The relationship between corporate culture and the use of management accounting innovations in vietnamese companies a study of techcombank

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THE RELATIONSHIP BETWEEN CORPORATE CULTURE AND THE USE OF MANAGEMENT ACCOUNTING INNOVATIONS IN VIETNAMESE COMPANIES: A STUDY OF TECHCOMBANK BY NGUYEN QUYNH THU Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Accounting) Hons October 2011 Declaration of Originality and Word Count DECLARATION I declare that this graduation project is based on my original work except for quotations and citation which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other courses/degrees at HELP University College or other institutions. Word Count: 11,602 words. Nguyen Quynh Thu Date 2 ACKNOWLEDGEMENT The completion and result of this thesis paper is not only the achievement of efforts from me but also the indispensable supports from a lot of helpful people. Firstly, I would like to express my gratefulness to my dear teachers at the International School, Vietnam National University where I spent nearly five years studying, researching and growing. They have helped me and my friends enlarge our knowledge as well as share with us lots of valuable experiences and lessons in life which I will never forget. Especially, I would love to extend my heartfelt thanks to my thesis’ supervisor, Mrs. Phan Thu Huong for her instruction and encouragement during the time. She was not only the person who initiated and inspired me to the topic of this paper, but also continuously supported and consulted me to find out solutions and complete this paper. Without her and other teachers’ advices and helps, I could not come to the destination and attain this result. Additionally, it is my great honor to receive the enthusiastic supports from all managers, chief accountant and other accounting staff who are involved in the survey conducted in this thesis. Although the relationship between me and those people is not close; however, I received one hundred percent replies over the questionnaire papers sent through both emails and in hands. Based on their answers, the influence of corporate culture on management accounting innovations in Techcombank has been found out and contributed a big value to this research. Finally, from the bottom of my heart, I would like to express my great thanks to all of my family members and friends for their vital encouragement and cares during the time conducting this thesis. 3 Once again, I’d love to send the profound feeling to the above-mentioned people, hadn’t been for all their supports and suggestions, this paper cannot be properly accomplished. 4 ABSTRACT THE RELATIONSHIP BETWEEN CORPORATE CULTURE AND THE USE OF MANAGEMENT ACCOUNTING INNOVATIONS IN VIETNAMESE COMPANIES: A STUDY OF TECHCOMBANK By NGUYEN QUYNH THU October 2011 Supervisor: Mrs. Phan Thu Huong Corporate culture is no longer a new term for developing countries. It has developed through the long history and nowadays it is expected to perform by any enterprises in the world. However, the term is not familiar to Vietnamese enterprises until the recent years when the economy is more open, corporate culture plays an important role in development and initiation of Vietnamese enterprises. In particular, this graduation project represents the results of research on the relationship between corporate culture and the use of management accounting innovations in Vietnamese companies, a case study of Techcombank. The objective of the research is to access the understanding of Techcombank’s managers and accountants about the influence of corporate culture on the initiations of managerial accounting system. In this thesis, the author reviews knowledge related to corporate culture and management accounting innovations involving definitions, elements, roles and theories of several international researches (Schein, Quinn and Rohrbaugh). The 5 author also analyzes the relationship between Techcombank’s corporate culture and its management accounting innovations based on models of Schein, Quinn and Rohrbaugh. Finally, from the success of Techcombank, the author will propose some useful experience lessons for Vietnamese companies. 6 TABLE OF CONTENT Declaration of Originality and Word Count ...................................................... 2 Acknowledgement ..................................................................................................3 Abstract ...................................................................................................................5 Table of contents ....................................................................................................7 List of Figures .......................................................................................................11 List of Abbreviations ...........................................................................................13 CHAPTER I – INTRODUCTION......................................................................14 1.1. Research background ...................................................................................14 1.2. Research objectives .......................................................................................15 1.3. Research significant ......................................................................................16 1.4. Research questions ........................................................................................16 1.5. Scope of research ...........................................................................................16 1.6. Structure of research ....................................................................................17 CHAPTER II – LITERATURE REVIEW ........................................................18 2.1. Overview of corporate culture .....................................................................18 2.1.1. Definition of culture .....................................................................................18 2.1.2. Definition of corporate culture .....................................................................19 2.1.3. The role of corporate culture in business .....................................................20 7 2.1.3.1. Fostering innovation and invention...............................................20 2.1.3.2. Creating corporate vision, shared values and beliefs ....................22 2.1.3.3. Creating the competitive advantage ..............................................22 2.2. Overview of the innovation of management accounting ...........................23 2.2.1. Definition of management accounting .........................................................23 2.2.2. Definition of management accounting innovation .......................................24 2.2.3. The role the innovation of management accounting ....................................24 2.3. The relationship between corporate culture and the use of management accounting innovations ........................................................................................26 2.3.1. Iceberg’s principle - The model of Edgar H. Schein ...................................26 2.3.1.1. Artifact ..........................................................................................27 2.3.1.2. Espoused values ............................................................................28 2.3.1.3. Assumptions ..................................................................................28 2.3.2. The competing value framework of corporate culture .................................29 2.3.2.1. Human relations ............................................................................30 2.3.2.2. Open systems.................................................................................31 2.3.2.3. Rational goals ................................................................................31 2.3.2.4. Internal processes ..........................................................................32 CHAPTER III – RESEARCH METHODOLOGY ..........................................33 8 3.1. The survey ......................................................................................................33 3.1.1. Objectives of survey.....................................................................................33 3.1.2. Questionnaire design ....................................................................................34 3.2. Case study ......................................................................................................35 3.2.1. Objectives of case study ...............................................................................35 3.2.2. Data collection .............................................................................................36 3.2.3. Data analysis ................................................................................................37 CHAPTER IV – RESEARCH RESULTS AND EXPERIENCE LESSONS .39 4.1. Findings from the survey ..............................................................................39 4.1.1. Detail findings ..............................................................................................39 4.1.2. Overall findings from the survey .................................................................50 4.2. Findings from case study ..............................................................................52 4.2.1. Overview of Techcombank ..........................................................................52 4.2.2. Corporate culture of Techcombank ..............................................................53 4.2.2.1. Artifacts .........................................................................................53 4.2.2.2. Espoused values ............................................................................55 4.2.2.3. Assumptions ..................................................................................57 4.2.3 Management accounting innovations in Techcombank ................................58 4.2.3.1 ABC method ..................................................................................59 9 4.2.3.2 BSC method ...................................................................................60 4.2.4. The positive relationship between corporate culture and the use of management accounting innovation in Techcombank ...........................................61 4.2.4.1. Human relations ............................................................................63 4.2.4.2. Open systems.................................................................................64 4.2.4.3. Rational goals ................................................................................66 4.2.4.4. Internal processes ..........................................................................68 4.3. The experience lessons for Vietnam enterprises ........................................70 4.3.1. Improving the awareness of people about corporate culture and its relationship with management accounting.................................................................................70 4.3.2. Establishing corporate culture for long-term strategy and development of management accounting .........................................................................................71 CHAPTER V – RECOMMENDATION AND RESEARCH LIMITATIONS73 5.1. Recommendations .........................................................................................73 5.2. Research Limitations ....................................................................................74 CHAPTER VI – CONCLUSION........................................................................76 6.1. Summary ........................................................................................................76 6.2. Conclusion Remarks .....................................................................................77 REFERENCES .....................................................................................................79 APPENDICES ......................................................................................................82 10 LIST OF FIGURES Figures Title Page