ABN AMRO perceives its corporate identity and values as the underlying principles of the organisation. Cost accounting integrates with financial accounting by providing product cost information to financial statements and with managerial accounting by providing some of the quantitative, cost-based information that managers need to perform their jobs. Refrain from either actively or passively undermining the achievement of the organization's legitimate and ethical goals.
SOURCE: Adapted from Joel Millman, "Choctaw Chief Leads His Mississippi Tribe into the Global Market," The Wall Street Journal (July p. 7Miriam Jordan, "Debut of Rival Diet Colas in India Leaves a Bitter Taste," The Wall Street Journal( July p SOURCE: Brandon Mitchener and Betsy McKay, “EU raids Coca-Cola's European offices on suspicion of illegal use of rebates,” The Wall Street Journal (July p.
10Texas Instruments, “The TI Ethics Quick Test,” http://www.ti.com/corp/docs/company/citizen/ethics/quicktest.shtml (August 13, 1999). This roadmap also plays an important role in the design of the organization's accounting and control systems. How big are you in each of the business segments defined above compared to the largest of your competitors?
What are the main strengths of the company as a whole, based on the aggregation of customers. views of your firm in the segments that make up most of your profits.
Organizational Structure
Organizational Mission
Because every organization is unique, even those in the same industries use different strategies that are feasible and likely to be successful. Objectives are also likely to be formulated for other major stakeholders such as customers, employees and suppliers. For example, one of ABN AMRO's goals is to become the leading euro bank.
To achieve this goal, the bank set a target of having all its systems euro-compatible by 1 January 1999, when the euro was introduced. Organizational structure reflects the way in which authority and responsibility for making decisions is distributed in an organization. Authority refers to the right (usually by virtue of position or rank) to use resources to accomplish a task or achieve a goal.
A continuum of feasible structures reflects the extent of authority and responsibility of managers and employees. At one end of the continuum is centralization, where top management retains all decision-making authority. Centralized companies often find it difficult to diversify operations because top management may lack the necessary and critical industry-specific knowledge.
At the other end of the continuum is decentralization, in which decision-making authority is widely distributed among organizational personnel, including lower-level managers and, perhaps, line workers. However, for decentralization to work effectively, there must be employee empowerment, meaning that people are given the authority and responsibility to make their own decisions about their work. A decision to decentralize is also a decision to use responsibility accounting, which is discussed in Chapter 18.
Most organizations operate on a different continuum at some point than either end. Thus, a top management decision may be the location of a new division, while the ongoing operational decisions of that division may rest with the new division manager. Long-term strategic decisions for the division can be made by the division manager in collaboration with top management.
Core Competencies
The objective was achieved at enormous cost, but management believes that ABN Amro's new ability to provide harmonized banking services across Europe will be worth the investment.14 The people directly affected by the problems (or now is about problems or opportunities), having the most relevant information and being able to best understand the consequences of a decision, do not make the decisions. Recall that Rolls-Royce plc, once one of the most respected names in luxury cars, sold its automotive division in 1972.
The company's management decided that its priority should be products resulting from its core gas turbine technologies.
Organizational Constraints
Thus, the company began to focus on civil and military aircraft engines and power generation and improved its service, parts and repair activities. One extension of the definition is that IC includes human, structural, and relationship capital.17 Human capital is reflected in the knowledge and creativity of an organization's workforce and is a source of strategic innovation and renewal. Structural capital does not “go home at night or quit and hire from a rival; it puts new ideas to work; and it can be used again and again to create value, just as a die can eradicate part after part.”18 Acquiring new technology is a way to create new strategic opportunities by enabling a company to do things better or faster to do – assuming the company has trained its human capital in using that technology.
In many respects, the customer element of relationship capital is the most valuable part of an organization's intellectual capital: without customers to purchase products and services, an organization would not need to use human or structural capital.
Organizational Culture
Environmental Constraints
To assess all the various internal and external factors that influence strategic planning, an organization must have a well-designed business intelligence (BI) system. Broad scope, assimilating all the competitor intelligence; provide an early warning of opportunities and threats, such as new acquisitions or alliances and future competitive products and services. The standard concepts and tools of [traditional financial reporting] are inadequate to control operations because all they provide is an overview of the skeleton of a business.
Financial accounting, balance sheets, profit and loss statements, cost distributions, etc. is an X-ray of the company's skeleton. The segment's mission is directly related to the product's life cycle, or the sequential stages that a product goes through from conception to product discontinuation. The five phases of the product life cycle are design and development, introduction, growth, maturity and decline.
The build mission is suitable for products that are in the early stages of the product life cycle, and the harvest mission is suitable for products in the final stages of the life cycle. Hold - this mission is aimed at protecting the market share and competitive position of the business unit. In order to make fair comparisons, the company must be reasonably certain of the validity of its costs.
Managers, assisted by financial staff, must then make quantitative estimates of the investment's qualitative benefits (for example, allowing the company to be the first to bring a product or service to market). Once this concept is accepted, members of the value chain become aware that information must be shared between all entities in the value chain. Much of the information required by managers comes from the business intelligence system (which includes the accounting information system) discussed earlier in this chapter.
One of the most important challenges in managing an organization is balancing short-term and long-term resource demands. Thanks to these tools, GM is making significant progress in one of the core areas of competition in the automotive industry. Central to GM's transformation is the adoption of "an integrated portfolio of tools based on computational mathematics." This means that all the different design and manufacturing activities use the same software package that changes.
REVISITING
The approach offers "a decoupling from the annual budget approval process," said a senior bank executive. The accounting information system comprises the cost, financial and management accounting functions - all of which provide essential information that supports strategic resource management. Discuss some of the additional information you think managers will need and why such information would be valuable.
Discuss the validity of the following statement: "Only large companies (such as those that are publicly owned and listed on a major stock exchange) have the ability to operate in a global market.". Which do you think is more important in each of the following organizations: a software start-up, a car dealership, a university, a hospital, and Coca-Cola. Identify each strategy that an organization can pursue to avoid competition and discuss the merits of each type of strategy.
Trade agreements) You have been appointed to a business advisory group in your country to consider the implementation of NAFTA. Give three examples of the strategic, operational, financial and informational risks that your organization faces. How does your mission statement reflect the goals and objectives of the college's mission statement.
Core Competencies) As a team, make a list of the core competencies of your college or university and explain why you think these items are core competencies. Competitive Strategy) Choose a company that could use each of the following strategies against its competitors and discuss the benefits that could be gained from that strategy. What activities or types of businesses would you include in the upstream (supplier) part of the value chain?
What activities or types of companies would you include in the lower part (distribution and retail) of the value chain. Choose one of the industries below and research the benefits and problems of e-commerce from a company in that industry. For each of the organizations listed previously, discuss your perceptions of which of the constraints would be most critical and why.
For each of the organizations previously mentioned, discuss your perception of whether human or structural capital would be most important and why. According to the Romanian distributor, the backs of the vans were loaded with the kits, and the glove compartments were filled with cash.
