JT Bear Business Strategy - Case Study Example

JT Bear Name Course Institution Date Executive Summary JT bear company deals with the manufacture and sale of bears. This report addresses the various aspects of this company that require certain adjustments to ensure it attains the desired levels of productivity. This report has been compiled after analyzing the case study about this company. It provides recommendations on the most suitable approaches to enhancing productivity. Based on the information provided, the business strategy has been designed. The achievement of this business has been built upon a differentiation strategy that will enable this company to continue producing quality products. This is what will enable the company to remain viable for a long time. At the same time, the success factors have also been pointed out. This will guide the company on where to put more resources in order to attain desired results. Moreover, responsibility centers have been raised in order to effectively account for the costs in various departments. Table of Content Introduction……………………………………………………………………………………….4 JT bear business strategy………………………………………………………………………….4 Success Factors……………………………………………………………………………………6 Responsibility Centers…………………………………………………………………………….7 Responsibility Accounting………………………………………………………………………..8 Treatment of departments as cost centers………………………………………………...………9 Engineering & Discretionary…………………………………………………………………….10 Conclusion……………………………………………………………………………………….12 References………………………………………………………………………………………..13 Introduction Management accounting is a field that focuses on the manner in which the organization gathers data and synthesizes it in order to be used for decision making. This kind of information is mostly used by the senior management to make the necessary decisions regarding the organization. These decisions can be long term or short term in nature depending on the goals of the company (Horngren & Sundem 1990, p. 702). The management needs a lot of information that is expected to guide them in making decisions. This explains why the management may dissect the data in order to be able to be used for a particular purpose. In this case study, JT bears also faces the need to gather and process information in order to be used for decision making in the organization. In this case, the main departments that have been dealt with include the production and repair & maintenance. The key processes have also been elaborated to create a picture of what takes place in the entire organization. JT Bear Division Business Strategy The business strategy adopted by JT Bear Division is guided by the current scenario in line with the demand of the product. From the data available, the company has been struggling to meet the demand for this product. Therefore, the long term goals associated with increased productivity and profitability must be achieved optimally. In order to do so, there is need to design a guiding policy that will guide the division in line with key objectives. This is the most productive division of the company and therefore the financial stability of the company is dependent upon it (Weetman 2006, p. 91). This implies that the company’s budget must be allocated in a way that will ensure this division has sufficient resources to be able to spur the required productivity. The level of acceptability of this product has laid a great foundation upon which more innovations can be undertaken to enhance productivity. One of the selling factors of the JT bears is the ability by the customers to customize the appearance of their teddy bears. It is possible to improve other features of the product that will enable more customers to be attracted to it. Therefore, the best way is to assess the current impressive features of this product and modify it to attract even a wider market (Proctor 2006, p. 360). Business Mission The focus of JT Bear is to develop teddy bears that will drive away loneliness in houses and even offices. To create a friend that is always smiling at you even when you are emotionally low. To provide utmost joy to children, girls and the entire society is this company’s top priority. In trying to meet the needs of esteemed customers, quality is a non-negotiable imperative. Therefore, customer satisfaction is the top most agenda of this company. Competitive Advantage In order to remain relevant in the current market, especially when dealing with products like bears, one must devise strategies that can be used to enhance competitiveness. Based on the features of the bear and how the product is doing on the market, the best way of ensuring this product is sustained on the market for an unforeseeable future is through differentiation. The product has already gained the market acceptance. Continuous product differentiation will ensure that the product is continually viable (Chadwick 1998, p. 192). This is to ensure that the product is always ahead of other products in the market seeking to emulate and come up with new and superior models. The marketing strategy will lay a lot of focus on the quality of product. This can be further enhanced by increasing the number of features that can be customized. This is to ensure that these bears can fully satisfy the changing needs of various customers around the globe. The ability to ensure these bears are fully customized as well ensuring that quality is not compromised will make it easy for the product to sell at higher prices as compared to competitors in the market. JT Bear Division Key Success Factors Every organization has factors that determine its success. These factors determine how and when to attain the mission of the organization. The nature of such factors demands that they should be carefully evaluated in order to ensure that the organization remains on the course of attaining its key objectives (Wild 2006, p. 193). The identification of key success factors enables an organization to work as a team and focus their combined efforts towards the most important activities. Therefore, the organization must have a common approach in order to centralize the required resources and skills towards the most critical factors. From the information