PART C

1. How did managers at ATH Microtech achieve their profit and performance goals during 2003?
The managers at ATH has introduced a comprehensive program named Push to profitability , an initiative to
breakeven during the year , as the company was suffering huge losses from past years in an attempt to achieve
rapid growth in sale s and profits the senior management tried to allure the employees by offering them a cash
bonus of 20% of their salary and a trip to Hawaii on successful achievement of the sales targets., Thus
employees worked hard to increase sales and in turn profits and cost control measures also undertaken through
management to further increase the chances of profitability at the end of the year. The results were good. The
company was not only able to breakthrough but also with huge margins of sales and profits figures.
2. What role did control systems play in ATHs success and problems?
Control systems at ATH were implemented in an objective to increase in sales and profitability including cost
reduction especially the discretionary cost. Top management and divisional managers were responsible for
effective implementation of the control systems .The end result at the period end of 2003 it proved effective and
the company was able to achieve the set targets for sales and market share capture. Management control
systems and performance measurement systems play a vital role in achieving any strategic objectives set by the
company. Those control systems should be formulated by considering their economic and social or
environmental impacts In other words any control system that proposed to be implemented in an objective to
achievement of any strategic goals must be backed by sustainable principles of aligning the goals with various
shareholder needs. this means incorporating social , environmental and value creating measures to the existing
control systems , thus the company will be able to remain competitive and ensuring a long-term business
success. In case of ATH though the management successfully formulated the controls systems yet they
completely ignored above-said important aspects owing to which ATH suffered from product quality failure and
reduction in overall profitability subsequently.
3. How could top management have avoided the actions by employees that led to the FDA
investigation?
The top management at ATH should have focused on the Value creating factors rather than profit centric factors
while formulating and designing its control systems. Accountability is a necessary aspect for effective
implementation of any control system. FDA found the quality of products below standard and red-flagged the
company and this happen only because the employees at ATH were not focusing the product quality while trying
to meet their sales targets .The management should have put pressure on the employees on the quality control
and could have formulated their bonus and incentive plans on product quality and customer satisfaction . a well
thought and carefully evaluated cost management system was in requirement rather than cutting costs with no
appropriate base as a result of which the production process, procurement process, the after sales-service all
suffered afterwards and these should have prevented.
4. What are the possible consequences of these events on the companys reputation?
The reduction of a growing company reputation is the major aspect to be concerned about. The events such as
decrease in product quality and customer dissatisfaction could have multifaceted effect on the companys future
prospects. As in case of ATH, the company has compromised with its product quality for achieving higher sales
target which was a short-sighted goal from the management point of view,
The company has been on the brink of losing customer faith with its poor quality products and FDAs notice
further worsened the situation as this could resulted in complete shutdown of its operations or large sums of
penalty could be imposed for non-fulfilment of the quality norms. The company was already suffering from a bitter
history of low profitability and all this events will contribute to further worsen the conditions. The company could

lose its loyal customer base, its existing key employees may went to its other competitors thus it will take a
substantial amount of time to get recovered from it.
5. If you were president of ATH what would you do to get the business back on track?
It is always a difficult situation to trade-off between profit driven strategies and value driven strategies especially
when the company is in a tough situation like ATH where a rapid increase in profits is required to sustain the
future. The company needs to formulate value creation strategies to achieve its sustainable long-term objectives
and profit centric strategies for its short term objectives. Mission and Vision should be clearly formulated to get
other people in the organisation know about what are the expectations of the company from them and how the
objectives need to ne archived without compromising with the quality and ethics of the business. Senior
management in any organisation are mainly responsible for implementing the key strategies and thus they are
the one who need to be accountable for the consequences of their actions and they must be sure about the
aftereffects of their decisions on the companys future. Hence a cause effect analysis of each strategy is
necessary beforehand of its implementation. Far sightless is another skill essential for the senior management.
Instead of formulating a bonus scheme that is only focused on sales growth, The management need to
implement an incentive scheme which must on the basis of performance on all the four aspects of strategic value
creation such as performance score on customer satisfaction and best quality retention, Proper internal
management etc. Further a performance measurement system need to be implemented such as the
performance score card on departmental basis which could helpful in conveying the performance of each team
with in the organisation Rather the focusing only on sales growth the senior management should go for a
systematic overall growth including the financial aspects thus will be able to sustain in the future. The 4 M;s
should be

