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Article: Law of the jungle: don't debilitate the best-performing business units of your company in a misguided bid to shore up the weaker ones. David Allen highlights the dangers of short-termism in a group enterprise. (Management).
- Article from:
- Financial Management (UK)
- Article date:
- May 1, 2003
- Author:
CopyrightCOPYRIGHT 2003 Chartered Institute of Management Accountants (CIMA). This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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As enterprises grow, they almost inevitably diversify so that they comprise more than one business, defined in terms of customers, products and/or facilities. It's interesting how management accountancy routines reflect (or, in some cases, anticipate) this development.
In the early stages, it's usually by way of analyses of sales revenues, contributions and directly attributable assets. Arbitrary apportionments of indirect costs usually generate more heat than light, but may be a precursor to focusing on what really matters: the value added by sharing such costs. Eventually, management accounts evolve from cost centres through investment centres to business units. ...