Answers for a Case questions provided

  • Category:
    Management
  • Document type:
    Assignment
  • Level:
    Undergraduate
  • Page:
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2Answers For Case Questions Provided

ANSWERS FOR CASE STUDIES PROVIDED

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Answers for case Questions provided

The banking centre is an important aspect in supporting a country’s economic development. The Indonesian government was aware of these benefits thus gave permission for six international banking institutions to open operations in the country. The paper will discuss the various categories management control mechanisms used in the study discussing one of mechanism requiring immediate control. Also to be addressed is the applicability of game-playing activities to the context of the case study.

Question two: Categories of management control mechanisms used by Citibank and Citibank Indonesia.

The target of every manager in a business is to achieve the goals that were established while the organization was being established. Management control systems are the strategies adopted by managers to help them achieve their respective goals and objectives in their departments (Berry & Jarvis, 2006). Citibank and Citibank Indonesia used various strategies in achieving their goals, both on a local scale and the international level.

The operations of Citibank in the various branches are split into three business units enabling the management to gain more control of the business. The three management control mechanisms are institutional banking, individual banking and capital market groups (Merchant, 2016). Managers of the various branches in the world gain more corporate control and can be able to evaluate the over the organizational performance. These three business units are the tools that Citibank and Citibank Indonesia use to achieve the objective of the business that is continued organizational growth.

Institutional banking is used by the bank to issue financial assistance to commercial organizations. Other financial services offered by the system are asset-based financing and electronic banking (Merchant, 2016). Governmental and commercial institutions requiring currency exchange services provided by Citibank and Citibank Indonesia uses institutional banking business unit.

Individual banking, the other management control mechanism employed by Citibank in all of its branches focuses on providing financial services to individuals. Services to individual include carrying out transactions, savings and lending services (Berry & Jarvis, 2006).

The last control mechanism by the management is the capital markets group. The main focus activity by the unit is linking up the flow of fund from the providing institute to the targeted beneficiary, who is the consumer (Berry & Jarvis, 2006).

The institutional banking unit demands immediate attention due to low performance as compared to the other mechanisms employed when the aspect of return on loan was taken into consideration. The net income generated from Citibank institutional unit in 1983 was 758 billion dollars from revenue of 2,896 billion dollars (Berry & Jarvis, 2006). It also recorded low return on equity and return on assets with 22.0 percent and 0.69 percent respectively (Emmanuel et al. 1991). The sector is recorded to make up the highest percentage of the budget but has minimum returns. The increase demand for higher profit with a minimum operating budget puts the department under threat.

Question four: applicability of game-playing activities to the context of the case study.

Managers use budgets as a tool to achieve their primary goals by providing resources necessary to supporting activities in an economic institution (Collier, 2015). Attaining the targeted budget by managers has many benefits that are essential in guiding an organization towards the attainment of its goals. Failure to meet the goals has seen many managers engage in fraudulent activities

Budgets can either be highly achievable from the perspective of the manager of stretched level budget. A stretched level budget is the one that is seems too hard to achieve as many factors hinder the performance of the business (Collier, 2015). The obstacles for stretched level budget are normally in the external environment where the manager is not in control of manipulating them. A highly achievable budget, on the other hand, is achievable but some factors that can be manipulated makes its attainment challenging. Most of the factors are internal giving the manager control and hence can manipulate them.

Managers in most corporations prefer setting highly achievable budgets rather than stretch level budgets. The likelihood of achieving a highly achievable budget is high and so is the probability of enjoying the budgets associated with such an accomplishment. The low probability of achieving a stretch level budget increases the chance of managers facing negative consequences associated with such failure (Collier, 2015).

Benefits that managers enjoy when they attain their targets include bonuses while exceeding the targets increases the bonus to be paid (Merchant, 2016). The employees at all levels of management also benefits from such bonuses thus acts as an incentive, motivating them to contribute towards the achievement of the targets. Since there are different levels of management and low level managers are responsible for the performance of their respective departments, promotion acts as an incentive. Setting of corporate goals should coincide with personal goals. Each manager work towards meeting the corporate goals and on the way their individual objectives. Promotions are important aspects of business as they align the organisations objective with those of the employees (Merchant, 2016).

Stretch level budgets, on the other hand, presents minimal chances of being met and with such, affects both the mentality and the motivation for employees at all levels of management (Merchant, 2016). With the corporate goals being beyond reach, the managers pursue individual goals. Such may involve manipulation of accounting results so as to guarantee retaining of the job position that is under risk. As stated in the statement, unachievable organisation goals increase the chance of game-playing activities by managers. Managers also transfer the pressure to the employees putting them under intense activities as they try to meet the goals also known as foolhardy decisions in the statement. Managers may engage in fraudulent statements, either financial or non-financial so as to gain the benefits associated with achieving the targets such as job promotion, and bonuses (Merchant, 2016).

Applying the concept to the case study shows that the likelihood of the Mr Mehli Mistri engaging in fraudulent activities, either financial or non-financial are minimum as the budget set is highly achievable (Emmanuel et al. 1991). Through hardwork and involving the employees in the management decisions can increase the chances for the achievement of these decisions.

References

BERRY, A., & JARVIS, R. (2006). Accounting in a business context. London, Thomson Learning.

EMMANUEL, C. R., OTLEY, D. T., & MERCHANT, K. A. (1991). Readings in accounting for management control. London, Chapman & Hall, University and Professional Division.

COLLIER, P. M. (2015). Accounting for managers: interpreting accounting information for decision making.

MERCHANT, K. (2016). Management Control Systems. Pearson Education Limited.