This paper is based on an introductory speech made by the author for the symposium entitled “Strategic Management Control in Divisionalized Organizations,” at the 1996 JAMA Forum. Its main purpose of the paper is to point out the basic characteristics of divisionalized management control in Japanese companies, especially when an investment center system is adopted.

In the sixties, after World War II, the “divisionalized management system” was introduced to major Japanese companies as a“new” management system. Most of them are said to have been encouraged by the MITI report, “Profit Management through Divisionalized Management Systems.”

The essential points of the MITI report were modeled after the theories of American scholars, which were based on the practices of US businesses; let us call it “US style” for convenience.

However, our case study and field research suggest that most of the Japanese enterprises which adopted the “new” concept and practices into their management systems have added various changes to their actual management processes in order to fit the system to their own business environments and to their own organizational behavior. The case and field research show that actual practices in divisionalized management control in Japanese companies have several characteristic differences in essential areas from US-style theories and practices; we call it “Japanese style”.

This paper supplies the case material which will help discern the characteristics of the Japanese-style management control system, compared with, the US-style system. The case examples are selected to point out two aspects of the major differences between the two styles: one concerning the organizational structure of the management control systems, and the other concerning the responsibility accounting systems.

In the economic evaluation of investment projects, one of relevant considerations is the impact of taxation. Especially, the impact of corporate income taxes, which vary with the corporate taxable income, should be considered. To compute the amount of the taxes from the project effectively, the effective taxe rate is used. Therefore, it is also an important factor in the economic evaluation of investment projects. The traditional method of computing effective tax rate, however, does not reflect the present taxation system in Japan, principally, the prepayment system of taxes. The purpose of this paper is to:

(1) show the method of computing effective tax rate which reflects present taxation system; and

(2) compare the proposed method with the traditional method.

We can conclude that, the traditional method makes large errors concerning the estimation of taxes from the project, when the discount rate is relatively high, or when the difference of taxable income before corporate enterprise tax between the first half and the latter half of the year is large.

The present study, involving the production of potted flowers, was undertaken to determine the conditions for the optimization of the production planning, where the planned production periods were assumed to be definite. The analysis technique used was that of DP (dynamic programming).

In this study, positing several alternative plans mutually exclusive in terms of the types of the plant cuttings and the sizes of the finishing flowerpots, I examined the constraints on available pot bench capacity and the rations of per-pot profits for pairs of different-sized pots (i.e. A₁=r₄/r₆ and A₂=r₅/r₆, where r_j stands for the profit for a pot of a certain size (j=4, 5 or 6). However, I confined the analysis to the cases where the assumed profit values and the realized values differed. As for production costs, I considered them only where they differed between the alternative plans. Furthermore, based on the analysis, I identified three alternative plans which were optimal for the respective pot sizes and potted their plan numbers on a A₁-A₂ plane, where 1=t=3 (t stands for production periods).

The model formula used for the analysis is considered to be useful for the evaluation of production planning where the available bench capacities and the profit rations A₁ and A₂ vary during the production periods.

Because the M&A often requires huge amount of investment, it is very important to evaluate the economic value of the investment. Various financial techniques are developed for the valuation, however, they are usually referred as an ambiguous numbers for the use of a quantitative judgment. These techniques tend to be referred without knowing its theoretical limitations so that the results often would not reflect the actual M&A situations.

This study presents the technique for valuing the M&A regarding the existence of the merged company. In Section 1, M&A process and valuing framework is described. Section 2 refers to the free cash flow approach and describes the issue that the economic value of the merger would gradually decreases when the surplus cash is retained at the merged company. In Section 3, a financial technique is developed by paying attention to the cash obtained from or retained in the merged company.