Presentation To

Prof. Bhambhani Presentation By Varinder Kaur On

Constraint On Business Unit Authority

August 5, 2013

Tolani Institute Of Management Studies

Constraint On Business Unit Authority

To manage profit center there must be control over three types of decisions: 1) Product Decision
2) Marketing Decision 3) Procurement Decision.
August 5, 2013

Tolani Institute Of Management Studies

If the business unit manager controls all three activities there is usually no difficulty in assigning profit responsibility and measuring performance.
The greater the degree of integration within a company the more difficult it becomes to assign responsibility to a single profit center for all three activities in a given product line.

August 5, 2013

Tolani Institute Of Management Studies

Constraint From Corporate Management

The constraint imposed by corporate management can be grouped into three activities: 1)Those Resulting From Strategic Consideration 2) Those Resulting because uniformity is required 3) Those resulting from economies of centralization.
August 5, 2013

Tolani Institute Of Management Studies

Most companies retain certain decision especially financial decisions at the corporate level , consequently one of major constraint on business unit result from corporate control over new investment.
Business unit must compete with one another for share of available fund . Thus a business unit could find its expansion plans thwarted because another unit has convinced senior management that it has more attractive plans.
Tolani Institute Of Management Studies
5

August 5, 2013

Other constraint of corporate management is that each business unit has a charter that specifies the marketing and production activities that is permitted to undertake and it must refrain from operating beyond its charter, even though it sees profit opportunities in doing so. Maintenance of the proper corporate image may require constraint on quality of products or on public relation activity.

August 5, 2013

Tolani Institute Of Management Studies

THANK YOU

August 5, 2013

Tolani Institute Of Management Studies