Short financial essay about the drugs company Ciba Geicy.

Ciba Geicy

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Ciba had strong Swiss/German roots and was a highly centralized company

with most management functions performed either at unified headquarters

or in large country organizations. Corporate headquartersand the country

organizations had large groups that provided familiar services to the

operating units.

Operating units were evaluated based on direct contribution and little

effort was make to allocate centralservices costs to the various lines of

business. This organization structure provided hold line-of-business

information.

In 1983, Ciba-Geigy used a matrix organization. One incline of the matrix was

seven product divisions (divided into a total of 41 strategic business units).

The other side of the matrix was 120 group companies responsible for a

specific geographical area.

In largecountries in that location were multiple group companies. Many group companies

had responsibility for sales and deed and the larger group companies

also controlled their own research and development.

At the sequence of their merger in 1971, Ciba and Geigy chose accounting methods

that they thought best presented their dependable economic picture. They felt that

the merger would reduce resistance to new-sprung(prenominal) accounting methods since the merger

required some changes anyway.

They decided to use Current make up Accounting for fixed assets and inventories.

They felt that current cost separate fictitious profits resulting from

subtracting historical costs from current revenues in the income statement.

They also used direct costing that included and variable production costs in

inventory and cost of goods sold. Fixed production costs were charged directly

to the income statement. They preferred directcosting because profits varied more

directly with sales. Also, enlighten income cannot be manipulated by build-ing or

depleting inventories as it can be in full costing. For divisions, Ciba measured

division mathematical process by contribution and a contribution-based performance factor.

All of a divisions variable expenses were subtracted from revenue to give

divisionalmarginal contribution. Transfer...

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