Barrows Consumer Products
1) What are some of the factors causing the problems in measuring performance in the Southeast Asia sector?
Comparing the performance of divisions operating in different countries is difficult due to legal, political, social, economic and currency differences. Additionally companies in different countries may adopt different accounting standards, which makes the financial statement not comparable. Calculation on ROI, RI and EVA for subunits that operate in different countries needs to be adjusted for differences in inflation and changes in the exchange rates.
Barrows currently uses two primary performance measures, Profit and ROI, for its established divisions in the U.S., Canada, Europe and Japan. It is …show more content…
Base on the EVA calculation, which reduces distortion cause by historical cost accounting data and focuses on share holder’s value, the Philippines performs the best. However we should also note that these three countries are part of a new emerging market where large investment is often necessary in the early stage to drive growth. ROI, RI and EVA calculations are all short term outlooks and do not apply well in emerging markets because investment tends to be high and income low in the early stages of emerging markets. From a long term perspective, it appears that the Philippines performed the best based on growth, followed by Vietnam, and then last was Indonesia. The Philippines had the highest growth in Total Current Assets (38% growth including a 33% growth in Accounts Receivable) and Total Shareholder's Equity growth (10.6% growth including a 12.5% growth in Retained Earnings). Viet Nam grew its Total Current Assets by 25% with a 28% growth in Accounts Receivables. Indonesia’s growth of Current Assets was the lowest at 8% and the lowest Accounts Receivable growth of 12.5%. Indonesia is also sitting on the most amount of cash (which grew 20%) also has the lowest liabilities, which indicates it may not be properly investing to drive growth for the future. Another indicator of efforts to grow and expand market share is advertising expense.