VIBHA PANDEY 57

SHUBI KHAN 34
SACHIN KADAM 29
SNEH SAMANT 68
ANIRUDDH Kulkarni 38
SUMAN BHARDWAJ 06
HEMLATA MORYA 45
 BACKGROUND:

1. In 1989 it was one of the largest clothing manufactures in the world.

2. 2~3 manufactures out of 25 of GJ Co. usually produced only blue jeans.

Currently, there were 20 contractors making all lines of GJ pants.

3. The contract price ceiling is established, but overall, it’s all depends on
Contractors’ performance.
4. Treat 25 plants as expense centers
5. The market is highly competence; the pressure comes from domestic and

Foreign competitors.
6. Grand Jean is using the incremental budgeting.
7. It uses one plant to produce one kind of jeans each year, but they usually need to do
The change in the midyear.
8. Use 1-to-5 scale reward system.
Grand Jean Company


Outside
Supplier

Factory 1 Factory 2 Outside

Supplier
Headquarters

Factory 3 Factory 4
Outside

…..
Supplier
Factory 25
Outside
Supplier

Marketing Outside
Supplier

Customers
 SWOT ANALYSIS
STRENGTHS
 Company’s been profitable for a
long time.
 The contractors are very reliable
to the company.
 Developed the learning curves to
see the production’s stand hour.
 Use budgeting to set the quota,
which can evaluate the
performance easily.
 1-to-5 scale reward system can
motivate employees work harder.
 Very clear marketing department
system. Also has the reward
system to support it.
WEAKNESS
 Single style of pant every year, then need to do
the change in the midyear.
 Make marketing department confused about the
production schedules with The midyear changes.
 Outcome budgeting is not accurate, because plant
managers will hide some of the pants. They want
to hide them for the future production
deficiencies.
 The reward system is not that fair, the people
who work at the headquarter have Higher
awarded rating then the plant managers.
 For some departments, they lack of staffs. But
based on the 11:1 rate, they can’t hire New
people. This will lower the production
 no expense budgeting only have the production
requirement
 CONT…

OPPORTUNITY THREATs

 By 1989 they were the world’s largest  The firm has tied up with outside independent

clothing manufacturers. They enjoyed a manufacturers to increase the production

capacity ,which was an threat for firm
monopolistic market, which was an
because they were also working for rival
opportunity for them to grow up and
competitors
more easily and capture the whole
 The plant manager were hoarding some of the
market.
pants produce over quota, to protect them self
 There production capacity was quite
against future production deficiency but if
high Which gave them an opportunity
they adopted this strategy it would have
to cover whole market and gained affected the demand of company.
customer trust and expand their
business in whole world
CASE FINDINGS AND CONCEPT LINKAGES
 Grand jean co. - responsibility centres may be classified as
 Revenue Centres
 Expense Centres
 Profit Centres
 Investment Centres

A responsibility centre is an organization unit that is headed by Plant manager

who is responsible for its activities.
 Delegation of responsibility for specific to successive lower levels of
organization.
 Motivation of the level of management to which a certain task has been
delegated.
 Measurement of the achievement of specified objectives.

 
REVENUE CENTRE

 Revenue centre encountered in the marketing operation of

a Grand jean co.. Marketing operation split into revenue
centers (with each responsible for a particular product
range). Grand Jean co. treat their 5 marketing department
as a revenue department.
 The sales department is an example for a revenue centre.
 Sales budget are prepared for revenue centre and budgeted
figures are compared with actual sales. Generally the costs
are not related to output.
COST OR EXPENSE CENTRE
 
 Cost centre – An identifiable part of an organisation where costs can
be calculated. A cost center is part of an organization that does not
produce direct profit and adds to the cost of running a company.
 Examples of cost centers include marketing departments, help desks
and customer service/contact centers. it is a smaller segment of
activity or area of responsibility for which cost can be accumulated. Its
manager is basically responsible for production of a product or
service; his decision authority relates to how human resource,
machinery and materials should be used to produce the product or
service.
PROFIT CENTRE –

