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Wesfarmers has a diversified business portfolio that is structured with divisions. Each division can contain more than one strategic business units. Examine the characteristics such as market share and financial performance of the main SBU(s) in its three divisions (Bunnings, Officeworks, and Kmart Group).
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- In a business where the divisions are organized as investment centers, discuss how a division that generates the largest dollar amount of profit among all divisions, could be considered the least profitableamong all divisions?JPMorgan Chase & Co., commonly known as JPMorgan, boasts one of the global financial industry's most intricate and diversified organizational structures. As of recent updates, JPMorgan's organizational chart reflects its multifaceted operations spanning investment banking, asset management, private banking, and retail banking services. At the helm of JPMorgan Chase & Co. is the executive leadership team, headed by the Chief Executive Officer (CEO), who oversees the company's strategic direction and overall performance. Reporting to the CEO are key executives responsible for various divisions and business units within the organization. JPMorgan's organizational structure typically comprises several core divisions: Investment Banking Division: This division encompasses mergers and acquisitions, capital raising, and global advisory services for corporations, financial institutions, and governments. It includes departments focusing on corporate banking, investment banking,…Fillmore Industries is a vertically integrated firm with several divisions that operate as decentralized profit centers. Fillmore's Systems Division manufactures scientific instruments and uses the products of two of Fillmore's other divisions. The Board Division manufactures printed circuit boards (PCBs). One PCB model is made exclusively for the Systems Division using proprietary designs, while less complex models are sold in outside markets. The products of the Transistor Division are sold in a well-developed competitive market; however, one transistor model is also used by the Systems Division. The costs per unit of the products used by the Systems Division are as follows: PCB Transistor Direct materials 1,85 0,40 Direct labor 4,20 0,90 Variable overhead 2,40 0,70 Fixed overhead…
- McDonald’s conducts operations worldwide and is managed in three primary geographic segments: U.S., International Lead Markets (including Australia, Canada, France, Germany, and the UK), and High Growth Markets (including China, Italy, Korea, Poland, Russia, Spain, Switzerland, and the Netherlands). A hybrid geographic/corporate segment, Foundational Markets & Corporate, reports on the results of all other countries as well as any unallocated amounts. McDonald’s allocates resources to, and evaluates the performance of, its segments based on operating income. The asset totals disclosed by geography are directly managed by those regions and include accounts receivable, inventory, certain fixed assets, and certain other assets. Corporate assets primarily include cash and cash equivalents, investments, deferred tax assets, and other assets. Refer to the following geographic segment data (in millions) from the 2017 annual report of McDonald’s Corp.:With its broad portfolio of market-leading businesses, the Jardine Matheson Group is an Asian-based conglomerate with extensive experience in the region. Its business interests include Jardine Pacific, Jardine Motors Group, Hongkong Land, Dairy Farm, Mandarin Oriental, Cycle & Carriage and Jardine Lloyd Thompson. These companies are leaders in the fields of engineering and construction, transport services, motor trading, property, retailing, restaurants, hotels and insurance broking. The Group’s strategy is to build its operations into market leaders across Asia Pacific, each with the support of Jardine Matheson’s extensive knowledge of the region and its long-standing relationships. Through a balance of cash producing activities and investment in new businesses, the Group aims to produce sustained growth in shareholder value. Incorporated in Bermuda, Jardine Matheson has its primary share listing in London, with secondary listings in Singapore and Bermuda. Jardine Matheson Limited…Phoenix Inc., a cellular communication company, has multiple business units, organized as divisions. Each division’s management is compensated based on the division’s operating income. Division A currently purchases cellular equipment from outside markets and uses it to produce communication systems. Division B produces similar cellular equipment that it sells to outside customers—but not to division A at this time. Division A’s manager approaches division B’s manager with a proposal to buy the equipment from division B. If it produces the cellular equipment that division A desires, division B will incur variable manufacturing costs of $60 per unit. Relevant Information about Division B Sells 90,000 units of equipment to outside customers at $130 per unit Operating capacity is currently 80%; the division can operate at 100% Variable manufacturing costs are $70 per unit Variable marketing costs are $8 per unit Fixed manufacturing costs are $900,000 Income per Unit for Division A…
- Evaluating investment centers Consider the following data, and determine which of the corporate divisions is more profitable. Explain your reasoning.Large corporations often have many product-based divisions that cater to different markets. Why each division may need its own cost of capital and why the divisional cost of capital may be different between two divisions.Large corporations often have many product-based divisions that cater to different markets. Give two reasons why each division may need its own cost of capital and why the divisional cost of capital may be different between two divisions.
- XYZ Corporation is a multinational conglomerate with diverse business operations spanning various industries and geographical locations. As a financial analyst for the company, you are tasked with preparing the consolidated financial statements for XYZ Corporation, incorporating its subsidiaries, associates, and joint ventures. The complexity arises from the application of different accounting techniques and financial reporting requirements for each business segment and country of operation. Outline the steps you would take to handle the challenges of preparing consolidated financial statements for XYZ Corporation, ensuring compliance with accounting standards and presenting accurate financial information.Xerox Corporation has been an innovator in its responsibility-accounting system. In one initiative, management changed the responsibility-center orientation of its Logistics and Distribution Department from a cost center to a profit center. The department manages the inventories and provides other logistical services to the company’s Business Systems Group. Formerly, the manager of the Logistics and Distribution Department was held accountable for adherence to an operating expense budget. Now the department “sells” its services to the company’s other segments, and the department’s manager is evaluated partially on the basis of the department’s profit. Xerox Corporation’s management feels that the change has been beneficial. The change has resulted in more innovative thinking in the department and has moved decision making down to lower levels in the company. Required: Comment on the new responsibility-center designation for the Logistics and Distribution Department.Differentiate between centralized and decentralized operations. In a decentralized company in which the divisions are organized as investment centers, how could a division be considered the least profitable even though it earned the largest amount of income from operations?