PART D
Q1 Why did senior managers introduce a vision and mission statement?
ATH has suffered losses and a degraded reputation during the couple of years due to its profit driven initiatives
and short sighted business objectives. Its senior managers proactively developed a plan to avoid such type of
decreased performance in the future. They required a vision and mission explicitly mentioned and access able to
everybody to get the employees motivated towards mainly value creation for customers and stake holders with a
little emphasis of the financial measures. The idea behind the formulation of Mission and Vision statements was
to align every employee and the managers of the company towards a common goal of long-term sustainable
operation and value creation for various stake holders in the process. A well-defined Mission and Vision
statement is a necessary factor behind every successful organisation. Unlike its previous incentive and bonus
schemes which were focused on drive to higher profit and higher sales, the senior managers at ATH formulated a
Incentive system based not only on financial parameters but also on the other essential factors such as customer
satisfaction, Product quality , Improvement in the process , and employee coordination.
Q2 Why did managers at ATH Micro tech. change their performance measures.
Performance measures aimed to achieve overall business development should be based on strategic measures
related to every aspect on an organisation function such as financial , customer satisfaction, internal growth and
the innovation and product service development .Existing performance measurement at ATH were mainly profit
centric and the other necessary factors were out of the picture , completely overlooked by ATHs management as
a consequence the company could not able to hold on to its profitability for more then a year and moreover in
the attempt to increase sales it has degraded its product quality and customer satisfaction. The company
suffered heavy losses during the year 2014 and its customer base decreased due to poor quality of product and
service. Thus ATHs senior managers changed their performance measures subsequently by including the
nonfinancial measures to attain a stable growth in the future while recovering from its past mistakes.
Q3 John Frost includes both process and output measures why? Why? What is he trying to accomplish?
Overall organisational development could only be achieved if both the process and output measures are taken in
to consideration simultaneously. Earlier ATH was only focused on output measures thus its earn-outs were

hovering around only profits and sales increase at a faster rate without considering other non-financial measures
of performance thus its employees were only focused on how to yield higher sales figures on the board to earn
high incentives based on their sales figure, and completely overlooked the customer perspective as a
consequence the company suffer huge losses during 2004 instead of making the proposed profits. Its reputation
was at stakes when FDA disapproved its quality of products and customers started to lose faith with the
company. In order to get the company out of all the mess John Frost introduced both the process and output
measures to evaluate companys performance in the coming years and to bring back its lost reputation and
profitability.
Q4 He also includes ratio and ordinal measures? What are the advantages and problems of each type?
Ratio and Ordinal Variables
Ratio analysis covers variables begin with zero and presenting a relation between two variables and also shows
relative difference. Ordinal variables are useful to measure qualities which may or may not be expressed in terms
of monetary terms and thus couldnt be part of ratio analyses. Thus in a nutshell ratios useful in comparing two
variable on percentage terms but ordinal variables compare the variable on the basis of individual opinion about
a particular situation. Ordinal measurement is presents conclusions to a problem, which in turn based on
statistical and analytical measurement of data through ratio analysis. For example, the level of customer
satisfaction will be analysed through comparative numerical data and conclusions could be drawn by use of the
ordinal measures such as questionnaires and through survey conducted for the same. Thus a logical and
realistic decision can be formulated by the use of both the quantitative measure such as ratio analysis and
qualitative measures such as an ordinal variable.

Advantages of Ordinal Measurement

Ordinal measurement is normally used for surveys and questionnaires. Statistical analysis is applied to the
responses once they are collected. The advantage of using ordinal measurement is ease of collation and
classification. So that they can easily be converted to statistics.

Ordinal Measurement Disadvantages

The same characteristics of ordinal measurement also create certain disadvantages. The responses are often so
narrow in relation to the question that they create or amplify bias that is not recognisable into the survey.

Advantages of Ratio Analysis

Ratio analysis facilitates analysis of financial statements to judge the operational efficiency and moreover ratio
analysis uses numbers thus comparatively less biased in comparison to Ordinal measures.

Disadvantages of Ratio Analysis

Obviously ratio analysis do not consider qualitative measures how much important that may be for strategic
decision making process, and ratios will show biased results it the source data get malfunctioned and windowdressed thus it is fruitless to do analysis of performance on the basis of ratios as they themselves could not
classify between the correct and wrong source of information.
Due to the above mentioned limitations it is advisable to consider both the Ratio analysis and Ordinal measures
to do analysis of business performance and operational efficiency for future strategic decisions about value
creation.

