Transfer pricing as a means for motivating management of profit centers

The main objective of this study is to analyze the role and potential of transfer pricing as a means of management control in large organizations. The special emphasis is on analyzing the potential of transfer pricing when we are motivating the profit center managers. The research approach is theoretical and literature reviews include studies about profit center organizations, performance measurement and analysis, incentive systems, transfer pricing techniques and agency theory. Based on the analysis, it seems that transfer pricing is a suitable tool for controlling, motivating and managing profit center managers. This requires that the performance measurement can be done fairly and transfer prices are set using fair assumptions. The motivating effects of transfer pricing can be enhanced if the reward system is connected to performance measurement system. In synthesis there is presented effects of transfer pricing to profit center managers behavior. There is also presented opinion about fair transfer pricing policy.

Sales lead management in a global enterprise

Many companies today struggle with problems they face around sales lead management. They are suffering from inconsistent quality of leads, they miss clear sales opportunities and even cannot handle well their internal marketing lists. Meanwhile customers are better and better equipped with means to easily initiate contact via internet, via call centers etc. Investing in lead generation activities that are built on a bad process is not a good idea. Better than asking how to get more leads, companies should ask how to get better quality leads and invest in improving lead management. This study looks sales lead management as a multi step process where a company generates leads in controlled environment, qualifies them and hands over to the sales cycle. As a final step, organization needs to analyze the incomes and successes of different lead sources. Most often in sales lead management a process improvement requires setting up additional controls to enable proper tracking of all leads. A sales lead management process model for the case company is built based on the findings. Implementing the new model involves changes and improvements in some key areas of current process. Starting from the very beginning, these include redefining a bit the lead definition and revising the criteria set for qualified lead. There are some improvements to be done in the system side to enable the proposed model. Lastly a setting for responsible roles is presented.

Marketing in support of sales in industrial high technology company

The aim of this study is to find out how Metso Paper’s marketing could better support sales and how sales people are executing marketing during the sales processes. This study is done from sales people’s point of view. The study is limited to cover only company’s internal environment. This research was executed through literature review and qualitative theme interviews, where 20 of Metso Paper’s sales people were interviewed. The interviewees were asked to tell their opinions about marketing’s support, marketing materials, information and the relationship between sales and marketing. The results of this study show that the relationship between marketing and sales is rather good, but there is still a great need for improvements. It is hoped that marketing would take more part in the selling processes. In addition, more information about the launches and schedules were also hoped for. Marketing is told to be quite Finland centric and sales people are wishing for more adopted marketing materials and occasions. It came up during the interviews, that sales people are not so willing to give regular feedback to marketing and quite often they think that marketing’s role in Metso Paper is not important at all.

Quantitative market and sales forecast accuracy analysis

The main objective of this master’s thesis was to quantitatively study the reliability of market and sales forecasts of a certain company by measuring bias, precision and accuracy of these forecasts by comparing forecasts against actual values. Secondly, the differences of bias, precision and accuracy between markets were explained by various macroeconomic variables and market characteristics. Accuracy and precision of the forecasts seems to vary significantly depending on the market that is being forecasted, the variable that is being forecasted, the estimation period, the length of the estimated period, the forecast horizon and the granularity of the data. High inflation, low income level and high year-on-year market volatility seems to be related with higher annual market forecast uncertainty and high year-on-year sales volatility with higher sales forecast uncertainty. When quarterly market size is forecasted, correlation between macroeconomic variables and forecast errors reduces. Uncertainty of the sales forecasts cannot be explained with macroeconomic variables. Longer forecasts are more uncertain, shorter estimated period leads to higher uncertainty, and usually more recent market forecasts are less uncertain. Sales forecasts seem to be more uncertain than market forecasts, because they incorporate both market size and market share risks. When lead time is more than one year, forecast risk seems to grow as a function of root forecast horizon. When lead time is less than year, sequential error terms are typically correlated, and therefore forecast errors are trending or mean-reverting. The bias of forecasts seems to change in cycles, and therefore the future forecasts cannot be systematically adjusted with it. The MASE cannot be used to measure whether the forecast can anticipate year-on-year volatility. Instead, we constructed a new relative accuracy measure to cope with this particular situation.

