CASE SOLUTION

CASE 5-1 PROFIT CENTER PROBLEMS

AMAX Automobiles
AMAX Automobiles was a car company with three product lines. Line A was aimed at the luxury segment, line B at the upscale segment, and line C at the mass market segment. Each of the three product lines was sold under a different brand name and used different distribution systems. Lines A, B, and C were currently produced and marketed by divisions A, B, and C, respectively. Some components were common to the three divisions. Some of these common components were sourced externally while others were manufactured inside the company. Also, there existed considerable scope for technology and know-how transfer across divisions. Specifically, product innovations seemed to originate in division A and then migrate to divisions B and C. However, process innovations seemed to originate in divisions C and then migrate to division A and B. How should AMAX be organized and controlled?

Solution: According to our opinion, when organization made divisions, automatically the organization made profit centers, because every divisions has its own jobs and each jobs has been delegated. In each divisions, we make standard and rule of law. So we can controlling the workers job. The organization also should have made a survey to predict the amount of market demand.

Indus Corporation
Indus was a diversified company operating in a number of niche markets that were largely independent of each other, that is, customer buying decisions in each of these markets were made independently. The companys primary basis for competitive advantage in each of

these markets was to be the first mover (and leader) in product innovation. The company faced the following customer/production situations :

Case A : the customer was mainly performance sensitive rather than price sensitive. Also, there was little production synergy across the various product lines. Solution: According to our opinion, the organization should have increased the performance by motivating the employees. The organization can increase employees innovation in order to grow up production synergy across the various product lines.

Case B : the customer was mainly performance sensitive rather than price sensitive. However, there was considerable production synergy across the various product lines Solution: According to our opinion, the organization should have increased their performance by motivating their employees. In this case, there was considerable production synergy across the various product lines. It means that the changed information in this organization is good, so the employees can increase their innovation.

Case C : the customer was equally sensitive regarding product performance and price. However, there was little production synergy across the various product lines. Solution : According to our opinion, the organization should have increased the performance by motivating the employees. Besides that, the organization has to press its products expense. So the organization can decrease its price products.

Case D : the customer was equally sensitive regarding product performance and price. However, there was considerable production synergy across the various product lines. Solution : According to our opinion, the organization has to press its products expense in order to decrease its price products. In this case, there was considerable production synergy across the various product lines. It means that the changed information in this organization is good, so the employees can increase their innovation.