Legal Entities (Business Area)

Structuring your enterprise using the company code scenario does increase the complexity of your organizational structures and business processes, but for the example enterprise it makes sense for the following reasons:

• Subdividing the enterprise into autonomous business units allows you to set up and optimize each business unit independently for strategic purposes.
• You can account for delivery of printed circuit boards and casings to German plants using separate transfer prices. You set up a relationship between internal customers and internal suppliers.
• At Sapo, externally salable products (casings, printed circuit boards) are created at different stages in the value chain. This means that there are specific external procurement and sales markets at certain value chain stages. In the company code scenario you can compare prices, manufacturing costs, and potential yield of circuit boards or casings with those of other manufacturers.
• This can increase your flexibility in procurement. For example if there is a stoppage at the Czech manufacturing facilities, or if casings cannot be procured internally under the usual market conditions, casings and printed circuit boards can be obtained from an external supplier.
• You can monitor cost factors for each stage in the value chain.
• You can make strategic investment and disinvestment decisions without having to make major changes to your organizational structure. So for example Sapo could sell its printed circuit boards or casings manufacturing facility without any difficulty.