Tests of International Asset Pricing Models in Scandinavian Stock Markets

This thesis examines whether global, local and exchange risks are priced in Scandinavian countries’ equity markets by using conditional international asset pricing models. The employed international asset pricing models are the world capital asset pricing model, the international asset pricing model augmented with the currency risk, and the partially segmented model augmented with the currency risk. Moreover, this research traces estimated equity risk premiums for the Scandinavian countries. The empirical part of the study is performed using generalized method of moments approach. Monthly observations from February 1994 to June 2007 are used. Investors’ conditional expectations are modeled using several instrumental variables. In order to keep system parsimonious the prices of risk are assumed to be constant whereas expected returns and conditional covariances vary over time. The empirical findings of this thesis suggest that the prices of global and local market risk are priced in the Scandinavian countries. This indicates that the Scandinavian countries are mildly segmented from the global markets. Furthermore, the results show that the exchange risk is priced in the Danish and Swedish stock markets when the partially segmented model is augmented with the currency risk factor.

Technology roadmap for new sales support and management system for crane manufacturing company

Sales configurators are essential tools for companies that offer complicated case specifically crafted products for customers. Most sophisticated of them are able to design an entire end product on the fly according to given constraints, calculate price for the offer and move the order into production. This thesis covers a sales configurator acquisition project in a large industrial company that offers cranes for its customers. The study spans the preliminary stages of a large-scale software purchase project starting from the specification of problem domain and ending up presenting the most viable software solution that fulfils the requirements for the new system. The project consists of mapping usage environment, use cases, and collecting requirements that are expected from the new system. The collected requirements involve fitting the new sales system into enterprise application infrastructure, mitigating the risks involved in the project and specifying new features to the application whilst preserving all of the admired features of the old sales system currently used in the company. The collected requirements were presented to a number of different sales software vendors who were asked to provide solution suggestions that would fulfil all the demands. All of the received solution proposals were exposed to an evaluation to determine the most feasible solutions, and the construction of evaluation criteria itself was a part of the study. The final outcome of this study is a short-list of the most feasible sales configurator solutions together with a description of how software purchase process in large enterprises work, and which aspects should be paid attention in large projects of similar kind.

Essays on pricing of risk and international linkage of Russian stock market

Last two decades have seen a rapid change in the global economic and financial situation; the economic conditions in many small and large underdeveloped countries started to improve and they became recognized as emerging markets. This led to growth in the amounts of global investments in these countries, partly spurred by expectations of higher returns, favorable risk-return opportunities, and better diversification alternatives to global investors. This process, however, has not been without problems and it has emphasized the need for more information on these markets. In particular, the liberalization of financial markets around the world, globalization of trade and companies, recent formation of economic and regional blocks, and the rapid development of underdeveloped countries during the last two decades have brought a major challenge to the financial world and researchers alike. This doctoral dissertation studies one of the largest emerging markets, namely Russia. The motivation why the Russian equity market is worth investigating includes, among other factors, its sheer size, rapid and robust economic growth since the turn of the millennium, future prospect for international investors, and a number of important major financial reforms implemented since the early 1990s. Another interesting feature of the Russian economy, which gives motivation to study Russian market, is Russia’s 1998 financial crisis, considered as one of the worst crisis in recent times, affecting both developed and developing economies. Therefore, special attention has been paid to Russia’s 1998 financial crisis throughout this dissertation. This thesis covers the period from the birth of the modern Russian financial markets to the present day, Special attention is given to the international linkage and the 1998 financial crisis. This study first identifies the risks associated with Russian market and then deals with their pricing issues. Finally some insights about portfolio construction within Russian market are presented. The first research paper of this dissertation considers the linkage of the Russian equity market to the world equity market by examining the international transmission of the Russia’s 1998 financial crisis utilizing the GARCH-BEKK model proposed by Engle and Kroner. Empirical results shows evidence of direct linkage between the Russian equity market and the world market both in regards of returns and volatility. However, the weakness of the linkage suggests that the Russian equity market was only partially integrated into the world market, even though the contagion can be clearly seen during the time of the crisis period. The second and the third paper, co-authored with Mika Vaihekoski, investigate whether global, local and currency risks are priced in the Russian stock market from a US investors’ point of view. Furthermore, the dynamics of these sources of risk are studied, i.e., whether the prices of the global and local risk factors are constant or time-varying over time. We utilize the multivariate GARCH-M framework of De Santis and Gérard (1998). Similar to them we find price of global market risk to be time-varying. Currency risk also found to be priced and highly time varying in the Russian market. Moreover, our results suggest that the Russian market is partially segmented and local risk is also priced in the market. The model also implies that the biggest impact on the US market risk premium is coming from the world risk component whereas the Russian risk premium is on average caused mostly by the local and currency components. The purpose of the fourth paper is to look at the relationship between the stock and the bond market of Russia. The objective is to examine whether the correlations between two classes of assets are time varying by using multivariate conditional volatility models. The Constant Conditional Correlation model by Bollerslev (1990), the Dynamic Conditional Correlation model by Engle (2002), and an asymmetric version of the Dynamic Conditional Correlation model by Cappiello et al. (2006) are used in the analysis. The empirical results do not support the assumption of constant conditional correlation and there was clear evidence of time varying correlations between the Russian stocks and bond market and both asset markets exhibit positive asymmetries. The implications of the results in this dissertation are useful for both companies and international investors who are interested in investing in Russia. Our results give useful insights to those involved in minimising or managing financial risk exposures, such as, portfolio managers, international investors, risk analysts and financial researchers. When portfolio managers aim to optimize the risk-return relationship, the results indicate that at least in the case of Russia, one should account for the local market as well as currency risk when calculating the key inputs for the optimization. In addition, the pricing of exchange rate risk implies that exchange rate exposure is partly non-diversifiable and investors are compensated for bearing the risk. Likewise, international transmission of stock market volatility can profoundly influence corporate capital budgeting decisions, investors’ investment decisions, and other business cycle variables. Finally, the weak integration of the Russian market and low correlations between Russian stock and bond market offers good opportunities to the international investors to diversify their portfolios.

