P
rofessors Kenneth A. Merchant and Wim A. Van der Stede wrote this teaching note as an aid to instructors using the Beifan
g
Chuang Ye Vehicle Group case.
Marshall School of Business
University of Southern California
Beifang Chuang Ye Vehicle Group
Teaching Note
Purpose of Case
The Beifang Chuang Ye Vehicle Group (Beifang) case describes a simple, but real, example of
an uncontrollable factor affecting a companys results. The effects of the uncontrollable event
a change in lawsare huge. Thus, the case makes it easy to motivate a discussion of whether
Assignment Question
To what extent should Mr. Zhou compensate his employees, even though his company is losing
money? Why? What factors did you take into consideration in making your judgment?
Case Analysis
The Beifang case describes just one uncontrollable event; a new municipal law requiring all new
cars sold in the Beijing city limits to have a fuel injection system. The first question to ask is:
From the perspective of the Beifang employees, is this event uncontrollable? Clearly, the event
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
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Rationale for paying salesmen (and other employees) full salary and bonus
based on the revised plan:
1. The problem is not their fault. They shouldnt be made to suffer.
2. The owners of the company are more diversified and are thus better able to bear the risk.
Rationale for not paying the salesmen:
1. The company is not earning any money. Where will the cash come from?
2. There is nothing for the salesmen to do. They wont be working for a couple of months and,
hence, wont be creating any value.
In the middle of the organization are the managers of the dealerships. Whether they should share
the pain can be explored with the students, both assuming they were and were not involved in
Pedagogy
This case is quite short, and the issue is straightforward. It can probably be discussed adequately
in 4050 minutes of class time. The suggested ordering of the questioning in class is as
discussed above.
To fill a longer class period, instructors can present supporting lecturettes, other
controllability examples, or go down the tangent of management in China. Here are some other
controllability examples that could occur in the industry in which Beifang operates. The
question in each case is: Should employees be held accountable for the effects of these events?
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1. After the companys plan was prepared, the company faced increased competition. Prices
and profits declined.
3. There was an uninsured fire in the dealership. The fire was caused by faulty electrical
wiring.
4. An employee who was delivering a car to a customer was involved in an accident that is
only partially insured.
These examples map to the classification of examples presented in Chapter 12. The first two