You are concerned about the company's largest division--luxury--because cost has been increasing much faster than revenue for the last 3 years. However, the head of the division, who reports directly to the CEO, believes that increased cost is simply a result of internal charge backs for what he terms as "overhead." On many occasions, he has stated that "IT and HR are hiring too many people and driving up my costs." Discuss with the CEO how the structure of the company impacts the cost of the luxury division. Be sure to discuss how changes could be made to incentivize the head of the three areas to work together to control costs.
The response addresses the queries posted in 755 words with references.
// Cost control is one of the major issues facing by the organizations in today's competitive world. Cost control requires efforts from all the departments to work in a cohesive manner. In this case we have been given a problem which concerns this issue. In order to start the analysis of the question it is important to provide a brief introduction of the case in order to elucidate the problem. //
The given company in the case is undergoing a problem concerning increasing expenditure. The problem is mainly attributed to the company's luxury division which happens to be the largest division. This division of the company has been incurring huge costs in the last three years. But the revenue is not increasing at the same pace. The heads of the luxury division are squarely blaming the overhead cost i.e. the internal charge backs for this rise in costs. In addition, he has also attributed too much hiring in the IT and HR for shooting up of the costs.
// Above we gave a brief glimpse of the situation which brought out the problem facing by the company. Moving on now we will discuss the impact of the ...