BUSİNESS MANAGEMENT - Deneme Sınavı - 4

Managers use a large number of tools and techniques for effective controlling. Therefore, we need to discuss specific techniques for managing the control process. First we will discuss budgetary control and then we will discuss financial controls and other control tools and techniques such as break-even analysis, activity-based costing, just-in-time inventory control, and total quality management.

The master budget includes three separate but interdependent budgets: the operating budget; the capital expenditures budget; and the financial budget.

The operating budget is a set of budgets that forecast revenues and expenses such as sales revenue, cost of goods sold, and operating expenses.

The capital expenditures budget presents a company’s plan for projects and long-term assets such as purchases of property, plant equipment, and other long-term assets.

The financial budget lays out how an organization will acquire its cash and how it intends to use the cash.

Controlling is the systematic process of regulating organizational activities to make them consistent with expectations established in plans, targets, and standards of performance. Simply stated, controlling is the process of ensuring that actual activities conform to planned activities.

In an “effective” internal control system, the following five components work to support the achievement of an entity’s mission, strategies, and related business objectives:
1. Control Environment
2. Risk Assessment
3. Control Activities
4. Information and Communication
5. Monitoring

The internal control system designed by companies for the purpose of efficient and effective business processes, reliable financial reporting, and compliance with rules and regulations is assessed through internal audit activities. The internal audit examines the adequacy and effectiveness of internal controls and
makes recommendations where control improvements are needed.

Managers determine all important areas of organizational performance and establish corresponding standards in each area. Managers can establish different kinds of standards related to operative goals. Some examples include the following:
• Profitability standards
• Market position standards
• Productivity standards
• Product leadership standards
• Employee development standards
• Social responsibility standards

Immediate corrective action corrects problems at once to get performance back on track. Basic corrective action looks at how and why performance deviated before correcting the source of deviation.

Tactical control is the assessment and regulation of the day-to-day functions of the organization and its major units during the implementation of its strategies. The most common types of tactical control systems are financial controls, budgets, the supervisory structure, and human resource policies and procedures. Financial and budgetary control contains elements of both strategic and tactical control systems. To the extent they focus on the entire organization, they tend to be more toward the strategic end of the continuum. The more they focus on specific units within an overall organization, they tend to be toward the tactical end. We choose to discuss them in this section since they focus on organizational units but note that they can also be used for some strategic control considerations.

There are different purposes for budgeting; therefore, there can be different types of budgets. Budgets can be classified as strategic and operational budgets on a time basis. While strategic budgets are long-term financial plans to coordinate the activities needed to achieve long-term goals of a company, operational budgets are short-term financial plans to coordinate activities needed to achieve the short-term goals of a company.

Sustainable competitive advantage is either being ahead of competitors or achieving higher performance than the industrial average for a long time. For this reason, the correct answer is D.

Perfect competition markets have many producers which sell an undifferentiated product such as iron, crude oil, and olives with a little or no pricing power in a fragmented market. For this reason, the correct answer is D.

Michael E. Porter’s well-known analytical framework, the Five Forces model is essential in identifying opportunities and threats facing a specific company in an industrial context. For this reason, the correct answer is A.

If the suppliers’ industry is dominated by a small number of companies and suppliers threaten to be rival producers, companies are not important customers for suppliers. When there are few good substitutes, which can be used instead of others, and suppliers do not depend heavily on the industry for a large portion of their revenues, the bargaining power of suppliers is high. For this reason, the correct answer is D.

The threat of substitute products is high if (1) good substitutes are readily available or new ones are emerging; (2) substitutes are attractively priced; (3) substitutes have comparable or better performance characteristics; (4) customers have low costs in switching to substitutes; and (5) customer companies grow more comfortable with using substitutes. For this reason, the correct answer is B.

A company’s value chain contains two categories of activities that create value: the primary activities that create value for customers directly, and the support activities that facilitate and increase the performance of the primary activities. Supply chain management, production, sales and distribution, and after-sale services are primary activities of many companies. Support activities of many companies are human resource management, accounting, finance, and research and development (R&D). For this reason, the correct answer is E.

Dominant-business diversification happens as a company gains 70% to 94% of the revenue from one business, which shares its resources, capabilities, and core competencies with all the other SBUs. For this reason, the correct answer is B.

There are a few companies that can hybridize cost leadership and differentiation. The essence of an integration strategy is offering customers more value for the money by satisfying their desires and reducing costs compared to competitors with similar caliber product offerings. For this reason, the correct answer is C.