Exhibit 1.

2: General Relationship among planning and control functions Management control fits between strategy formulation and task control in several respects. Strategy formulation is the least system and task control in several respects. Strategy formulation is the least systematic of the three, task control is the most systematic, and management control lies in between. Strategy formulation focuses on the long run, task control focuses on short-run activities, and management control is in between. Strategy formulation uses rough approximations of the future, task control uses current accurate data, and management control is in between. Each activity involves both planning and control, but the emphasis varies with the type of activity. The planning process is much more important in strategy formulation, the control process is much more important in task control, and planning and control are of approximate equal importance in management control. Exhibit 1.3: Framework for Strategy Implementation The tools that managers use to implement strategy in order to boost performance of the company is Implementation Mechanisms, where in the process of implementing strategy we have to go through : Management controls: helps managers focus primarily on strategy execution

 Organization structure: that specifies roles, reporting strategies, and division of responsibilities that shapes decision-making within the organization. Human Resource Management: Selection, training, evaluation, promotion, and termination of employees so as to develop the knowledge and skills required to execute organizational strategy. Culture: refers to the set of common beliefs, attitudes, and norms that explicitly or implicitly guide managerial actions. Exhibit 2.2: Two Levels of Strategy Corporate-level Strategy: about being in the right mix of business, concerning where to compete and how to compete in particular industry. Where there are several generic strategic options: Single industry firm that operates in one line of business Related diversified firm that operates in several industries Unrelated diversified firm that operates in several industries that is not related to one another. Usually, in this level of strategy the primary organization involved are the corporate offices.

Business-level Strategy: deal with how to create and maintain competitive advantage in each of industries in which company has chosen to participate.

Business unit mission: The BCG model Build (Low cash source, high cash use) -> increase market share Hold (high cash source, high market growth rate) -> protection from competitors Harvest (low market growth rate, high relative market share) -> maximize short term earnings and cash flow even at the cost of market share Divest (low relative market share, low cash use) -> withdraw from business through a slow liquidation Calculate Profitability (ROI): ROI = Profit margin x Investment turnover Investment turnover = Revenues / Investment

Profit Margin = (Revenues - Expense) / Revenues

Exhibit 2.7: Industry Structure Analysis Five Competitive forces: Intensity of rivalry from Competitors

Industry growth, product difference, number and diversity of competitors, level of fixed cost, intermittent overcapacity and exit barriers Bargaining power of Customers

No. of buyers, buyer switching cost, buyer ability to integrate backward, impact of the business unit product on buyer total cost or product quality, and significance of business unit volume to buyers Bargaining power of Suppliers

No. of suppliers, suppliers ability to integrate forward, presence of substitute inputs and importance of the business unit volume to suppliers. Threat from Substitutes

Price/performance of substitutes, buyers switching cost and buyers propensity to substitute Threat from New Entry

Capital requirements, access to distribution channels, economies of scale, product

differentiation, technology, expected retaliation and government policy Exhibit 4.2: Types of Responsibility Centers Engineered Expense Center

responsibility centers in which engineered costs predominate but it does not imply that valid engineered estimates can be made for each and every cost item. characteristics: their input measured in monetary terms, output measured in physical terms, optimum dollar amount of input required to produce one unit of output can be determined. ex. manufacturing operations (warehousing, distribution). Discretionary Expense Center

Cost incurred depend on management's judgement as to the appropriate amount under the circumstances. Output cannot be measured in monetary terms. The term discretionary does not imply that management's judgement as to optimum cost is capricious or haphazard, rather it reflects management decision regarding certain policy. There is no objective way to judge management decision to be right, depends on certain

circumstances. The difference between budget and actual expense is not measure of efficiency. Revenue Center

output (revenue) is measured in monetary term but no formal attempt is made to relate input (expense or cost) to output. Ex. marketing/sales unit that don't have authority to set selling price and not charge for cogs they market. Profit Center

measure both input and output in monetary term. Responsibility center whose financial measurement is measured in terms of profit. profit is useful performance measure since it allows senior management to use one comprehensive indicator rather than several. Investment Center

measure the relationship of profit and investment. Expense Center

responsibility centers whose inputs are measured in monetary terms but whose outputs are not. Types of expenses center: engineered (those for which right or proper amount can be estimated with reasonable reliability)

and discretionary (those for which no such engineered estimate is feasible).

Exhibit 5.3 Example of Profit Center Income Statement Contribution margin: reflect the spread between revenue and variable expenses. Argument for using it: fixed expenses beyond profit manager's control. This premise is wrong, it is actually controllable. Direct profit: reflect profit center's contribution to the general overhead and profit of the corporation. It does not include expenses incurred at headquarters. Argument against: does not recognize motivational benefit of charging headquarters costs. Controllable profit: Includes headquarter's expensed that is controllable by business unit manager, ex. IT. It is what remains after profit deducted by all expenses that maybe influenced by profit center manager. The best measure, if it cannot control controllable cost, it can maximize profit.

 Income before taxes: All corporate overhead allocated to profit centers based on relative amount of expense each profit center incurs. Argument against: some expenses are not controllable by profit center manager. Argument for: performance of profit center will be more realistic and profit manager will try their best to minimize all costs and motivate them to make LT marketing decision. Net income: amount of net income after income tax. Tax is actually uncontrollable by profit manager since it comes from government. It may motivate manager to minimize tax liability (if company has foreign subsidiary).