Programme MBA 3rd year (CSP)

Date
Translation by English Department
Member Name
AHMED TAHER YASSIN
Member ID#
18945MBAF
Question 1: i:
VRIO is a framework of analysis used by Barney who suggests 4 questions to evaluate the key resources
of a company and decide if they comprise a strength or weakness. A resource is considered as a strength to
a company if it does or can do better than other competitors, and it is a weakness if the company doesn’t or
cannot do it better than other competitors.
The four factors are:
- Value. The question is if the resource is valuable and adds value to the customers and if you are
capable to exploit this advantage, you can consider next factor, or otherwise, the result will be a
competitive disadvantage.
- Rareness. The question is if the resource is rare and unique in its nature and hard to be offered easily
by competitors, then move to the next step, or otherwise, the result is competitive parity.
- Imitability. If your resource is inimitable or is very hard and expensive to be imitated or an
alternative to being found for it, then you can move to the next step, or otherwise, the result is a
temporary competitive advantage.
- Organization. If your company is well organized and it has the strength to exploit the opportunity of
utilizing this valuable, rare, and inimitable resource, then you have a sustained competitive
advantage and you can attain your objectives, or otherwise you have an unused competitive
advantage, and accordingly, you have to revise your organization in a way to give you the strength
to exploit this competitive advantage.
Question 1: ii:
Value is the entire amount that buyers are eager to pay for the corporate product. The difference
between the total value and the total cost performing all of the corporate activities providin margin which
implies that organizations understand a profit margin that depends on their aptitude to achieve the linkages
between all doings in the value chain. This simply means that the organization is able to supply a product
for which the purchaser is enthusiastic to pay more than the sum of the expenditures of all activities in the
value chain which focuses on the activities starting with the unprocessed till the transformation into final
goods. The final goals in performing value chain analysis are to enhance value creation while also
monitoring and minimizing prices.
Most organizations engross in a great number of activities in the procedure of converting inputs to outputs.
These activities can be categorized generally as either primary or support activities that all businesses must
commence in some procedure. Primary activities are unswervingly concerned with creating and delivering
a product. They can be accumulated into five main areas: inbound logistics, operations, outbound logistics,
marketing and sales, and service. Support Activities help the primary activities in helping the organisation
attain its competitive advantage. There are four main areas of support activities: procurement, technology
development, HR management, and infrastructure including information management. Support
activities are usually the most significant source of differentiation advantage. On the other hand, primary
activities are usually the source of cost benefit, where costs can be effortlessly identified for each action
and correctly managed.
Organizational analysis: it is the process of monitoring the different information gathered from the
internal and external environments. Analyzing the internal environment, it is usually consisted of a number
of variables (i.e. the points of strength and weakness) within the organization and is subject to the authority
and control of senior management on the short term. It is based upon:
- The organizational structure which consists of communication, authority and chain of command
- Culture that implies the different beliefs, expectations and shared values
- Resources which consist of the organization’s assets (such as materials, skills, human
capabilities and managerial talents).
On the other flip, the analysis of the external environment in terms of (opportunities and threats)
focuses upon the external boundaries of the organization and thus, it is not subject to the control of the top
management on the short term. It mainly includes two important elements:
- The general environment: it implies all the external forces that affect the organizational
decisions taken on the short and long runs hand in hand with the economic, technological,
cultural, social, political and legislative powers.
- The specific (or private) environment: it includes the elements that directly affect the basic
organizational operations and their contributing components such as the government,
reconciliation groups and trade unions.
For a successful and accurate analysis, it is important to adopt precise and organized methods during the
collection of data and apply realistic forecasting or prediction of future situation away from any
complexities. It is also necessary to put into consideration the following elements:
• Mission: it is the reason behind the existence of the organization.
• Objectives: they represent the results or outcomes of the set plans.
• Profit
• Effectiveness
• Development or growth
• Wealth of investors
• Full exploitation of resources
• Reputation of the organization
• Contribution to employees
• Contribution to society
• Market leadership
• Technical leadership
Question 2:
An Industry means a group of businesses conducting a similar activity in providing goods or services.
They have many common factors affecting them from external factors and the environment.
Michael Porter has an approach to industry analysis, which states that there are five factors to consider
when analyzing the competition intensity within an industry. He insists that the intensity and strength of
these factors comprise the most important concern for any business within its industry.