that has been provided in the above case study, it is possible to single out those factors that determine the success of this company. One of the key success factors is to invest more resources in innovation and creativity. One of the selling points for this bears is the ability to be customized. This should go to a level higher in order to attract more customers. This is the most important ingredient to the differentiation strategy for this product. Innovation will ensure that the product being marketed maintains its superiority throughout (Horngren & Sundem 1990, p. 545). In order to attain this level of performance, the company must set aside finances to cater for this program. This will work well to ensure increased market share through attraction of other customers. Another success factor is ensuring employee safety is guaranteed. The employees working in the repair and maintenance department are faced with several health-related risks. This can be an impediment to productivity if not well handled. For this reason, the mechanisms that have been cited as preventive measures must be fully implemented in order to ensure safety of employees is not compromised. This will reduce the rate of employee turnover which in most cases acts as hindrance to maintaining high standards of performance (Proctor 2006, p. 364). This is because increased employee turnover rates robes the company of the skilled labor required to spur its growth and productivity. Therefore, any strategy that effectively works to retain the current staff members will ensure that customer satisfaction is maintained. Lastly, there is also need to focus on increasing the plants and machines used for production. Currently, low level of production is what has caused shortfalls in the supply of JT bears. In order to deal with this, there is need to expand the production capacity of the product. Based on the data gathered, the potential of the market for these bears is expected to grow. The company must be prepared to deal with the projected overwhelming demand for the bears. Increasing the company’s capacity to sustain improved productivity is the best way of ensuring to achieve collective objectives of the company. Responsibility Centers This can be a department in the company where a manager is appointed to oversee what takes place therein. The responsibility centers are units within an organization that helps dissect the large entity into units that can be easily analyzed. Different responsibility centers have varying functions in the organization (Smith 2007, p. 306). These responsibility centers form the basis for responsibility accounting. The production department for instance is an example of a responsibility center. There are distinct types of responsibility centers in an organization. The first responsibility center is the cost center. This is a department in an organization where costs incurred in the production process can be traced to. The manager in charge of this responsibility center is charged with monitoring the various costs that are incurred in this department. The inputs in the production process are incurred in this center and they are evaluated in monetary form. An example of a cost center in this case is the production department. Another responsibility center is the revenue center. This is a department or unit where the manager is responsible for revenue generation. This can be the sales and marketing department in an organization. The manager in this center is not concerned about other factors that may affect the organization except sales revenue. Apart from the revenue center, there is also the profit center. The manager in charge of a profit center is concerned about the cost, revenue and the profit aspects of production (Garrison, Noreen & Brewer 2011, p. 81). This is because costs and revenue are critical determinants of profit. It is through regulation of costs and stimulating sales revenue that a company is able to achieve profits. The last responsibility center is the investment. This is involved with the costs, revenues, profits and the assets involved in the generation of the said revenue. The senior management in most organizations is charged with overseeing the activities in an investment center. This is because the nature of activities in an investment center is focused on the long term goals of the organization. Responsibility Accounting This is the accounting or budgeting that takes place in the responsibility centers that have been discussed above. It is used for setting planning and control measures that actually take place in the responsibility centers. Targets are set in each center and at the end of it an analysis is undertaken to ascertain any deviation that may have arisen. The managers later write reports to the senior management in order to enable informed decision process at higher levels. For instance, in this company, the JT bears division has two departments, which we refer to as responsibility centers. These centers include the production and the repairs departments. Costs are separately evaluated in these departments and reports are addressed to the general manager. The information from the different responsibility center enables the management to design mechanisms of regulating costs and stimulating productivity. Benefits of treating the 2 departments as responsibility center The treatment of the two departments as responsibility centers has quite a number of benefits to the entire organization. The treatment of the above departments as responsibility centers come as a decentralization strategy. The focus of the organization is to reduce the bulkiness of transactions at higher management level. Reducing the bulkiness of transactions at the management and devolving those responsibilities to the lowest center is a way ensuring efficiency in operations. This indeed will pave way for responsibility accounting. This has many benefits to the organization. The use of this system of account will ensure that all items of cost or revenue are taken into consideration. The manager of the given responsibility center, whether production or repairs, is in a position to oversee most of the transaction in that center (Coombs, Hobbs & Jenkins, p. 304). This also increases the chances of attaining the set objectives. Another benefit of this accounting system is the ease of detecting weaknesses in the organization. Decentralization operation makes it easy to identify some areas that require remodeling in order to ensure continued productivity. Moreover, this kind of accounting system increases the morale of the employees because they consider themselves directly responsible for the achievement of the company’s goals. Such a feeling by the employees will be healthy to the organization in several ways. This may be through reduced rates of employee turnover. Engineered vs. Discretionary Cost Centers Engineered cost center measures all the activities taking place in monetary terms. Therefore, engineered cost center may not be suitable to all responsibility centers. This kind of cost center is most preferable where the output is quantifiable. On the other hand, discretionary cost center is mostly administrative in nature (Drury 2008, p. 518). This center is suitable where the nature of output cannot be easily measured in terms of quantity. For discretionary cost center, the allocation of costs is done based on some predetermined guidelines. JT bear production department is more suitable for an engineered cost center. This is because the output produced in this department is quantifiable in some way. The fact that the production process is completely repetitive in nature is an indication that it can work well under the engineered cost center. On the other hand, the JT bear repair and maintenance may be quite suitable to the discretionary cost center system. This is because this kind of cost system works well with non-quantifiable kind of output. The use of this kind of cost center in apportioning responsibility ought to be undertaken with due care to ensure that reliable conclusions are drawn. Some of the conclusions that can be drawn relates to the variations that may arise from the differences between budgeted and actual costs incurred. The interpretation of variations that arise in the repair and maintenance must be different from the same interpretation when it is in the department of production. This explains why special guidelines must be provided for when dealing with evaluation of costs in the repair and maintenance department. Challenges of Evaluating Performance under Discretionary Cost Center As opposed to engineered cost center, discretionary cost center faces a number of challenges in evaluating performance. The criteria used for evaluating performance under this method have not been proven. One of the challenges that seem to arise when dealing with evaluation of performance under this method is the fact in most scenarios, the relationship between input and output is not elaborate (Drury 2008, p. 519). While this is a cost center, it is unfortunate that the performance of the managers is not evaluated on the basis of costs. Other grounds are used to evaluate the performance of managers working in this responsibility center. In most cases, variations are used to gauge the performance of such managers. When using discretionary cost center, the variations in costs does not point to an issue of efficiency. This may be completely in contrast of the engineering cost center. This creates another difficulty when evaluating the performance of managers in the various cost centers. This explains that if managers cannot be accurately evaluated, other non-professional factors may be used to evaluate the performance of the managers. When it comes to evaluation of the cost center itself, there are some challenges that we can point out. For instance, the fact that this cost center deals mostly with the non-quantifiable products present a concern. For such products, it requires a lot of judgment in evaluating the various costs in the department. It is quite difficult to lay monetary value on the services rendered in the repair and maintenance department. All these factors point to the uniqueness of this particular cost center in terms of dealing with non-quantifiable output. It calls for the use of other methods in assessing the value of the output. Conclusion The management has gathered the required information from the case study. The various discussions that have been undertaken have opened the scope of understanding. The management must therefore use the information that has been provided to improve the critical areas of the organization. When a business entity is able to use its information carefully, it will be in a position to maintain competitiveness. JT bear is therefore expected to use the available information in order to ensure high levels of productivity. The company will be expected to do everything to ensure that it is able to meet the demand for JT bear all over the globe without necessarily adjusting the price. In order to achieve that, many other factors of consideration in the company must also be evaluated in order to guarantee productivity. References Atkinson, A. & Kaplan, R 2011, Management Accounting: Information for Decision Making and Strategy Execution, Prentice Hall, New York, pp. 128-137. Chadwick, L 1998, Management Accounting, Cengage Learning, Mason, pp. 191-195. Coombs, H., Hobbs, D & Jenkins, Management Accounting: Principles and Applications, SAGE Publications, Mason, pp. 304. Drury, C 2008, Management and Cost Accounting, Cengage Learning, Mason, pp. 515-529. Drury, C 2010, Management Accounting for Business, Cengage Learning , Mason, pp. 101-109. Garrison, R, Noreen, E. & Brewer, P 2011, Managerial Accounting, 14th ed., McGraw, New York, pp. 78-91. Horngren, C.T & Sundem, G.L 1990, Introduction to Management Accounting, Prentice Hall, New York, pp. 700-719. Proctor, R 2006, Managerial Accounting for Business Decisions, Prentice Hall, New York, p. 355-367. Smith, J 2007, Handbook of Management Accounting, Cima Publications, Washington DC, pp. 457-471. Weetman, P 2006, Management Accounting, Prentice Hall, New York, pp. 88-97. Weetman, P 2006, Financial and Management Accounting, Prentice Hall, New York, pp. 600- 607. Wild, J 2006, Managerial Accounting 2007 Edition, McGraw-Hill, New York, pp. 291-308. Read More