Product Data Managemet as a Key Success Factor in After Sales Business

The objective of this master’s thesis is to define Larox´s Product Data present state and future development needs from after sales point of view. In particular the object was to investigate after sales needs, which data related to products need to be managed by using Product Data Management. Empirical material of thesis was collected mainly through interviews, benchmark visits, and personal experience. Among the interviewees were internal stakeholders who are closely related to the product process, as well as external stakeholders. Interviews revealed that each stakeholder group has deviating needs for product data management and that at present all the needs are not met to take the best possible way. The main requirement was availability of up-to-date information, which plays a key role in after sales business. At the end of study is concentrated to find development targets at Larox, especially from after sales point of view. In addition, consideration of how the product data management advantages can utilized in making internal processes more efficient. Development needs are collected together as project descriptions, whose headings are shown at the end of the study.

Sales and Operations Planning Implementation

The master’s thesis focused on implementing a sales and operations planning process. The main objectives were to create planning methods and tools for the implementation. The ultimate goal of the process, beyond this master’s thesis, is to balance the supply of products with customer demand, with optimized profitability. The theoretical part focused on giving a thorough view on the sales and operations planning process. The basis for a monthly planning cycle was identified. Methods, tools, and metrics for demand forecasting and operations planning were also introduced. Based on the theoretical part, a method for forecasting, a forecast spreadsheet, and a forecast accuracy metric were designed. A spreadsheet tool and methods were also designed for the monthly planning of production volumes, capacity, and inventory. The implementation progress was reviewed for two product families for three months. The sales and operations planning process was able to successfully identify a demand peak for the product families. Suggestions for the future of sales and operations planning were also made.

Managing the Pricing of Integrated Solutions in Export Partnerships

Little research has been conducted to guide the management of marketing variables, such as pricing, in systems business context. Furthermore, given that international partnering has become a popular mode of operation for SMEs, the objective of the current thesis was to explore the scantly researched topic of managing the pricing of integrated solutions in an export partnership. Specifically, the thesis synthesizes literature findings from the three areas of export pricing, systems business, and export partnerships. The empirical section of the study consists of a qualitative single-case study of a Finnish systems integrator that has recently launched its export operations. Primary data was collected by conducting four interviews of the case company’s managers and by organizing one group interview session. The study findings indicate that a systems integrator’s pricing strategy in an export partnership can be very multidimensional and dependant on international pricing environment and partner characteristics, that an export partnership appears to have unique implications on a systems integrator’s pricing process, and that customer value –based pricing strategies might be particularly suited to pricing integrated solutions.