The five forces are:

- Rivalry among existing companies. The companies are competing on offering the best quality and
the lowest price within a reasonable and acceptable profit margin. They also try to differentiate their
products to attract more customers and attain more profits by increasing the volume of sale. There is
a stable margin of profit and none of them can get away from that level too far. In some conditions
or in some geographical areas, a company might decrease the price to have more sales and more
profit. The others might follow the same, unless if there is a special circumstance not existing for
them. A company might raise the price and gain more profit, only if knows that there is a high
demand not affected by the price rise, and especially when the offer or stock has decreased for a
while. It is a risk which might affect the customers to go for alternative goods or services if exist
and it has to be done carefully. A business sometimes wants to leave the industry, but it loses much
as an exit barrier and it must stay and try to survive and for a long term exit with fewer losses.
- Threats of new entrants. This threat is strong if the entry barriers are low or weak, which means that
a new business can enter the industry without having to raise too much fund or to provide unique
production or trade facilities. The barriers could be the size of production which is considered as
economies of scale. Another barrier might be the lack of interest and interest by the customers to
switch to another product which might require spending more time to get familiar with or to be able
to use if efficiently such as new technology. Some products are well promoted and attractive to the
customers and finding a competent product will be a barrier for a new entrant to differentiate its
product and find new customers. Another barrier is that the new entrant cannot find a place for their
products to be marketed in the retailer shops as other existing firms offer good incentives and the
new entrant should offer more costing incentives to be able to find distributors to its products. The
competition sometimes is not intense and any company can enter the business, but some of the
companies prevent the new entrant through the government power to restrict by law the new entrant,
either by imposing hard conditions or by limiting the grant of license to new businesses.
- The threat of alternative or substitute product or service. The threat of emerging or existing a
substitute product is always limiting the ability of the existing companies to raise the price and
profit margin, as a small dissatisfaction by the customers with the price and move to a substitute
product will cause a decline in the sale of the original product. It could be temporary and reversible
but it might also lead to a permanent failure to the original product and constitutes a high risk. When
such a possibility exists of having a substitute for a product, the current firms should be aware and
count for that.
- Bargaining power of buyers. The retailer buyers can comprise a threat if they have a high
opportunity to find alternative suppliers for the same product or similar and they can negotiate more
 about the price. If the buyer is the volume of purchase is high, will give more bargaining power to
the buyer.
- Bargaining power of suppliers. The suppliers’ power can comprise a threat for the buying businesses
if they cannot find alternative suppliers and especially when the product is unique and specific to
one or a few suppliers. The suppliers also comprise a threat if there is no substitute for their
products. Sometimes the suppliers are able to act as distributors and replace the retailers, which is
also a threat for the distributor retailers. The suppliers having a high bargaining power can raise the
price or decrease the quality unless there is a fair competition exists.

There is an additional sixth factor to the five forces of Michael Porters, which is called the
stakeholder's force or power. This force includes the groups and unions of laborers, shareholders
and even government and political authorities and the most important competitors who are
complementors. The complementors are the companies who deal in a product complementing
another product traded by a different company.
A possibility is that the original product cannot function properly without the complementor
product, but another possibility is that both products can be used separately but they add more value
together to the consumer. There is another possibility that a product is essential and can be utilized
independently, but another independent product can only act as a complementary product to the
original product. Any of the factors included in the group of sixth force is having a different
influence on each industry as each of them might affect some industry but not affect others.

SWOT is the method or technique used to analyze the current situation of a business, which is the first
step of strategic planning. It studies the current strength owned by the business besides the opportunities
which could be exploited with the current strength or by improving it. It also identifies the possible and
potential threats which might face business and the weakness towards them and it tries to identify solutions
to boost and overcome these weak points to protect the business from the threats.
Strength and weakness are internal factors specific to a business and the opportunities and threats are
external factors have a current or future influence on the business. SWOT analysis is subject to some critics
because of its lack of verified opinions and requiring only a single level of analysis and its lengthy list and
non-weighted factors. It also has no link to the implementation of the strategy and some factors are double-
faced, means they could be an S or W at the same time. Most of these critics have been replied and sorted
out by using EFAS (external factors analysis summary) and IFAS (internal factors analysis summary)
tables with SFAS matrix.
SWOT is still broadly used in the formulation of a strategy for many corporations for its proved
effectiveness.

