CVP ANALYSIS IN BUSINESS CONTEXT LECTURE

BUSINESS

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

2. 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.
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3. Corporate Organization Chart
Purchasing Personnel Vice President
Operations
Treasurer Controller
Chief Financial
Officer
President
Board of Directors
Organizational Structure
Decentralization is the delegation of decision-Decentralization is the delegation of decision-
making authority throughout an organization.making authority throughout an organization.
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4. Process Management
Business functions making up the value chainBusiness 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.
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5. 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.
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6. 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.
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7. 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.
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8. 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 determinedThe constraint in a system is determined
by the step that has theby the step that has the smallest smallest capacity.
Theory of Constraints
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9. 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
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10. 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.
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11. Six Sigma
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.
The Six Sigma DMAIC Framework
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12. 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.
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13. Confidentiality
Do not disclose confidential Do not disclose confidential
information unless legally information unless legally
obligated to do so. obligated to do so.
Ensure that subordinates do Ensure that subordinates do
not disclose confidential not disclose confidential
information. information.
Do not use Do not use
confidential confidential
information for information for
unethical or illegalunethical or illegal
advantage. advantage.
IMA Guidelines for Ethical Behavior
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14. 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
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15. 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.
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16. Corporate Governance
The system byThe system by
which a company is directedwhich a company is directed
and controlled.and controlled.
Board of
Directors
Top
Management
Stockholders
To pursue
objectives of
Incentives and
monitoring for
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17. Enterprise Risk Management
A process usedA process used
by a company toby a company to
proactively identifyproactively identify
and manage risk.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?
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18. 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.
CustomersEmployees CommunitiesSuppliers Stockholders
Environmental
& Human Rights
Advocates
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19. End of Chapter 1
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