Managerial Accounting and the Business Environment Chapter 1 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Customer Value Propositions Understand and respond to individual customer needs. Customer Intimacy Strategy Operational Excellence Strategy Deliver products and services faster, more conveniently, and at lower prices. Product Leadership Strategy Offer higher quality products. 1-2

Organizational Structure Decentralization is the delegation of decision- making authority throughout an organization. 1-3

Process Management Business functions making up the value chain Product Customer R&D Design Manufacturing Marketing Distribution Service A business process is a series of steps that are followed in order to carry out some task in a business. 1-4

Traditional “push” manufacturing Traditional “Push” Manufacturing Company Large inventories Finished goods Raw materials Work in process Materials waiting to be processed. Completed products awaiting sale. Partially completed products requiring more work before they are ready for sale. 1-5

Lean Production The lean thinking model is a five step approach.  Identify value in specific products/services.  Identify the business process that delivers value.  Organize work arrangements around the flow of the business process.  Create a pull system that responds to customer orders.  Continuously pursue perfection in the business process. 1-6

Customer places an order Create Production Order Generate component requirements Production begins as parts arrive Goods delivered when needed Components are ordered Lean Production The five step process results in a “pull” manufacturing system that reduces inventories, decreases defects, reduces wasted effort, and shortens customer response times. 1-7

A constraint (also called a bottleneck) is anything that prevents you from getting more of what you want. The Theory of Constraints is based on the observation that effectively managing the constraint is the key to success. The constraint in a system is determined by the step that has the smallest The constraint in a system is determined by the step that has the smallest capacity. Theory of Constraints 1-8

4. Recognize that the weakest link is no longer so. 1. Identify the weakest link. 2. Allow the weakest link to set the tempo. 3. Focus on improving the weakest link. Only actions that strengthen the weakest link in the “chain” improve the process. Theory of Constraints 1-9

Six Sigma A process improvement method relying on customer feedback and fact-based data gathering and analysis techniques to drive process improvement. Refers to a process that generates no more than 3.4 defects per million opportunities. Sometimes associated with the term zero defects. 1-10

Six Sigma 1-11

Competence Follow applicable laws, regulations and standards. Maintain professional competence. Provide accurate, clear, concise, and timely decision support information. IMA Guidelines for Ethical Behavior Recognize and communicate professional limitations that preclude responsible judgment. 1-12

Confidentiality Do not disclose confidential information unless legally obligated to do so. Ensure that subordinates do not disclose confidential information. Do not use confidential information for unethical or illegal advantage. IMA Guidelines for Ethical Behavior 1-13

Mitigate conflicts of interest and advise others of potential conflicts. Abstain from activities that might discredit the profession. Refrain from conduct that would prejudice carrying out duties ethically. Integrity IMA Guidelines for Ethical Behavior 1-14

Communicate information fairly and objectively. Disclose all relevant information that could influence a user’s understanding of reports and recommendations. Credibility IMA Guidelines for Ethical Behavior Disclose delays or deficiencies in information timeliness, processing, or internal controls. 1-15

Corporate Governance The system by which a company is directed and controlled. Board of Directors Top Management Stockholders To pursue objectives of Incentives and monitoring for 1-16

Enterprise Risk Management A process used by a company to proactively identify and manage risk. Once a company identifies its risks, perhaps the most common risk management tactic is to reduce risks by implementing specific controls. Should I try to avoid the risk, share the risk, accept the risk, or reduce the risk? 1-17

Corporate Social Responsibility CSR extends beyond legal compliance to include voluntary actions that satisfy stakeholder expectations. Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. Corporate social responsibility (CSR) is a concept whereby organizations consider the needs of all stakeholders when making decisions. CustomersEmployeesCommunitiesSuppliersStockholders Environmental & Human Rights Advocates 1-18

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