TOWS is a matrix used to find alternative strategies for a business. It uses the same factor of opportunities
and threats and combines them with strength and opportunity to be in consistency and thus results in four
sets of alternative strategies. TOWS is encouraging the strategic formulating managers to create both
growth and retrenchment strategies to count for any possible set of events for the business or the corporate.
The combination of each 2 factors represents a different strategy.
- SO strategy considers the strength of the company and how to utilize it for exploiting possible
opportunities.
 - ST is trying to use the strength to avoid the threats or adapt itself to transform the threat to
opportunities with higher risk
- WO tries to utilize opportunities by overcoming its weakness
- WT strategy tries to defensively avoid threats and overcome or minimize weaknesses.

Question 3:
Alfred Chandler has reached a conclusion that structure follows strategy.
The changes done in the organizational strategy when revised necessitate changes to be done in the
organizational structure.
The organizational strategy is the way the organization wants to achieve its long term strategic objectives.
The organizational structure should be included in the strategic analysis when looking at the strength and
weakness and should be changed to fit the strategy implementation. If a well-formulated strategy is in place
but the structure is not supporting, the structure is pulling back the company and doesn’t allow the proper
implementation and there will be a diversion from the strategy.
The organizational structure is a composite of all the staffing, resources, relations, positions and processes.
It determines how the tasks are distributed and who will be responsible to and of whom and what, and it
defines the tasks to the people to be measured in timelines and to be revised if necessary.
Implementing the strategy requires studying the structure very well and looking if a department or division
needs to be created or removed and if the span of control to be narrowed or widened. The management
style which is reflected in the structure also should be studied if it fits the set strategy or otherwise to be
changed.
The relation between strategy and structure is two directional as some people think that the strategy also
follows the structure. It means that the strategy is set by taking the current structure as strength and the top
management who are formulating the strategy might try to adapt the strategy to the current structure which
should have been adopted by the same top management. When a company has a democratic decentralized
organizational structure, its strategy also might be directed in a democratic way and fits the structure.
The strategy should be global and broader in objective and time but the structure shouldn’t be a fixed
element of the organization unless if it constitutes a strength. If the structure represents a weakness factor, it
should be changed to follow the strategy which is more important and the strategy shouldn’t be affected by
the structure strictly.
Organizational structure: The organizational structure of any organization is the tool which
enables the organization to achieve its goals efficiently. It assists the organization in implementing the
plans, making the decisions, determining the role of each individual inside the organization, and
coordinating among the different activities and units. On the other hand, the organizational structure has a
great influence on the behaviors of the individuals and groups inside the organization. Work division means
that each employee carries out specific tasks. This lets an individual feel job satisfaction. The
organizational structure is the chart which shows all main functions inside the organization, the business
units and the relationships between all these units, and the lines of authority.
The success of the organizational structure of an organization depends on the ability of this organization to
provide a suitable work environment and its ability to select the structure which fits its objectives. The
efficiency of the human and tangible resources of an organization has a great influence on the success of
this organization.
Accordingly, the organizational structure of an organization could be defined as it is the framework which
determines the managements and departments of the organization. Without the organizational structure,
chaos will break out and then the organization will deviate from its path towards the objectives. An
unsuitable organizational structure causes many troubles for the organization and has bad influence on the
employees' spirit. Because of unsuitable structure, conflicts arise, employees' creativity will be stifled and
costs increase.
An effective organizational structure helps carry out the following tasks:
 Improving the efficiency of employees