 An identifiable part of an organisation where costs and revenue can be

calculated. A profit center is a unit of a company that generates revenue in
excess of its expenses.
 Profit center management is equivalent to running an independent business
because a profit center business unit or department is treated as a distinct entity
enabling revenues and expenses to be determined and its profitability to be
measured. Miss. Mia Packard has suggested to organize manufacturing plants
in terms of profit centers where the profit center's revenues and expenses are
held separate from the Grand jean co. in order to determine their profitability.
Usually different profit centers are separated for accounting purposes so that
the management can follow how much profit each center makes and compare
their relative efficiency and profit.
WAYS TO CREATE PROFIT CENTRE:

 There are essentially two ways to create a new profit center. The first method
is to create an extension of the original business—a new product related to
existing products, or new services that build on services that are already
offered.
 The second method is to create an entirely new business altogether that can
operate using the first business's corporate infrastructure (at least initially) and
that can be operated at the same time as the original business.
 
USE OF PROFIT AND COST CENTRE IN
GRAND JEAN COMPANY

 This allow the business to compare performance between

departments / across products / brands etc
 This allows the business to make decisions about underperforming
areas
 Establishing profit centers, and generating daily profit/loss
statements, has allowed them to better identify, and correct, there
weaknesses.
 MANAGEMENT CONTROL SYSTEM

 It Is the process of evaluating, monitoring and controlling the various sub-units

of the organization so that there is effective and efficient allocation and
utilization of resources in achieving the predetermined goals.
 FEATURES OF MCS:
 Involvement of people
 Action taken by people
 Information about the actual state of the organization is compiled by people.
 Actual Performance is compared to Planned Performance in control, so
planning and controlling are interlinked and are known as P&C systems
 It decides what the organization plans to achieve in a given time framework
which is known as Planning Process.
 The management decides the desired state or standards against which
performance is compared.
GRAND JEAN CO. MANAGEMENT PLANNING

 The plant budgeting begins with Mr. Wick and the staff
determining what a plants quota {in pairs of pants} for each month
should be for one year ahead of time. They look at the plants past
performance and add a little to this because they expect people to
improve this year. These yearly budgets are updated at the end of
each month in light of the previous month’s production. In a plant
managers beats this budgets figures, they feel he has done a good
job.
MCS OF GRAND JEAN CO.:

 Treating plants as expense center.

 keeping there plants at peak efficiency.
 worker turnover.
 Standard labour hours for the month
 Compare figure against the actual labour hours.
CONT…

 Feedback from manager.

 Rating manager performance.
 Providing bonus.
CASE FACT:
 Contract agreements are negotiated based on the company’s’ values is at
its highest for those that can deliver the aforementioned values the best.
 Grand jeans company’s corporate objectives are: producing quality
product at a reasonable price in a timely fashion.
 The corporate strategy is to effectively access each business unit in
attempts to allocate resources as needed.
 In the case of grand jean company engineered expense center for the
plant divisions are used to distribute their market –leading jeans in this
functional organization. In an expense center approach the financial
performance report evaluates the efficiency of the manager.
ENGINEERED EXPENSE CENTRE

 Engineered expense centers are usually found in

manufacturing operations. Warehousing, distribution trucking
and similar units within the marketing organization may also
be engineered expense centers.
 In an engineered expense center, output multiplied by the
standard cost of each unit produced measure to improve what
the finished product should have cost.
CONCLUSION:

 EVALUATION OF THE SYSTEM:

 The plant manager of grand jean co. was hoarding some of the pants produce
over quota. They does this in good months to protect themselves against future
production deficiencies.
 They use 11:1 ratio for surprise their employee i.e. they are assigned 11
workers for every supervisor or member of the office or administrative staff.
MAIN PROBLEMS IN THE GRAND JEAN CO. MCS

 Grand Jean has a functional organization and it causes

several disadvantages: there is no real way to determine
the effectiveness of the separate functional divisions
(production and marketing).   And yet, there are real
inequalities in these organizations because the marketing
division is higher awarded than the plants managers.
Furthermore, the requirements which the plants' manager
have to meet are very high.
ALTERNATIVES:
 Establishing profit centers, and generating daily profit/loss statements,
has allowed them to better identify, and correct, there weaknesses.
 Put more focus on the input control. Decide the engineered cost and
discretionary cost. Do not only focus on the output, starts to control
the input.
 Engineered costs are those for which the right or proper amount can
be estimated with reasonable reliability- for example, a factory’s costs
for direct labor, direct material, components, Supplies, and utilities.
 Discretionary Costs (also called managed costs) are those for which
no such engineered estimate is feasible.