fpg - final
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8/2/2019 FPG - FINAL
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FPG DetailsFPG Details
FPG was a diversified chemical company.FPG was a diversified chemical company.
Founded in 1954 with a capitalization of over Founded in 1954 with a capitalization of over
NT$5million. NT$5million.
FPG has grown over years into largest privateFPG has grown over years into largest private
company in Taiwan .company in Taiwan .
FPG was organized into 3 major corporationsFPG was organized into 3 major corporations
which contains several divisions and more thanwhich contains several divisions and more thana dozen other affiliated companies located ina dozen other affiliated companies located in
Taiwan & abroad.Taiwan & abroad.
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FPGFPG -- OrganisationOrganisation
TheThe divisionsdivisions whichwhich werewere organizedorganized
functionallyfunctionally werewere reasonablyreasonably autonomousautonomous..
DivisionalDivisional managersmanagers werewere ableable toto makemake therethereownown plans plans andand arrangearrange allall production production andand
marketingmarketing decisionsdecisions..
ManyMany administrativeadministrative functionsfunctions areare centralizedcentralized
toto taketake advantagesadvantages of of economieseconomies of of scalescale..
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FPGFPG -- StrategyStrategy
Being low cost producer in the marketBeing low cost producer in the market
segments.segments.
Automate production process to improveAutomate production process to improve productivity. productivity.
Making sizable investments to improveMaking sizable investments to improve
existing products, quality and efficiency.existing products, quality and efficiency.
Increasing investments to develop newIncreasing investments to develop new
products. products.
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Objective ????Objective ????
TargetingTargeting growthgrowth of of companycompany by by continuouscontinuousrefinementrefinement of of existingexisting systemsystem by by
implementationimplementation of of newnew ideasideas..
ImprovementImprovement of of existingexisting products, products, product product
quality,quality, product product efficiencyefficiency andand toto prevent prevent
pollution pollution..
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FPGFPG -- FinancialFinancial ControlControl SystemSystem
GroupGroup companiescompanies andand divisionsdivisions werewere measuredmeasured
onon ROIROI basis basis..
DetailedDetailed costcost accountingaccounting andand reportingreporting systemsystem.. CostCost standardsstandards werewere revisedrevised promptly promptly whenwhen
conditionsconditions warrantedwarranted..
PerformancePerformance relatedrelated bonus bonus plan plan werewere alsoalso ananimportantimportant part part of of controlcontrol systemsystem..
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FPGFPG -- FinancialFinancial Control SystemControl System
TheThe returnreturn elementelement inin thethe ROIROI measuremeasure
includedincluded allocationsallocations of of allall corporatecorporate expensesexpenses..
TheThe investmentinvestment elementelement of of ROIROI measuremeasure diddid
notnot includeinclude corporatecorporate assetsassets allocatedallocated toto thethe
divisiondivision..
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FPGFPG -- Financial Control SystemFinancial Control System
Within the divisions, classification divisionsWithin the divisions, classification divisions
were as follows:were as follows:
Plants and product groups : Profit centres;Plants and product groups : Profit centres; Production processProduction process
and group of machines : Cost centresand group of machines : Cost centres
Non production Non productionoriented units : Expense centresoriented units : Expense centres
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FPGFPG -- FinancialFinancial Control SystemControl System
IndirectIndirect costscosts werewere allocatedallocated toto entitiesentities andand
products products usingusing aa varietyvariety of of allocationallocation basis basis..
TheThe companycompany produced produced anan extensiveextensive setset of of performance performance reportsreports onon aa monthlymonthly basis basis..
FPG¶sFPG¶s president president monitoredmonitored performance performance
closelyclosely..
EachEach month,month, hehe metmet withwith 3030 senior senior managersmanagers
inin aa detaileddetailed performance performance toto reviewreview meetingmeeting
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S.
No.PLAN NAME SUMMARY
1. Bonus plan based on performance of the
corporation
Bonuses were usually in the range
of 3-5 years of base salary
2. Performance bonus plan (for all people
under section chief level and also for
service batches)
Based on their position & % of their
performance targets reached.
3. Annual bonus plan (for employees at and
above section chief level)
Based on individual performance &
performance of employeescorporation.
4. Incentive awards (for R&D staff) For sharing innovative ideas.
FPG¶s Bonus plansFPG¶s Bonus plans
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FPG¶s Bonus plansFPG¶s Bonus plans
In all the above cases top management decidedIn all the above cases top management decided
subjectively the sizes of awards and the basessubjectively the sizes of awards and the bases
on which to give the awards.on which to give the awards.
