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Fmgt 7210 - Controal & Agency Theory

Essay by   •  January 14, 2018  •  Coursework  •  585 Words (3 Pages)  •  820 Views

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  1. Yes. Acquire an existing retail chain is a sound idea.
  2. Purchase an existing retail chain is achieved by the actual and mature business resources of the target retail chain, including assets, manpower, technology, brand and so on, so that the expected operating results can be achieved in a relatively short period of time. Because set a new operation often takes longer, through the acquisition of a chain access to the already formed business resources and to make full use of, not only effective, but also can effectively avoid the construction period may exist in a variety of investment risks.
  3. Agency theory refers to the relationship between agent who are the director in executive of the entity (W company in F country) and the principal which is the senior management team will be send to L country.

Agency theory assumed everyone will act in their own self-interest so that both of agent and principle will make decision or act that benefit themselves. For example, director in W company in F country may consider a proposal which will lower company’s variable cost of 1M, however, it will spend the senior management team’s time that they suppose to have a vacation. So, the senior management team may compare the benefit from over time and the vacation they suppose to have. If the benefit is low, the senior management team may refuse the proposal or act inefficiently after.

  1. Management control is the process by which managers influence other members of the organization to achieve organizational strategy. Management controls involve a range of activities, including: planning actions; coordinating activities in various parts of the organization; exchanging information; evaluating information; determining actions; influencing people to change their behavior. The purpose of management control is to enable the strategy to be implemented so that the objectives of the organization can be achieved. Therefore, management control emphasizes the implementation of the strategy. Management control is one of the tools for managers to implement their strategies and achieve their goals.

The company should implement Budgeting, Performance measurement, evaluation and reward, Transfer pricing.

The company needs to make a budget for set up a new operation and buy an existing retail chain. Although set up a new operation will have a high cost and there is a higher risk, such as misunderstanding to the local market and uncertainty. However, the price of the acquisition a chain may be relatively high, because we not only need to pay for the physical asset, but also pay to goodwill and others, so, budgeting can help the company assess, what kind of company for the acquisition and the specific amount of the acquisition is within our acceptable scope.

Since the company has dispatched a senior management team to abroad, this group will be away from the board's supervision. So regular performability, evaluation, and reward based on performance. Both contribute to the development of new chains abroad. And is beneficial to the parent company's assessment of new markets while making even strategic adjustments or staff transfers.

Due to the new chain and the W company out of different countries and regions, there is a high risk in foreign exchange. W company should set the price not only suitable for the local market but also to meet the consumer acceptance while maintaining the price of profits. Based on the information they will required further, againsting the exchange rate and the original output price.

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