Published by:
Harvard Business Publishing
Length: 11 pages
Topics:
Decentralization; Return on investment
Share a link:
https://casecent.re/p/48632
Write a review
|
No reviews for this item
This product has not been used yet
Abstract
Return on investment (ROI), as a measure of division contribution to profits in decentralized companies, is of limited use. ROI is too simple a model for a complex process, especially when different profit objectives and types of fixed assets exist. ROI application problems include: setting proper annual profit objectives, assigning responsibility for deviation, and measuring accounted profit in a short period of time. Increased familiarity with division operations and more realistic profit objectives and time span evaluations are needed. Recentralization is an inappropriate alternative for ROI, and correction of the technical drawbacks and implementation constraints of ROI procedures is necessary pending further improvements for new research.
About
Abstract
Return on investment (ROI), as a measure of division contribution to profits in decentralized companies, is of limited use. ROI is too simple a model for a complex process, especially when different profit objectives and types of fixed assets exist. ROI application problems include: setting proper annual profit objectives, assigning responsibility for deviation, and measuring accounted profit in a short period of time. Increased familiarity with division operations and more realistic profit objectives and time span evaluations are needed. Recentralization is an inappropriate alternative for ROI, and correction of the technical drawbacks and implementation constraints of ROI procedures is necessary pending further improvements for new research.