 Supervising the general performance

 Controlling the work systems and procedures and organizing the distributed tasks

 Responding to the environmental variables

 Achieving job satisfaction for all laborers and employees

Every organization is consisted of three main levels; the executive level (responsible for implementing the
set plans and strategies), the top management (in charge of supervising the execution of business) and the
external society with its prevailing customs and traditions. In some organizations, the lines of
communication between the top and executive managements are absent. Such a problem can be overcome
through redesigning the established organizational structure. Generally, designing an organizational
structure is a complicated process that is conducted according to a number of considerations; the most
important of which are: the formulated strategies, the size of organization and its life cycle, the
centralization or decentralization of authority, the job division and specialization, the type of manufactured
products, the level of technology, the skills and potential of the human resources, the work operations and
hours ,the geographical area of target markets, the standard of living of customers and the conditions of the
changing environment. In addition, it is very crucial to highlight the defined goals when designing an
organizational structure, determine the related tasks and responsibilities and develop all the necessary plans
needed.
Over and above, there are a set of distinguished characteristics of organizational structure. For example, an
effective organizational structure is designed with high degree of flexibility to accept the constant
organizational modifications necessary in response to the internal and external changes in the surrounding
environments. It is also designed to exert balance between the authorities and responsibilities granted by
the working members and the span of control and functional lines of communication. It should be
established according to the adopted scientific rules and steps and with the ability to anticipate the future
changes as accurately as possible without having to incur radical changes. Objective and scientific rules are
necessary to be followed when designing the organizational structure to ensure successful and efficient
implementation of the defined goals and objectives. One of the elements determined by the organizational
structure is the span of control determined for each manager. Span of control refers to the number of
employees working under the supervision of a manager and it is influenced by several factors such as: the
type of business, the abilities and potential of managers, the time estimated for the supervision process, the
tools available for training the employees and the efficiency of the coordination process.
An organizational structure can be regarded a well-panned framework according to which the different
organizational units (i.e. the departments and internal sections) are determined, the lines of authority are
defined and the important managerial decisions are taken. Thus, an organizational structure is the outcome
of a group of variable and complicated factors and the selection of the suitable structure is bound by the
organization’s goals, type of industry and environmental circumstances prevailing.
Classification of organizational structures according to how they affect the organizational strategies:
generally speaking, there are two main models of organizational structures:
- The classical model (and it implies: the line organizational structure, the functional organizational
structure and the line-staff organizational structure)
- The organic model (and it includes: the matrix organizational structure, network structure and team-based
structure)
First: the classical models:
- Line organizational structure: it is regarded the oldest and most traditional type of structures and it has
first used by military organizations. It is usually consisted of vertical relations that connect the different
managerial levels directly from top to bottom. The structure takes a hierarchy form. This type is very
simple and characterized with unity of order and authority and the quickness in taking decisions. That is
why it is most suitable for small size organizations with no complexities. Yet, it ignores the job division on
basis of specialization and managers have to bear excessive responsibilities and duties because there is no
delegation of responsibilities.
- Functional organizational structure: it is based upon the principle of job specialization and division. It has
been suggested by Taylor who has believed in the necessity of distributing responsibilities upon a number
of executive managers (almost 8 in number); each is specialized at carrying out the type of tasks that suit
his potential and skills and under the supervision of the top management. This type paves the way for
benefiting from the experience of specialists which facilitate the execution of work more efficiently,
encourages cooperation between laborers and provides the technical and scientific assistance needed for
solving the related problems. Its only limitation is the overlapping between authorities and responsibilities
of the executives and technicians.
- Line & staff organizational structure: it gathers the characteristics of the previous two types (the line and
functional structures). It is relied upon providing the executives with the consultations of technical experts.
It is characterized with centralization of decision making and authority and it is considered the most
suitable type among all for business organizations nowadays. Nevertheless, it is possible that conflicts
occur between the consultants who provide support and recommendations for the executives without
bearing responsibility for their opinions. Therefore, in case the results are not satisfying, the blame is all on
the executives.
Second: the organic models: organic structure is a developed form that is different from the classical
model and it is regarded an open type of organizations according to which each manager is responsible for
running one managerial unit with defined goals to be achieved. Thus, managers have to delegate
responsibilities within their units to qualified employees. Organic structures are very effective for
organizations that are run within constantly changing environments where it is difficult to expect any
changes coming. It is consisted of three main types, and they are: matrix structure, network structure and
team-based structure.
- Matrix structure: it is one of the most complicated structures in which the activities of each task or
mission or transaction are set up as a matrix instead of the traditional hierarchy. Work groups are organized
and the members are selected from the different organizational units according to their specialties and
abilities. Yet, these groups are established temporarily for executing the highlighted tasks or projects.
Matrix structure implies two types of authority; an executive one that is practiced from top to bottom by the
heads of departments and top managers upon their subordinates and a technical authority practiced
horizontally by the project managers upon their cadres. This type provides a number of advantages, and
they are:
 Flexibility in organizing the work activities

 Facilitating the exploitation of resources and improving the selection of human members who
own the technical experience and needed specialization

 Enriching the experience of laborers by indulging them in large projects

 Helping implement the different projects

 Facilitating the supervision and control upon the general performance and the assessment of the
achieved results

The sole disadvantage of this type is the opposition of the principle of the unity of command and order
since employees receive their work orders from the project managers and simultaneously the executive
managers. This raises conflicts between both parties and cause dissatisfaction and distraction for laborers.
- The network structure: it is a less hierarchical and a more decentralized structure that is based upon
determination of the jobs and tasks the organization can not implement due to its high cost. Most of these
activities relates to areas of manufacturing, sales, engineering and accounting and sometimes security and
safety activities as well. Under such circumstances, the organization hires independent organizations to
carry out such activities according to the terms and conditions they both agree upon. This type of structure
allows organizations step into international markets and permits high degree of flexibility in dealing with
different organizations. It also helps organizations adapt to the new market opportunities. Nevertheless, it is
not preferred by some organizations due to the lack of direct supervision upon the quality of products and it
requires constant reorganizing of the resources available; particularly the human ones.
- The team-based structure: it is a highly flexible and decentralized and a less hierarchical structure that
organizations apply to be able to respond to the massive fluctuations in the competitive environments.
Certainly, some teams are permanent and other teams are temporary. In general, team-based structure
lessens the pressure upon managers of the different units, facilitates taking decisions, strengthens the moral
spirit of employees by indulging them in the decision-making process and helps solve the different
problems by opening common discussions. However, there are some problems to be faced such as the dual
loyalty of employees towards the team and simultaneously the executive department they belong to. This
creates a lot of organizational conflicts and disputes. Moreover, managers do not prefer this type of
structures for fear of losing their span of control and face an increase in the decentralization of authority
because of the passive obedience of employees.

Question 4:

(i) Management by Objectives

 Management by objectives is a way of management when the orientation and direction of the
management will be focused on the common objectives which should be for the organization and the staff,
not the human relations and interactions.
The objectives should be specific, measurable, ambitious, realistic, and timely.
The process in this management approach should be followed in a few steps.
- Setting the organizational operational and tactical objectives which fit with the strategic objectives.
- Setting the individual objectives which should be compatible with the organizational objectives and
it should be agreed upon by the staff as well, not enforced without convenience.
- Setting the action plan to be implemented to achieve these objectives within a time frame in
agreement with the staff.
- Setting indicators to act as tools of monitoring and measuring the performance.
- Setting the performance measurement schedules and mechanism to evaluate at the end of each
period.
- The basic aim is to build the capacity of the staff and reward him for achievements and to lead the
organization towards positive growth and the attaining of the set objectives

Some of the pros of MBO are as follows:

- Managers efficiency: the mangers have to be efficient in setting the objectives and they have no
choice but to analyze and understand very well the objectives of the organization to be able to set
the individual objectives of the staff. It urges the managers to improve their knowledge and
managerial experience as this is a vital role to be played by them. When you are requested as a
manager to set objectives, you have to be professional and you need to learm more.
It is a very good practice for managers and a motivating factor and also enforcing them ti improve
themselves to practice this managerial vital role in setting objectives, setting action plans and
monitor the performance of the staff.
It is indeed a great responsibility and makes you feel that you are in charge of the performance of
others, and the impact of your plans and judgements and the result of your suprvisees’ performance
will be clear for the top management, and they can judget your efficiency accordingly.
- Employee contribution: the employees feel they are important for the organization when they are
called individually to take part in setting the objetives wich should lead to the attainment of the
objectives of the organization. The feel more committed to the objectives as they are told
transparently about them and also because they have had an opinion in setting them. The employees
are also feeling that they are respected by the manager and the organization and they realize their
role in the organization and the responsibility they have to take and the power they have within the
action plan to achieve their objectives in line with the overall objectives of the organization. The
employees will feel more justice in the course of appraisal of their performance as the objectives are
clear and previously set. The employees themselves have the right to give their opinios during the
appraisal and the chance being biased by a manager to the employee will be minimum as he/she has
to explain the measurement and judgements on the results by justifying the rates and away from just
personal opinions,
The overall output will be rewarging the good staff and encouraging the staff who needs
improvement to work harder to meet and attain the objectives.
 - Organization: ti gives the organization a chance to be structured more clearly and the roles and
responsibilities of the employees and the managers will be better defined. Tehere will be clear lines
of supervison with clear individual objectives with clear action plans. The results could be well
measured and actions to be taken to insist on the same successful action plans or to adjust them for
the future in order to attain the individual objectives set for the employees and accordingly achieve
the objectives of the organization.
The MBO practice forces the organization to have a clear structure when setting the objectives and
doing the appraisal for the staff. Without having a clear set of objectives and a clear action plan and
having clear indicators and standards to measure them, the MBO will not be possible. The structure
should be strong and well defined and clear to enable the practice of MBO and this is an advantage
fro the organization to be more organized and better set up in structure.