Q5 Why did John Frost include departmental performance in the bonus scheme?
A bonus or incentive scheme on department basis has its own advantages. Normally individual bonus schemes
related to a particular employees performance and Motivational after-effect of the individual bonus scheme has
very little motivational effect on the other employees and further it sometimes backed by personal bias of the
senior staffs, hence it is very difficult to achieve a common organisational goal with an individual bonus scheme,
On the other hand a group bonus system or a department wide bonus system could help the company in
achieving its common goal as unlike the former scheme departmental bonus scheme influences department wise
performance , motivated each and every team member be in the upper level of the hierarchy or the lower level
executives , The employees will be working as a team with fine-tuning coordination and interdepended within
different teams makes the bond even tighter, hence a departmental bonus system has far more positive effect
then an Individual bonus schemes, That was the reason the Senior managers at ATH went for the Departmental
bonus system as the individual bonus scheme has left a bitter taste of experience with them. Moreover The
Senior managers were preparing the organisation for an objective of Total quality enhancement and the
departmental bonus scheme is the perfect reward for overall performance of the company and its employs as a
whole.
Q6 What are the risks for ATH Microtech going forward? How should these risks be monitored and
controlled?
Every businesses face a wide array of risk throughout its operational periods. As a business grows, day by day
alongside the opportunities different problems and risks come forth which needed to be addressed on a priority
basis to move the business to the next level. Strategy applied a year ago might now be not the best approach
due to dynamic macro environments. Recognizing and overcoming the common pitfalls associated with growth is
essential if the business is to continue to grow and thrive. Ironically the managers also need to be ensured that
the steps they take today mustnt themselves create additional problems for the future and due to which the
business needs effective leadership at the first place to help it with this dilemma and make the most of the
opportunities, creating sustainable growth for the future. As going forward ATH may face the types of risk that are
common to a growing business like ATH and their effects on companys overall performance are mentioned
below.
1. Tactical Risk: It is the risk that the companys strategy becomes less effective and the company unable to
reach its goals as a result. It could be due to technological changes, entrance of a new competitor in to the
market, shifts in customer demand, and increase the costs of raw materials.
2. Compliance Risk: is the risk whether the company is complying with all the necessary laws and regulations
that apply to the business, it is obvious that laws keep changing and theres always a risk that the company may
face additional regulations in the future. And as it expands itself it might find itself needing to comply with new
rules that didnt applied before. Even if the business doesnt expand geographically, it can still exposed to new
compliance risk just by expanding its product line or a new data protection rule requires it to change over its
websites security, Or employee safety regulations .Just like the FDA noncompliance affected ATH badly in 2004.
3. Functioning Risk: denotes that the companys internal factors are also a source of risk otherwise called
operational risk which refers to an unexpected failure in the companys day-to-day operations. It could be a
technical failure, like a server outage, or could be caused by the employees or processes .In some cases,
operational risk can also stem from events outside companys control, such as a natural disaster, or a power cut,
or a problem with the companys website host. Any situation that will going to affect companys core operations
comes under the category of functioning risk.
4. Financial Risk: Covers mainly an adverse financial impact, in terms of extra costs or lost revenue. But financial
risk also refers specifically to the cash flows, and the possibility of a sudden financial loss.
In case, the company have a significant financial risk. Arise may be due to delay in debt recovery or delays
payment for creditors and supplies, puts business in big trouble. Having a lot of debt also increases the
companys financial risk, particularly if the company is highly leveraged and the interest rates began to increase.
Financial risk is also increased when the company do business internationally due to the changing exchange
rates.
5. Reputational Risk If the companys reputation is damaged, the company will see an immediate loss of
revenue, as customers become wary of doing business with the company. Its employees may get demoralized
and even decide to leave. The company may find it hard to hire good replacements, as potential candidates have
heard about the companys bad reputation and dont want to join with it.. Suppliers may start to offer the
company less favourable terms. Advertisers, sponsors or other partners may decide that they no longer want to

