Question

The Bates Company has been producing tools for over fifty years. In that time the company has been acknowledged as a producer of high quality tools at a reasonable price. Bates' competitive prices can be attributed to three factors. First, the company recognized early in its development that tools made from specific blends of various types of metal were less costly to produce and had superior performance compared to traditional metals. Accordingly, Bates made investments in developing tools made for specialty metals long before other competitors and has made a series of investments over its operating history that have put it far ahead of its competitors in terms of product development. Industry analysts believe that based on these investments it would be difficult and extremely costly, if it were even possible, for rivals to catch up with Bates. Second, in recognizing the importance of certain metals, Bates was able to sign long-term contracts with suppliers of the metals that have provided Bates with a lasting cost advantage. Finally, Bates maintains its cost advantages by using a thorough budgeting and reporting system that allows it to closely control costs, and these systems are supported by a frugal company culture and financial incentives that reward employees for finding ways to save money throughout the company.

Bates' culture is an example of a(n)
A) informal management control.
B) formal management control.
C) compensation policy.
D) formal reporting structure.

Answer 1

Bates Company's stringent budgeting and cost-control practices, along with its rewards for employee cost-saving measures, clearly depict a formal management control system.

Step-by-step explanation:

The Bates Company's culture exemplifies a formal management control system. This system is characterized by a stringent focus on efficiency, predictability, calculability, and control, similar to the principles behind the concept of McDonaldization. By using a meticulous budgeting and reporting system paired with a company culture that rewards cost-saving measures, Bates effectively regulates costs and ensures consistent quality and pricing of its tools. These features align with formal management controls as they are part of the deliberate and structured processes employed by management to direct activities towards the achievement of organizational objectives.

The company culture at Bates is an example of a formal management control. This is because Bates has implemented a thorough budgeting and reporting system and has a frugal company culture supported by financial incentives for cost-saving measures. Bates' culture and control systems are designed to closely monitor and control costs, ensuring the company's competitive pricing advantage.