Figure 2.1 Role of corporate culture in organizational commitment 21 Figure 2.2 Corporate culture – Iceberg’s principle 27 Figure 2.3 The competing values model of corporate culture 32 Figure 4.1 Necessary for building corporate culture in Techcombank 40 Figure 4.2 Elements of corporate culture in Techcombank 40 Figure 4.3 Roles of corporate culture in Techcombank 41 Figure 4.4 Difficulties in building corporate culture in Techcombank 42 Figure 4.5 Initiative methods of managerial accounting in Techcombank 43 Figure 4.6 The most understandable method in managerial accounting in 43 Chapter II Chapter IV Techcombank Figure 4.7 Roles of management accounting innovations in Techcombank 44 Figure 4.8 Levels of manager use management accounting innovations in 45 Techcombank 11 Figure 4.9 Difficulties in using management accounting innovations in 46 Techcombank Figure 4.10 Level of impact of corporate culture on the innovations in 47 managerial accounting system in Techcombank Figure 4.11 Problems in the relationship between corporate culture and 48 managerial accounting innovations in Techcombank Figure 4.12 Solutions for problems in the relationship between corporate 49 culture and managerial accounting innovations in Techcombank Figure 4.13 Relations of BSC in Techcombank 61 Figure 4.14 Illustrate the relationship between corporate culture and 62 management accounting innovations based on the competing value model Figure 4.15 The influence of human relations on management accounting 64 innovations Figure 4.16 The influence of open systems on management accounting 66 innovations Figure 4.17 The influence of rational goals on management accounting 67 innovations Figure 4.18 The influence of internal processes on management accounting 69 innovations 12 LIST OF ABBREVIATIONS Abbreviations Full name Techcombank Vietnam technological and commercial joint stock bank ABC Activity-based costing ABM Activity-based management BSC Balanced scorecard TC Target costing % Percentage (Percent) 13 CHAPTER I – INTRODUCTION 1.1. Research background For the last ten years, “corporate culture” has been a popular concept with organizations and the society. Together with the development of the global economy, organizations require not only technological advance, human resource or capital flows but also corporate culture to ensure management success and access to international market. According to Maloney and Federle (1990), and Flamholtz and Randle (1998), nearly all organizations acknowledged that an organization’s well founded culture could contribute to the accomplishment in every aspect of performance such as economy and finance. In particular, for accountants, corporate culture plays a crucial role on the managerial accounting system. However, the relationship between the corporate culture and the management accounting innovations is not clear, which many organizations do pay adequate attention to. Accountants often are less interested in corporate culture and its influences on the accounting innovations. Therefore, the first step to build a strong corporate culture is that organization must understand and consider its culture as beliefs and expectations which can powerfully shape the behavior of individuals and groups in the organization (Schwartz and Davis (1981), Schein (1990), and O’ Reilly III et al. (1991)). Indeed, corporate culture is powerful driver of the economy as well as the social development. Nevertheless, within the scope of the study, this research only concentrates on analyzing the influence of the corporate culture on the management accounting innovations, and how this provides managers with information designed to 14 support and enrich decision making. In advanced manufacturing environment, new management accounting techniques are needed by managers (Green and Amankhienan (1992)). Besides, this research focuses on Techcombank, one of the leading banks in Vietnam as an example of Vietnamese enterprises. Consequently, I have chosen the topic “The relationship between corporate culture and the use of management accounting innovations in Vietnamese companies: A case study of Techcombank” as a graduation project in the hope that some results and recommendations from this thesis can become a reference to help further develop a successful corporate culture for the company. 1.2. Research objectives The study concentrates on the concepts of corporate culture and the relationship between corporate culture and the use of management accounting innovations. From the case study of Techcombank, I expect the good recommendation will be made for creating corporate culture process of this company. Therefore, this research aims to: i. Systematize the basic issues of corporate culture and the management accounting innovation ii. Understand what is the relationship between the corporate culture and the innovations of managerial accounting in Techcombank iii. Understand why and how the corporate culture influences on the use of managerial accounting innovations in Techcombank iv. Find out some solutions and recommendations to upholding the good effects of corporate culture on the use of management accounting innovations in Techcombank 15 1.3. Research significant Vietnam appropriates the value of human as well as the value of culture. Therefore, an enterprise built without cultural foundation has difficulty in increasing trust of its staff, customers and the society. Because of this reason, the research focuses on understanding the value of the corporate culture, in particular, understanding the relationship between the corporate culture and the innovation of management accounting. This research only aims at Techcombank – one of the leading companies of Vietnam in banking industry. Accordingly, this study will explore whether Techcombank has built a stable corporate culture as well as a good relationship between the corporate culture and the management accounting. 