INTEGRATED CASE STUDY ACC 4291 Group Case Summary:

Beifang Chuang Ye Vehicle Group

Prepared by: Nur Amira Binti Khairuddin Nurul Aishah Bt Mohd Ali Umar Bashir Bin A. Aziz 0829620 0824292 0824265

CASE SYNOPSIS

Beifang Chuang Ye Vehicle Group is a large company which consists of four automobiles dealership in Beijing. Recently, the company is having a crisis when the government of Beijing imposed a new law and standard to control the production of cars.

Due to that, the company did not make any sales in the early of 1999 since the cars are not meeting the legal requirements.

DILEMMA

Ming Zhou, the General Manager of the company is in dilemma whether he should make payment for the employees or distribute the losses among them. Normally, an incentive compensation pool will be created to reward the workers based on their performances. The bonus pool share of total net profit of the group will be on the percentage of 0, 25 and 27 depending on the achievement of each company. The prediction on market variation and companys past performance will be the basis in setting up the net profit target for the following year.

OPTIONS

Since the company expects that there will be no sale until March and company will lose money, a prompt decision needs to be made by the Ming Zhou on how the company should deals with the losses and how will the company compensate the employees. The company can pay the workers but with a new revised plan whereby the payment will be lower and create a hard time for them. Besides, this plans come with a risk of employees leaving the company to look for a better alternative employment.

PROTAGONIST

We believe that the protagonist in this case is Ming Zhou. The vice president and general manager of the group. He needs to make major decision pertaining to payroll for employees and how actually they will face the losses future times.

MAJOR ISSUE

The major issue in the case is the new law enforcement that requires all passenger vehicles sold within the Beijing city boundaries to be equipped with a new fuel injection system. This announcement has hurt most companies including Beifang since they did not react to it fast even though they had aware about the implementation of the new law about a year ago.

As the company is affected by the loss, the management has to decide whether they are compensating the employees or to just share the loss.

PROBLEMS

The government enforces new law on vehicle emission control standard.

The company aware of the new law but did not expect that the government will enforce the law strictly.

PROBLEMS
Some problems faced by the company are :

The government would not register vehicles which are not meeting the new requirement.
As a result of the enactment, Beifang got no cars to sell since all of them are satisfying the standards for at least until March. Sales had fallen to zero and the dealership companies are losing money.

Beifang will not be able to achieve its target.

The losses that the company is incurring are covered from the partners personal funds.

ALTERNATIVES
1)

Keep the employees on the payroll, prepare the revise plan and reward them if plan the revised plan is achieved.

2)

Maintain the payroll but at lower salary rate, perhaps even down to the government-mandated salary of approximately 500 yuan per month.
Lay off all or some of the employees until cars were available to be sold.

3)

TQ

QUESTION ?