Hitsaustoiminnan käynnistäminen pk-alihankintakonepajassa

Tämä diplomityö on tehty HT Laser Oy:n Vieremän tehtaan hitsaustoiminnan käynnistämisen yhteydessä. Diplomityön tavoitteena oli hitsaustoiminnan käynnistämisen kustannusten minimointi ja hitsattavien tuotteiden myynti- ja valmistusprosessin luominen. Työn teoriaosassa on esitelty hitsauslaitteistolle asetettavia vaatimuksia, hitsauskustannuksiin vaikuttavia tekijöitä, tuotantojärjestelmiä, tuotannon ohjausmenetelmiä, laadunhallintaa, henkilöstöasioita, osavalmistusta, hitsauksen hinnoittelua ja tilauskäsittelyä. Ensisijaisesti työssä on tavoiteltu sujuvan ja tuloksellisen tilaus/tarjouskäsittelyprosessin luomista. Tämä on nähty edellytyksenä ongelmattomalle tuotannolle ja hyvälle toimitusvarmuudelle. Työssä on luotu malli tarjousvaiheessa läpikäytävälle esikatselmukselle, jota on esitelty kahden case -esimerkin avulla. Case -esimerkeissä on käsitelty myös tuotteiden valmistukseen ja hinnoitteluun liittyviä asioita ja ongelmia sekä näiden ratkaisuja.

Taktiset toimenpiteet ja niiden käyttö muotikaupan tuoteryhmän kannattavuuden kehittämisessä - case: Ketjuohjattu naisten muodin myymälä

Muotikauppaketjun yksittäisellä myymälällä on tyypillisesti varsin rajoitetusti mahdollisuuksia päättää myymälässä myytävistä tuotteista, niiden hankinnasta sekä hinnoittelusta. Tämän tutkielman tavoitteena oli selvittää, millä toimenpiteillä muotialalla toimivan yrityksen ketjuohjattu myymälä voi vaikuttaa oman yksikkönsä myyntiin ja tavoitellun kannattavuuden saavuttamiseen. Lähempään tarkasteluun rajattiin visuaaliseen markkinointiin ja hinnanalennuksiin liittyvät toimenpiteet. Empiirinen osuus toteutettiin kvalitatiivisena tutkimuksena yhdessä ketjuohjatussa muotikaupan myymälässä. Aineiston hankinnassa käytettiin kolmea eri aineistonkeruumuotoa: havainnointia, teemahaastattelua sekä myyntitapahtuma-aineiston keruuta. Tutkimustulokset osoittivat, että myyntikauden aikana tehtävillä tuotteiden esillepanojen uudistuksilla ja tuotteen paikan vaihtamisella myymälässä on merkitystä myynnin edistämisessä ja hinnanalennusten välttämisessä. Myymälöitä tulisi rohkaista aloittamaan hinnanalentaminen huonosti myyville tuotteille aikaisemmin myyntikauden aikana ja tuotteiden kauden jälkeistä varastointia tulisi välttää. Tutkimustulosten perusteella yksittäisellä ketjuohjatulla myymälällä on varsin paljon mahdollisuuksia vaikuttaa eri toimenpiteillään oman yksikkönsä kannattavuuteen, mutta se vaatii onnistuakseen tiivistä yhteistyötä ketjuohjauksen kanssa.

Efficient installed base information management and utilization in global after sales service business

This Master´s thesis explores how the a global industrial corporation’s after sales service department should arrange its installed base management practices in order to maintain and utilize the installed base information effectively. Case company has product-related records, such as product’s lifecycle information, service history information and information about product’s performance. Information is collected and organized often case by case, therefore the systematic and effective use of installed base information is difficult also the overview of installed base is missing. The goal of the thesis study was to find out how the case company can improve the installed base maintenance and management practices and improve the installed base information availability and reliability. Installed base information management practices were first examined through the literature. The empirical research was conducted by the interviews and questionnaire survey, targeted to the case company’s service department. The research purpose was to find out the challenges related to case company´s service department’s information management practices. The study also identified the installed base information needs and improvement potential in the availability of information. Based on the empirical research findings, recommendations for improve installed base management practices and information availability were created. Grounding of the recommendations, the case company is suggested the following proposals for action: Service report development, improving the change management process, ensuring the quality of the product documentation in early stages of product life cycle and decision to improve installed base management practices.

Sales performance measurement and steering in a multinational company

The objective of the study is to find out how sales performance should be measured and how should sales be steered in a multinational company. The beginning of the study concentrates on the literature regarding sales, performance measurement, sales performance measurement, and sales steering. The empirical part of the study is a case study, in which the information was acquired from interviews with the key personnel of the company. The results of the interviews and the revealed problems were analyzed, and comparison for possible solutions was performed. When measuring sales performance, it is important to discover the specific needs and objectives for such a system. Specific needs should be highlighted in the design of the system. The system should be versatile and the structure of the system should be in line with the organizational structure. The role of the sales performance measurement system was seen to be important in helping sales steering. However, the importance of personal management and especially conversations were seen as really critical issue in the steering. Sales performance measurement could be based on the following perspectives: financial, market, customer, people, and future. That way the sales department could react to the environmental changes more rapidly.