Some cons of the MBO:

- The individual objectives might become narrow in scope and they might conflict with the
objectives of the corporation if they are not set efficiently.
- They employees might stick to their objectives and consider it a the ceiling they shouldn’t exceed
which might cause wasted opportunities to the organization.
- The objectives could be misused by the managers if there is no verification or control system by the
top management in place, as the mangares judgment affect the appraisal and the measurement of the
performance and possible rewards for the employees, and any unfair decision by the managers
might not be detected then.
- The mangers should be efficient, or otherwise, they might be unpurposely unfair to their
supervisees. It might lead to reluctancy and demotivating of the staff if the set objectives were not
realistic or attainable.
- The time frame and deadlines set for the objectives might not be sufficient fro achieving the
objectives, and accordingly, the employees will feel disappointed not to meet these targets. It will
have a negative impact on the morale of the staff if the deadlines were not revised.
- The emphasis on achieving the objectives might lead the employees to the breach of some rules or
instructions or the policy and values of the organization which will have bad impact on the
reputation of the organization,

Question 4:

(ii) Activity Based Costing

ABC is an accounting method assigns fixed and indirect costs to the activities that go into the products.
It assigns overheads of the activities to the products according to the relation and impact of the activities on
any specific product.
ABC is mostly used and useful for manufacturing companies where the overhead costs may comprise 70%
to even 90% of manufacturing costs, and the wrong allocation of these overhead costs will cause errors to
the pricing and accordingly to incur losses to the company.
Traditional cost accounting system depends on the volume of sale to assign the overhead costs and it
understates the unit cost of complex products with a low volume of sales and overstates simple products
with a high volume of sales.

The ABC accounting calculates precisely and realistically the cost of production for each product according
to the activities and processes involved in the production of a batch of this product, regardless of the
volume of sale.

An example is in the construction industry. Suppose that you have 2 types of house desing with the same
building area of 120 m2, house A is of normal standard house and type B is of Corner houses. The direct
material and labor cost is 50.000 USD for each of them. The overhead of the project is 48,000 $ for 20
houses, 16 of normal type A, and 4 piecs of corner type B.
48,000$/(20*120m2)=20$ per m2 of building, if we use the traditional cost accounting, and the cost will be
120m2*20$/m2=2,400$ the overhead share of each house.
The total cost of each house will be 50,000+2,400=52,400$. The selling price will be set as 70,000$ to give
a profit mrging of 17,600$.
The total profit for 20 houses will be 20*17,600=352,000$

Now if we use the ABC method and analyze the time spent by engineers, monitors and the technical staff
on each corner house, we find out that the time it takes to implement the desing of corner house type B will
be more compared to that needed for type A.
We reached a conclusion that 16 piecs of normal type A needs 2,000$ each, but each house of the 4 corner
type B needs 4,000$. The total is 16*2,000+4*4,000=48,000.
Th proft for 16 A houses and 4 B houses will be 16*18,000+4*16,000=352,000$.

The total profit is equal as we had the same selling price and the same overall costs.
The management is now seeking the option of encouraging the production of less costing A type than more
costing B type, if that was possible. This is not possible as the houses are 4 corners and 16 normal for each
block of 20 houses and there is no way to change this composition,
The other choice is to sell the 4 houses of type B with a higher price, to keep the similar profit of 18,000$
as type A, by raising the selling price from 70,000$ to 72,000$.
Hence the proft of each house will be 18,000$ and the total profit will be 20*18,000=360,000$ instead of
352,000$.
But of course we have to study the readiness of the market to accept a higher price for the corner type B,
and as this is well received by the customers who are ready to pay more for the differently designed and
more open house of type B, a more total profit will be gained for the company.

The ABC is efficient in analyzing the real cost of specific products by analyzing the real cost of activities
involves in their production. It can detect the locations of having wasted efforts or material and it can guide
on eliminating the unnecessary processes or encouraging the profitable and cost effective activities. The
profit marings will be more analyzed and understood and accordingly decided opon the selling prices.
The ABC is costing money and time and it is not necessary or feasible if you are producing only few
similar products with low overheads, as it has no impact.
The ABC is more complicated and more paper work and analysis than the traditional cost accounting, and
the mangaers in general don’t like to use it unless when it seems necessary.