

Cisco created a system that decentralized IT investments. The new “Client Funded Model (CFM)” gave each business-unit manager the authority to make whatever expenditures were sensible to increase sales and customer satisfaction. In addition, the organizational structure was changed so that IT reported to a new group called Customer Advocacy.

Cisco’s efforts in the area of standardized B2B commerce platforms illustrate the company’s innovation process. Cisco has automated the purchasing process for its largest customers by writing custom software that integrates the customer’s purchasing systems with Cisco’s order management systems.

Q2.Do you think Cisco should centralize any aspect of the innovation process? Which of the three possibilities above seems most appropriate (or can you suggest a different one)? Why? How would you define the specific charter of the new organization?  Up to some extent it is advisable to centralize any aspect of innovation

process as far as technology and innovation is concerned. While the decentralized system, combined with an emphasis on staying close to the customer, has been incredibly successful for Cisco so far, it is not perfect. First, as the company grows, it becomes more complex. The alternative to the current decentralized system is some sort of centralized organization that focuses on innovation.

At a conceptual level, Cisco executives are tossing around at least three possibilities:

1. A Technology Research and Training Team centralized : “Think-tank” that studies emerging technologies and keeps business

managers informed of what will soon be possible 2. A “Venture Engineering Team”: Centralized technology research and implementation team  3. An Internal Venture Capital Group Centralized technology business analysis and funding team  According to us “A Technology Research and Training Team centralized”

one of the possibilities that CISCO is looking for is best one because technology research and training team help in developing as well as discovering new Innovations which is ultimately beneficial to CISCO.

Can Cisco measure its innovative efforts? compensation to these efforts? If so, how?Cisco’s efforts in the area of standardized B2B

commerce platforms illustrate the company’s innovation process. In the past, Cisco has automated the purchasing process for its largest customers by writing custom software that integrates the customer’s purchasing systems with Cisco’s order management systems. To extend this functionality to far more customers, Cisco, in conjunction with an industry consortium known as Rosetta Net, is developing protocols and platforms that will simplify this process and obviate the need for (painful, brute-force) custom solutions.