be associated with the company. Reputational risk can take the form of a major lawsuit, an embarrassing product
recall, negative publicity about the company or it could be a slow death by a thousand negative reactions or
reviews.
How to monitor and Control the abovementioned Risk factors at the first place.
Risk monitoring or control is the combined process of keeping record of the identified risks, ensuring the
implementation of risk plans, and formulation of strategies for reducing the after effects of risk contingency plans.
it is an ongoing process for an organisation. Good risk monitoring and control processes provide information that
assists with taking preventive measures beforehand the risks occurring. Obviously Communication is the vital
aspect to mitigate future risks as various stakeholders are needed to assess periodically the acceptability of the
level of risk associated with a new decision.following are com Tools and Techniques for Risk Monitoring and
Control
Risk management plan and Risk response plan. .
Communication. About project performance and risks.
Risk response audits. Risk auditors examine and document the effectiveness of the risk response in
avoiding, transferring, or mitigating risk occurrence as well as the effeteness of the risk owner.
Periodic overall risk reviews.
Monitoring of company performance against a baseline plan. Results may indicate potential deviation of
the company at the end of its projected period from both cost and revenue perspectives
Additional risk response planning covers those types of risk which were originally not anticipated in the
risk response plans then it is necessary to perform additional response planning to control the risk.
.Risk database. A repository that provides for accumulation, maintenance, and analysis of data
gathered and used in the risk management processes. The risk database will be greatly help
management in deal in with future plans. This database includes risk identification checklists frequently
get updated from will help risk management in the future

PART E
Q1 Why did ATH Microtech experience problems with its new products? What role did measurement and
control systems play in the problems?
At the beginning on year 2007 ATH scheduled to introduce the New product on a hope that this product will help
it ti regain the market share and loyalty of the customers as this new products were based on state-of the art
technology and as per the current customer requirements. All situations seemed favourable until the products get
bounce back after failed to perform in their final test. On the basis of adverse report from several doctors the
company was forced to withdraw the products from the market, the main reason behind the product failure was
development of the product in the cheapest an fastest way possible by ATHs development team in order to meet
the deadline date. The role of control and measurement systems are vital for success of any product or process.
Though the company has changed its quality measure parameters form product centric to customer centric and
fixed bonus accordingly. Accountability is the necessary ingredient for success of any organisation as whole and
the various performance measures and control systems needs continuous monitoring along ide the internal
processes.ATH lacks in both. Its new management has modified the Quality measures but in order to meet the
departmental bonus the development team did a quick fix of the new product which supposed to help the
company recapture its lost market share in order to achieve the departmental goal. It seems that the controls and

measure systems that ATHs management has introduced couldnt get articulated with each employees
behaviour. Hence a lots of efforts need be to properly implement the control and performance measures.
Q2 In hindsight what should have been done differently?
Application of disciplined tactics related to revenue and cost management with elimination of non-value
added activities and optimise resource utilisation more efficiently and effectively.
Adherence to the 4Ms Measure the strategies, Monitor the control systems and performance of
employee and processes, Manage them effectively thus maximise shareholder and customer value with
providing quality product and services.
To achieve business excellence and creation of shareholder value go beyond normal measurement
systems and adapt SAILS stand for strategy aligned Integrated Linked sustainable system scoring
system in order to integrate the organisation from top to bottom line with clear goal mentioned through
the mission and vision statements.
Educate employees about the usefulness of maintaining quality of product and how critical it is for the
development of the organisation as a whole. Their individual goals or department-wide goals need to be
closely linked with organisation goals so that deviation could not happen and both can go hand to hand.\
A planning of business process with careful consideration of how the environment is changing and how
the company could cope with the changing situations.
Development of a common database for every decision making process of both financial and nonfinancial nature.
Align every corporate function with the overall cost management systems so that Integrated and
Interrelated activities could be Identified and mapped.
Communication is the key to success of any strategy, proper communication of organisation strategy,
measurement and control initiatives are necessary to achieve complete success. Communication could
be done by Mission & Vision statements, by senior management through induction meetings or
department meetings etc.
A balanced cost management system could have formulated with the help of balanced score card from
the very beginning of ATHs operations.
Following additional measures could have taken to ensure profitability and efficiency of the operations in
the future.
Identification of true total products and avoidance of unrequired allocations and complexity. Reporting of
cost of quality and performance information on regular intervals to support strategic goals.
Reward for achieving performance related to customer satisfaction and business value creation for
stakeholders instead of linking the rewards directly to the sales and profitability.
Focus could have developed on the cost prevention of potential non-value added costs and isolation of
concealed non value added activities to fine tune the production process and increase sustained
profitability.
As an incentive and bonus system has been established throughout the years of discussion, a penalty
for deviance and poor quality could have imposed so that the employee will be careful of not to be in a
rush while pursuing his targets. This could have saved the company form the defective product returns,
negative customer feedbacks, other Product quality related issues which remained with it from the very
beginning till the development of the new product.
Although ATH has a lot of potentials to be a market leader in imaging technologies yet it failed to
achieve the position due to the short sight-ness of its senior management staff and total failure in
educating communicating its staff about the core business objectives and their responsibility in the
growth of business.
During 2007 ATH experienced a major change in the senior management team and also changes made
in the performance measurement systems yet every change takes time and the recent changes will
show their effect in the near future if the implemented strategically and get monitored regularly.amoung

