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
Customer
Understand and respond to
Intimacy
individual customer needs.
Strategy

Operational Deliver products and services

Excellence faster, more conveniently,
Strategy and at lower prices.

Product
Leadership Offer higher quality products.
Strategy

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

Corporate Organization Chart

Board of Directors

President

Purchasing Personnel Vice President Chief Financial

Operations Officer

Treasurer Controller

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Process Management
A business
process is a series of
steps that are followed in order to
carry out some task in
a business.

Product Customer
R&D Design Manufacturing Marketing Distribution Service

Business functions making up the value chain

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 Traditional “Push” Manufacturing Company

Traditional “push” Large

manufacturing inventories

Raw Work in Finished

materials process goods
Materials waiting Completed products
to be processed. awaiting sale.
Partially completed products
requiring more work before
they are ready for sale.

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Lean Production
 Identify value  Identify the
in specific business process
products/services. that delivers value.

The lean thinking  Organize work

arrangements around
model is a five
the flow of the
step approach. business process.

 Continuously pursue  Create a pull

perfection in the system that responds
business process. to customer orders.
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 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.

Customer places Create Production Generate component

an order Order requirements

Goods delivered Production begins Components

when needed as parts arrive are ordered
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Theory of Constraints
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 capacity.

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 Theory of Constraints
Only actions 2. Allow the
that strengthen weakest link to
the weakest link set the tempo.
in the “chain”
improve the
process.
3. Focus on
1. Identify the improving
weakest link. the weakest
link.

4. Recognize that
the weakest link
is no longer so.
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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 Sometimes

generates no more associated
than 3.4 defects per million with the term zero
opportunities. defects.

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Six Sigma
The Six Sigma DMAIC Framework
Stage Goals
Define ● Establish the scope and purpose of the project.
● Diagram the flow of the current process.
● Establish the customer's requirements for the
process.
Measure ● Gather baseline performance data related to
the existing process.
● Narrow the scope of the project to the most
important problems.
Analyze ● Identify the root cause(s) of the problems
identified in the Measure stage.
Improve ● Develop, evaluate, and implement solutions
to the problems.
Control ● Ensure that problems remain fixed.
● Seek to improve the new methods over time.

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 IMA Guidelines for Ethical Behavior
Recognize and
communicate professional
limitations that preclude
responsible judgment.

Maintain Follow applicable

professional Competence laws, regulations
competence. and standards.

Provide accurate, clear,

concise, and timely decision
support information.

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 IMA Guidelines for Ethical Behavior
Do not disclose confidential
information unless legally
obligated to do so.

Do not use
confidential
information for Confidentiality
unethical or illegal
advantage.

Ensure that subordinates do

not disclose confidential
information.

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IMA Guidelines for Ethical Behavior

Mitigate conflicts of
interest and advise others
of potential conflicts.

Refrain from
conduct that
would prejudice Integrity
carrying out
duties ethically.
Abstain from activities that
might discredit the
profession.

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IMA Guidelines for Ethical Behavior
Communicate information
fairly and objectively.

Disclose delays or
deficiencies in information
Credibility timeliness, processing, or
internal controls.

Disclose all relevant

information that could
influence a user’s
understanding of reports
and recommendations.

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Corporate Governance
The system by
which a company is directed
and controlled.
Board of Incentives and
Directors monitoring for

Top To pursue
Management objectives of

Stockholders

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Enterprise Risk Management
Should I try to avoid the risk,
share the risk, accept the
risk, or reduce the risk?
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.
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 Corporate Social Responsibility
Corporate social responsibility (CSR) is a concept
whereby organizations consider the needs
of all stakeholders when making decisions.

Environmental
Customers Employees Suppliers Communities Stockholders & Human Rights
Advocates

CSR extends beyond legal compliance

to include voluntary actions that satisfy
stakeholder expectations.

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End of Chapter 1

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