Discuss the rationale for tfx company, Strategic Management

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TFX is a multinational company which manufactures and retails branded designer clothing with business units in a number of different countries globally. Up unless now, each of the business units has had its own finance department.

 The company recently appointed an external consultancy company to undertake an internal review of the organisational structures to establish if they are 'fit for purpose'. One of the outcomes of the review is the recommendation that the finance function should be transformed, moving to a shared service centre model.

In taking this recommendation forward a number of factors will needs to be considered, for instance any possible difficulties of moving to a shared service centre model, and also in which country the shared service centre should be established.  The execution of a shared service centre will also require the formation of latest teams of staff.

Discuss the rationale for TFX Company moving to a shared service centre model, containing the benefits and any possible disadvantages. 

 

The shared-service centre (SSC) methods refers to the provision of a service by one part of the organisation where that service has previously been found in more than single part of the organisation. The establishment of a SSC for TFX Company would basically involve the bringing together of the various finance departments across the organisation into one central unit. It is sometimes referred to as internal outsourcing since it would allow TFX Company  to take benefits of the benefits of consolidation whilst maintaining full internal control and therefore minimising the control risks associated with outsourcing.  

By consolidating the finance departments to a SSC, TFX could expect to enjoy substantial payback in terms of reduction of overhead costs and as unit transaction costs. 

One of the overarching advantages of establishing a SSC is that it can lead to economies of scale, since the finance staff are gathered together to form a centre of excellence rather than being spread across business units. This arrangement would basically lead to headcount reductions and hence cost savings since it will reduce duplication. In addition, since it would be located in single centre there would be a decrease in premises and associated costs.

 


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