Management Control

Systems in Japan
Matsushita Electric Industrial, Ltd.
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Presented By
Patrick Kanny Sarkar (801)
Md. Awlad Hossain (815)
Rayhan Ahmed (820)
Md. Nafeesur Rahman Khan (821)
Md. Shakhawat Ullah (825)

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What is Management Control
An abbreviated phrase for management planning and control.


A Mechanism for managers to control their subordinate managers, thereby
achieving organizational goal.


A process supported by many systems but management accounting is the
primary one.

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Management Control at Matsushita
Divisionalized system first launched in May 1933

The system invented in USA but Matsushita invented the system at almost
the same time.

The system was created from the notion of Optimally scaled business

Basically a decentralized system.
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Management Control at Matsushita
The company has many kinds of management control or management
accounting system, they can be classified in two ways,
Top
Management
(President)
Divisional
managers
Departmental
managers
Control tools
Control tools
1. Divisional planning system
2. Internal capital system
3. Monthly accounting settlement system
1. Budget system
(Departmental Budget, Standard cost system)
2. Monthly accounting settlement system
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Divisional Planning System
Each division prepares its own plan
Corporate plan of the whole company is prepared form the divisional plans
One year plan
Outputs of the plan,
Production Plan
Sales Plan
Budgeted income statement
Capital Expenditure Plan
Budgeted Fund Statement
Budgeted Balance Sheet
Working Capital Sheet
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Divisional Planning System
There some steps in divisional planning process,

Announcement of
basic corporate
policy
Instruction of
divisional planning
guideline
Preparation of each
departmental plan
Preparation of
proposed
departmental
budget
Preparation of
proposed divisional
budget
Authorized divisional
plan
(budget)
Authorized
departmental plan
(budget)
Checking and
determining
divisional plan
Handing over the
divisional plan
outline
(king sealed doc.)
Instruction of
divisional planning
policy
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Divisional Planning System
Accounting Staff for Centralized Management

Number of staffs is about 1500 (only 100 work for central accounting department and
the rest work for divisions and profit centers).

Monthly evaluation system

Staffs from corporate level and divisional level collaborate to make divisional plan and
to measure monthly results of the division.

Supports various departments within a division by providing necessary data needed to
prepare departmental plan.

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Divisional Planning System
Damlike Management and Nondebt Policy
Independent Business

Has no bank loans

A company should have buffer in every aspect of business (human resource,
technology, inventory)

Excess liability can may cause poor performance

Profit management and fund management

Increase of profit

Management of A/R, A/P
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Internal Capital
Internal capital for a division is some of fixed assets and working capital needed for
the division.

To measure working capital (current asset, current liability) a standard value is
applied against which actual amount is compared and judged. Internal
Capital=Standard working capital + fixed assets reserves.

Internal capital is given by central office to the divisions

Rules of internal capital system,
1. Structure of internal capital

2. 1% interest charge for internal capital to central office in each month

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Internal Capital
3. 3% of sales must be paid to central office by divisions to cover expenses. Net profit
should be 10% of sales after the payment.

4. 60% of net profit should be deposed of as dividends and taxes and rest (40%) as
earned surplus. Dividends and taxes should be paid to central office.

5. Additional investment for the fixed assets and working capital should be based on
divisional own fund

6. If the fund is insufficient division can borrow from central office.


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Evaluating Division Manager
Performance
Annual Accounting Settlement
Divisional Managers performance is evaluated in terms of profit relative to sales.
There are four ranks (Rank A not less than 9%, Rank B not less than 6%, Rank C, not less than
4% Rank D less than 4%)
If Rank D persists for 2 years at a division the manager is transferred.
Monthly Accounting Settlement
Calculated almost in the same way as the annual settlement
Calculated for each division on the twentieth of the month
Comparison of budgeted plan and actual plan
It is used by top management to measure the performance of divisions and used by divisions
to measure the performance of the respective departments.
Performance is compared with that of prior three years and projected three years.

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Evaluating Division Manager
Performance
Monthly Accounting Settlement
Has two purposes (1. Profit Management, 2. Invigorating the division by installing
managerial consciousness in each responsible person in the budget unit.
Steps to achieve this goals are,
Measuring results
Finding Problems
Sharing problems with the concrened managers
Resolving the problems
Examining the results of the improvements
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Performance Check Meeting
Participative approach.

Responsible persons from all budget units meet a meeting where
performance is checked.

Identifies the reason for the inefficiency (except human recourse and
machine factors)

Dialy analysis of results and corrective actions.
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Budget system for cost control
Departmental budget for each division.
Subsystem of overall divisional system
Cost control from input side
Cost control from output side
Labor or Machine rate
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Budget system for cost control
Procedure for preparing the divisional plan using the budget system are as follows,

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