FINANCIAL MANAGEMENT
Initial evaluation 4.
Inadequate control of financial management
Need for cash flow forecasts, costing systems, budgetary control
The larger firm suffers from inadequate systems whereas the smaller firm often lacks a control system
Systems are inffective due to:
- Poorly designed systems
- Poor use of management accounting information
- Organizational structure hinders effective control
- Inappropriate methods of overhead allocation
High cost structure
Relative cost disadvantages
Inability to take advantage of economies of scale
Lack of experience
Absolute cost disadvantages - competition has:
- Ownership or control of raw materials
- Proprietary production know how
- Favorable site location
- Cost disadvantages due to:
- Diversification strategy
- Organization structure and management style
- Operating inefficiencies, e.g.
- Low labor productivity
- Poor production planning
- Lack of adequate maintenance
- Allocation of sales force time
- Allocation of advertising expenditures
- Distribution/terms of trade
- Unfavorable government policies
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