Evaluation

&
Recommendations
• Abrams company consist mainly four profit
centers
• Because of differences in type of customers each
product division have separate plants & OEM
sales department
• To increase control over overall system & to
avoid loss of information, AM marketing division
& product division integration need to be increase
• Products div. should treat AM div. at same level
as OEM
• There should be continuous feedback control
system between AM & product div.
• Although there is separate sales department for
each product div. , as AM div. represent company
in domestic & foreign market, hence top
management should invest more in AM division.
• Incentive compensation plan more focus on staff
managers, no bonus policy stated for other
employees
• Internal sales of parts were made at outside OEM
market prices which has created dispute
• Top management need to assess their transfer
price policy
• To avoid excess inventory there should be a
proper aggregate plan
• Strengths:
1)Abrams company has four profit centers, as per
scope & market concerns these centers have
provide quality & speed in Decision making to
corporate HQs.
2)Top management get relived from day to day
decision making
3)Abrams decentralization had given good training
ground for company managers to gain experience
in managing all financial areas
4)Decentralized profit centers help to increase
competitive performance and introduce new
products
• Weakness:
1)Due to decentralized divisions there is friction
between AM div. & product div. over transfer
pricing
2)Tendency of considering as ‘captive customer’ to
AM div. by product div. has affect overall control
system & hence stability
3)Divisionalisation had imposed additional
cost( additional management, staff personnel,
record keeping) & may lead to task redundancies
at each profit centers
CONCLUSION