BB LTD Case Study Answers.docx - BB LTD CASE STUDY 1 Evaluate the use by BB Ltd of the concept of ROI and its policy that forbids cross subsidization

BB LTD Case Study Answers.docx - BB LTD CASE STUDY 1...

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BB LTD. CASE STUDY1.Evaluate the use by BB Ltd of the concept of ROI and its policy that forbids cross subsidizationReturn on Investment (ROI) by definition is a measure of the ratio of net profit to the totalinvestment of the business annually. This profitability ratio is acceptable as a measure ofbusiness performance. By implication a business making enough profit should be able toachieve a good ROI value. Thus, BB Ltd has good standing for using ROI as a measure ofbusiness performance across the three divisions. Nevertheless, it is risky to rely on only onemeasure of business performance. Businesses have begun to embrace contemporarymeasures of business performance such as Impact on community (CSR), customersatisfaction, employee ratings, innovation capability, market share, etc. It is argued that anybusiness which do not take these into consideration may not survive for long. Thus, BB Ltdmay be taking a great risk by basing performance on compulsory 15% ROI figures. This 15%initiative alone may put the board in so much pressure to make profit in the short termthereby, forgetting to develop a more long-term sustainable strategy which may harm thebusiness growth in the future. As some of the divisions are not meeting up with the 15% ROI target, it is advisable for BBLtd to also consider other performance measures. For instance, if the business not meeting

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