Decentralized operations provide unique challenges for organization-wide management. A key cost figure for decentralized operations is transfer pricing across divisions. A transfer price can be based on cost, market-based, variable, or negotiated prices. Attention to behavioral aspects of managing the organization is critical to overall performance.
The key financial measures of performance include return on investment (ROI), residual income (RI), and economic value added (EVA). Please review the material on performance metrics including the discussion of invested capital, asset allocation to division, and gross versus net value of assets to prepare for the discussion questions.