1.4. Research questions This research paper attempts to address the three questions. Firstly, what is corporate culture? And what is the innovation of management accounting? Secondly, what is the relationship between the corporate culture and the use of management accounting innovations in Techcombank? Finally, what are the experience lessons from building corporate culture in Techcombank in order to achieve the efficiency of management accounting innovations? 1.5. Scope of research 16 Due to time limitation, the research only concentrates on concept of corporate culture and its relationship with the use of management accounting innovations in a specific company. It is Techcombank – the best enterprise in banking industry in Vietnam. The content of this research is specific information of corporate culture at Techcombank in two year: 2009 and 2010 and its relationship with the use of management accounting innovations. From the results of survey and case study, this thesis might draw lessons for Vietnam enterprises in building and developing their own corporate culture. 1.6. Structure of the research The preferable structure of the thesis consists of six chapters. The first chapter identifies an overview and background of research topic as well as research significant. Chapter II is literature review that covers definitions and theories deal with corporate culture, management accounting innovations, and their combination. Chapter III is research methodology that presents the research methods as well as data collection. The results are then present in chapter IV, which refer to the findings from the selected research methods. Besides, it also discusses the experience lessons for Vietnamese enterprises. Discussion on recommendations and research limitations is then presented in chapter IV. The last chapter summarizes the key findings and an overall evaluation for the whole study. 17 CHAPTER II – LITERATURE REVIEW 2.1. Overview of corporate culture 2.1.1. Definition of culture According to anthropologist Edward B. Taylor, the first person to give the definition of “culture”, culture is “that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society.” (Edward B. Taylor, Primitive Culture 1 (3d ed. 1889)) It means that culture plays a crucial role in life of human beings. When the human factor is considered as an engine to establish and reform society, culture becomes a basic measure to assess activities as well as a thorough understanding of human beings. In fact, culture is a hard concept to define. During many centuries, there are many different definitions of culture after Edward B. Taylor’s notion. For example, Useem, J., & Useem, R. (1963) stated that “culture has been defined in a number of ways, but most simply, as the learned and shared behavior of a community of interacting human beings” (Human Organization, 22(3), p.169). However, this research only reviews a united definition of culture following Edward B. Taylor in order to find an easier manner to reach the matter of the organizational culture. 18 2.1.2. Definition of corporate culture In the earlier seventies of the twenties century, the term of “corporate/organizational culture” was widely used by research professions and managers in many organizations over the world, especially in Japanese and American corporations. And until the nineteenth decade, many in-depth researches about corporate culture as well as its influence on the development of enterprises were carried out. This is one of the main reasons why there are many different concepts of “corporate culture”. According to Schein H.Edgar (2004), corporate culture was considered as “the system of shared beliefs, values and standards of solving problems, which is created in the forming and developing process of a corporation and demonstrated through physical and nonphysical forms and behaviors of its members.” This concept means that corporate culture is similar to culture in society that includes norms, values, beliefs and patterns of behavior of each individual in society. Besides, Rob Goffee (2003) briefly talked about corporate culture in his book “The character of a corporation: How your company’s culture can make or break your business”. He said that “a company’s culture is often buries so deeply inside rituals, assumptions, attitudes, and values that it becomes transparent to an organization’s members only when, for some reason, it changes.” It implies that corporate culture is influenced by the internal integrity of the corporation, the environment and how well the corporation is competing in the market as well as its effectiveness. In general, corporate culture, in its true meaning, means “the way we do things round here”, or behavior. Therefore, organizations of all size posses some type of 19 corporate culture, in which every corporation has a set of values and goals that help to define what the business is all about. 2.1.3. The role of corporate culture in business The concept of corporate culture is popular on the world. However, in Vietnam, in the last few years, enterprises have been aware of corporate culture. In particular, when Vietnam has been an official member of World Trade organization (WTO) in 2007, this stimulates Vietnamese economic development rapidly in the harmony way with the global trend. Consequently, understanding of the corporate culture is one of the essential issues that Vietnamese enterprises need to emphasize when taking part in the international market. So, what is the role of corporate culture in Vietnamese enterprises? This thesis will discuss three main characteristics about role of corporate culture in Vietnamese companies, as following: 2.1.3.1. Fostering innovation and invention Corporate culture is considered an engine to encourage innovation and invention in organizations. According to the study by Zahariah Mohd Zain, Razanita Isahak, and Eelane K Ghani (2009), corporate culture plays an important role in changing “Organizational Commitment” that helps organizations explore the relative strength of employees’ attachment or involvement with their organization. These authors built a specific framework through four hypotheses including teamwork, training and 20
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