The factors considered in making theThe factors considered in making the
performance evaluations and their relative performance evaluations and their relative
weightings varied across roles and divisions.weightings varied across roles and divisions.
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PERFORMANCE STANDARDSPERFORMANCE STANDARDS
AND EVALUATIONAND EVALUATION
Profits, revenues and cost targets were set up yearlyProfits, revenues and cost targets were set up yearly
in which bottom up planning process was followed.in which bottom up planning process was followed.
The functional plans were reviewed and approved byThe functional plans were reviewed and approved by
division managers, corporate accounting departmentdivision managers, corporate accounting department
and corporate management.and corporate management.
Often the division managers had to revise their plansOften the division managers had to revise their plans
several times before top management approved them.several times before top management approved them.
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PERFORMANCE STANDARDSPERFORMANCE STANDARDS
AND EVALUATIONAND EVALUATION
At the corporate level, the annual plans had proved to beAt the corporate level, the annual plans had proved to be
quite accurate.quite accurate.
Further the corporate accounting department performed aFurther the corporate accounting department performed a
detailed analysis of each division¶s performance.detailed analysis of each division¶s performance.
Division managers were involved in the planning processDivision managers were involved in the planning process
to make some key planning assumptions.to make some key planning assumptions.
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PERFORMANCE STANDARDSPERFORMANCE STANDARDS
AND EVALUATIONAND EVALUATION
Uncontrollable factors for performance evaluation areUncontrollable factors for performance evaluation are::
Prices of products sold (Commodity divisions only).Prices of products sold (Commodity divisions only). Raw material prices.Raw material prices.
Effects of raw material problem.Effects of raw material problem.
Major problems deemed to be outside theMajor problems deemed to be outside themanagement¶s control.management¶s control.
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PERFORMANCE STANDARDSPERFORMANCE STANDARDS
ANDAND EVALUATIONEVALUATION
Because selling prices and raw materialBecause selling prices and raw material
prices considered uncontrollable, managers prices considered uncontrollable, managers
are evaluated on these factors:are evaluated on these factors:
Quality of productsQuality of products
Production quantityProduction quantity
Consumption of materialsConsumption of materials
Production efficiencyProduction efficiency
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The Polyolefin DivisionThe Polyolefin Division
The Polyolefin Division¶s sales were notThe Polyolefin Division¶s sales were not
growing due to a shortage of ethylene supplygrowing due to a shortage of ethylene supply
from CPC, the only local ethylene supplier.from CPC, the only local ethylene supplier.
FPG was paying ethylene prices thatFPG was paying ethylene prices that
arranged, 4arranged, 4--5% higher than US prices.5% higher than US prices.
Ethylene also caused financial planningEthylene also caused financial planning problems because the Taiwanese ethylene problems because the Taiwanese ethylene
prices fluctuated significantly. prices fluctuated significantly.
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ProblemsProblems
FPGFPG isis facingfacing difficultiesdifficulties of of
11.. ShortageShortage of of qualityquality labour labour..
22.. RisingRising wageswages..
33.. RadicalizationRadicalization of of environmentalenvironmental
movementsmovements..
AtAt timestimes somesome of of thethe centralcentral staff staff andand
divisionaldivisional dealingsdealings hadhad been been confrontationalconfrontational..
TaiwaneseTaiwanese labour labour costscosts werewere risingrising alongalong withwith
thethe country¶scountry¶s higher higher standardstandard of of livingliving
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ConclusionConclusion
Shortage of quality labor can be reduced byShortage of quality labor can be reduced by
automation of production process.automation of production process.
Rising wages was due to increased standard of Rising wages was due to increased standard of living in Taiwan which is an uncontrollableliving in Taiwan which is an uncontrollable
economic factor and can be controlled at theeconomic factor and can be controlled at the
corporate level by framing inbound policies.corporate level by framing inbound policies.
Sizable investments should be made to preventSizable investments should be made to prevent
pollution . pollution .
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ConclusionConclusion
Sometimes it is not possible to separateSometimes it is not possible to separate
controllable and un controllable factors for controllable and un controllable factors for
evaluation.evaluation.
It can be said now that interactive managementIt can be said now that interactive management
system and good planning can be used to facesystem and good planning can be used to face
the emergent strategy.the emergent strategy.
Managers should plan the resources andManagers should plan the resources and
manpower so well so as to adapt.manpower so well so as to adapt.