all it is necessary to let the employees fully aware about the theme behind the mission and vision
statements and it will be the role of senior staff to educate them.
Furthermore all the above said measures could be summarised in to four strategic measures
6. Adaptation of Activity based management,
7. Establish a minimum acceptable threshold
8. Increase customer intimacy to know the customer well so that company can its product mix
to serve each category.
9. Drive to achieve operational excellence.
Q3 How would you measure and evaluate Sceptres decision to purchase ATH Microtech Inc. in 2000?
Evaluation & measure of a merger beforehand is always a tough task for any acquirer often too much aggressive
or too submissive strategies applied as a result most of the mergers couldnt able to generate synergies in the
future and gets dissolved before any concrete actions could be taken to correct the mistakes. Hence a balanced
integration strategy with crystal clear defined goals and value evaluation are required to get the job done
properly.
Elaborate discussion about the managements mission, preparation of a roadmap for value creation through the
M&A,Make distinction between the price paid for the acquisition and value generated out of it. And Estimate
prices of merger and value creation through various models such as Asset approach, Different Multiples,
Market capitalisation and discounted cash flow.
Measures to be considered for a merger decision.
Shareholders need to be adequately compensated otherwise firm will be unable to attract new capitals
at the time of its need.
Put the companys capital to its best use, maximise shareholder value through managing resources
properly.
Make decisions that are consistent with the acquiring companys Mission and Vision statements.
Account for the progress of the organisation.
Elements of a successful acquisition
Clear objectives and criteria for selection of candidates, evaluate the related synergies in context with the product
market dynamics.
Adapt right valuation models such as EVA and Discounted cash flow of future earnings. Establish a walkaway
price with synergies and Keep an eye upon the alternate bidders strategy.
Integration of teams through value linked targets and time tables, while continuously monitoring the same to get
quick benefits from the target company.
Value created is the excess of Value associated with the target company over the prices paid to acquire the
same. Companies need to evaluate the Value to be created for each stake holders and financers beforehand the
merger process.
The whole evaluation and measurement process of an acquisition could be summarised in to 4 Ms, which are as
followsMeasure the process and Objectives aligned to the processes.
Manage the Operations, the trade-off and the People associated or going to be affected by the integration
.Maximise Contributors wealth and Value.
The main problem that lies with ATH is the nature of global competitions is facing and technological advance
required to do excel in business over the other players. Its customer base getting diluted due to the offerings by
the competitors with a higher level of service.
Septres perspective about the acquisition
In the year 2000 ATH seemed a promising venture to be invested in as it has state-of the art technology and a
new product that has definite marketability. Sceptre a Pharma and medical product company wanted to increase
its market share with to add a well-tested and promising product in to its product line to increase its avenues of
profitability and revenue growth. It is evident from the events throughout the year 2000-07, Sceptre could not
able to get the benefits of the proposed synergies as ATH has become a hub for largescale mismanagement and
operational inefficiency. No mergers is good or bad , its the strategy ,its implementation and getting people

involved in the mission and vision of the merger plays the vital role in success or failure of the deal. Septer
should have formulated a clear vision and strategy about how to realise every possible synergy out of this
merger, it needed to keep control over the operations of ATH with continuous monitoring the implementation of
the strategic decisions..ATH has invested huge amounts of R&D and this step should have carefully assessed
the feasibility of the product and technology in the long-run and a detail understanding of the customers
requirements and its pattern of change over time. Continuous innovation is the major factor that ATH needed to
focus upon to stay ahead of its competitors as it is in a technology driven sector and it requires relentless pursue
innovation and product development for which the company needed to be cash rich or at least has enough cash
to keep its R&D activities going on. The Sceptor has paid 90 million as a consideration for the merger along with
various earn-outs but Scepter need to assess how much value has been created for the stakeholders and how
the company could retain the Value creation process in to the future. The decision to purchase ATH is not to be
blame upon. Rather Sceptor need to do a lot of modifications and structural changes to bring the business on
track also stay focused on the strategic goals attached with the merger as mentioned above.