AB03 Chapter 1.docx

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University of Toronto Scarborough
Financial Accounting
G.Quan Fun

MGAB03 Week 1 09/06/13 Chapter One: The Role of Accounting Information in Ethical Management Decision Making Strategic Management and Decision Making Exhibit 1.1: Strategic Management Process Organizational Vision Core purpose and ideology Create Value for stakeholders  Owners (for-profit)  Donors (not-for-profit)  Constituents (govn’tal)  Employees  Customers/clients  Suppliers Operating Plans  Community Organizational Strategies Specific Performance Objectives  Society Long-Term Goals Short-term financing  other Organizational Structure Short-term resource Allocation Financial Structure  Production of Long-term Resource goods/services Allocation  Inbound and outbound  Investment /divestments logistics Actual Operations  Nature of operations  Marketing and sales Core Competencies  Product or service and Strengths Relative to markets  Service Competitors  Technology  Productivity  Human resource  Skills  Cash flow  Knowledge  Technologies  Physical resources  Customers/suppliers relationships  Reputation  Growth opportunities  Legal rights  Regulatory advantages  Financial resources Organizational Vision  Organizational vision: core purpose & ideology of an organization, which guides the organization’s overall direction & approaches toward various stakeholder groups  shud b built on existing & achievable strengths Organizational Core Competencies  Organizational core competencies: the organization’s strengths relative to its competitors which creates value for stakeholders  Usually find theses by evaluating a company’s SWOT  SWOT analysis: an analysis which looks @ the strengths, weaknesses, opportunities, and threats of an organization 1 | P a g e MGAB03 Week 1 09/06/13 Organizational Strategies  Organizational strategies: the tactics that mangers use to take advantage of core competencies, while working toward the organizational vision Operating Plans  Operating Plans: involves specific short-term decisions that shape an organization’s day-to-day activities, drawing cash from a bank line of credit, hiring an employee, or ordering material  Often include specific performance objectives, such as a budgeted revenue & costs Actual Operations  Actual operations: the various actions taken & results achieved over a period of time  Including customer orders received, revenues earned, # of employees hired, cost incurred, units of goods r services produced, cash received & paid etc. Measuring, Monitoring, and Motivating Performance  Management control systems: the systems & routines that mangers use to  the likelihood of organizational success  Mgers need info to measure actual operations so that they can monitor the success of their decisions & motivate employees to work towards the organizational vision  Decisions r monitor by -- Comparing actual operating results against plans, such as budgets, n against long-term goals  Motivate employees -- Tying employee performance evaluation & pay to LT r ST results Levers of Control  4 levers of control to measure & monitor organizational performance & motivate employees to take actions consistent w/ organizational strategies Exhibit 1.8: Four levers of Control BELIEF SYSTEMS BOUNDARY SYSTEMS Risks to Be Core Values Avoided Strategy Strategic Preset Uncertainties Goals DIAGNOSTIC CONTROL SYSTEMS CSYSTEMS Belief Systems  Organizations succeed wen employees understand the organizations core values & work to achieve them 2 | P a g e MGAB03 Week 1 09/06/13  Belief systems: inspire & direct employees to take actions that r consistent w/ the organizational vision  Vision statement: a theoretical description of wht the organization shud become  Mission statement: a high-level declaration of wht the organizations purpose  Core value statement: a summary of the beliefs that define the organizations culture Boundary Systems  Boundary systems: establish limits on individual behaviour  ex. codes of conduct & budgets (also include procedures for ensuring compliance  things that limit specific behaviours Diagnostic Control Systems  preset goals: this that must be achieved for the organizations strategy to be successful  diagnostic control systems: measure, monitor, & motivate empolyees to achieve preset goals  some diagnostic control systems include:  buget & variances  performance evaluations measures & rewards  balanced scorecards  DCS often used for personal evaluations  Suboptimal decision: decision r actions that benefit the employees r their buz but at a cost to the organization Interactive Systems  Interactive control systems: recurring sets on info that demand attention from mangers @ many levels  Mangers must communicate interactively & stimulates debates bout wht the info means  Leads to new insight bout strategic challenge
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