Inter-firm Control

Question 1

What is business process re-engineering? BPR

Answer 1

It details, questions and redesigns business processes to minimise inefficiencies, errors and costs
It focuses on simplification and elimination of wasted effort.
It aims to eliminate non-value added activities by asking why each task is performed.

Question 2

What are the criticisms of re-engineering? 3

Answer 2

Actions that are easy to write or talk about can be hard to implement in practice.
Difficult to distinguish between value adding and non value adding activities
TQM is radical and often uses eternal consultants. Managed inventively, it can create employee resistance and fear that jobs will be eliminated

Question 3

What is benchmarking?

Answer 3

It identifies companies that are best at performing activities or producing products to learn how they achieve high performance, involving:

1. Internal and competitive analysis
2. Building a benchmarking team
3. Choosing partners and sharing information
4. Taking action to meet benchmark

Question 4

Criticisms of benchmarking: 2

Answer 4

1. A close match of internal and external indicators must exist with the benchmark company
2. Benchmarking can create a league table mentality that focuses on competition not improvement

Question 5

What is Activity Based Management ABM?

Answer 5

Can be used to identify areas for improvement
Benchmarking can be used to compare costs and activities
ABM can be combined with benchmarking to provide a systematic approach to identifying the activities with the greatest room for improvement

Question 6

What are the problems with ABM? 3

Answer 6

1. AMB sheds a different interpretation of the true impact of ABC. The ABC/AMB project has expanded into making indirect costs direct.
2. Although some stand activities may be counted and routines, both team work and customer relations may suffer because they are hard to measure.
3. The danger is that the performance of activities will take precedence over original purpose. Both ABM and BPR may mean that non-routine stand actively is eliminate even if it creates value for the company.

Question 7

What is supply chain management?

Answer 7

Bought-in-goods and services may be quantitively more significant than internally generated costs.
There are areas where traditional management accounting techniques impact on the supply chain e.g. target costing system

Question 8

Why outsource?

Answer 8

Cut costs
Concentrate on core business units
Service areas are often outsourced e.g. IT, HR

Question 9

Interanal shared services are more suitable if: 3

Answer 9

Process consolidation benefits form the largest part of the business case
Internal resources are skills are available to manage large transformational programmes
Stakeholders are risk averse and see outsourcing as high risk strategy

Question 10

Outsourcing is preferable if: 3

Answer 10

The company’s strategy requires resources and skills to be focused elsewhere.
The business case is dependent on fast process re-engineering and improvement
The business requires rapid improvement in service quality.

Question 11

Outsourcing checklist: 7

Answer 11

1. Ensure stakeholder buy-in and support for outsourcing
2. Establish cultural fit and compatibility with outsource provider
3. Ensure service level agreements are structured to meet business needs
4. Establish service-orientated culture within the business partnership
5. Establish a transparent baseline and implement robust performance management.
6. Minimise business disruption
7. Allow time for the negotiation period and leaning about how the commercials work from both parties perspectives .