|Managerial Accounting and the Business Environment|
Successful companies follow strategies that differentiate themselves from competitors. Strategies often focus on three customer value propositions—customer intimacy, operational excellence, and product leadership.
Most organizations rely on decentralization to some degree. Decentralization is formally depicted in an organization chart that shows who works for whom and which units perform line and staff functions.
Lean production, the theory of constraints, and Six Sigma are three management approaches that focus on business processes. Lean Production organizes resources around business processes and pulls units through those processes in response to customer orders. The result is lower inventories, fewer defects, less wasted effort, and quicker customer response times. The Theory of Constraints emphasizes the importance of managing an organization’s constraints. Since the constraint is whatever is holding back the organization, improvement efforts usually must be focused on the constraint to be effective. Six Sigma uses the DMAIC (Define, Measure, Analyze, Improve, and Control) framework to eliminate non-value-added activities and to improve processes.
E-commerce and enterprise systems are being used to reshape business practices. An enterprise system integrates data across the organization in a single software system that makes the same data available to all managers.
Ethical behavior is the foundation of a successful market economy. If we cannot trust others to act ethically in their business dealings with us, we will be inclined to invest less, scrutinize purchases more, and generally waste time and money trying to protect ourselves from the unscrupulous—resulting in fewer goods available to consumers at higher prices and lower quality. Unfortunately, trust in our corporate governance system has been undermined in recent years by numerous high-profile financial reporting scandals. The Sarbanes-Oxley Act of 2002 was passed with the objective of improving the reliability of the financial disclosures provided by publicly traded companies.In this chapter, the following learning objectives will be covered: