The third concern would be that there is excess inventory carried by the AM and

The third concern would be that there is excess

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to fulfil the internal sales requirements and rewarded if they are able to fulfill those requirements. The third concern would be that there is excess inventory carried by the AM and product divisions due to lack of inventory control by management. Additionally, ROI is used as a measurement of the manufacturing plants, however, this does not provide a fair representation to evaluate the company’s performance because inventory will decrease during the Christmas holiday period, resulting in a lower inventory level during the beginning of the year. Recommendation : Add or use other performance measurement such as inventory turnover or other measurements that is related to inventory management Question 2: The company measures their performance by using ROI. Abrams ROI system does not consider the additional investments that happen during the year, since they only contribute the benefit in the long run and provide little effort to the current year. To increase and maintain the motivation of the employees, Abrams company is implementing reward system. The incentive compensation plan is calculated precisely based on an equation. The company is also made judgements about the performance of the managers. Their performance is measured by comparing the actual profit with the budget profit. All in all, Abrams is already adopting the low cost , market focus, differentiation, and ROI strategies. In addition, they have established their own management control systems in order to reach company’s goals. Strength :
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1. Company has a clear management structure 2. Company has a compensation system, such as, bonus for the employee 3. Company is able to save cost when it input internal. The AM marketing division will input products from the other divisions, and sell it to the domestic and foreign market. Weakness : The company has three different divisions. Each division work individually and lack of connection. They purchase their materials separately and they hold excessive inventories most of the year. Furthermore, the negotiation on price, might lead to low productivity and profit.
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  • Spring '19
  • Ahmad Mutaaqin
  • Marketing, Abrams

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