Tài liệu The impact of accounting information on management decision making process case study samsung electronic corporation

THE IMPACT OF ACCOUNTING INFORMATION ON MANAGEMENT DECISION MAKING PROCESS CASE TUDY: SAMSUNG ELECTRONIC CORPORATION BY BUI THI CAM DUYEN Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfilment of the Requirements for the Degree of Bachelor of Business (Accounting) Hons OCTOBER 2011 I DECLARATION OF ORIGINALITY AND WORD COUNT I hereby declare that the graduation project is based on my original work except for quotations and citations which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other course/degree at Help University College or other institutions. The word count is 10, 286 words. ______________________ BUI THI CAM DUYEN 17 October, 2011 II ACKNOWLEDGEMENT This project would not have been made possible without the assistance, support and encouragement of many people. I wish to take this opportunity to thank all the people who have helped me during the time of completing the dissertation. Firstly, I would like to express my deep gratitude to my supervisor Dr. NGUYN VAN ANH,. she has kindly helped me and supported me all the way through. For that, I am very grateful. I also would like to extend my special thanks to managers, accountants, my friends, and other people who have help me to carry out the survey. I want to thank them for all their support, interest and valuable hints. III THE IMPACT OF ACCOUNTING INFORMATION ON MANAGEMENT DECISION MAKING PROCESS CASE TUDY: SAMSUNG ELECTRONIC CORPORATION By BUI THI CAM DUYEN October 2011 Supervisor: Dr. NGUYEN VAN ANH ABSTRACT This paper aims to explore factors, which influence the process of accounting information implementation in the context of developing countries like Vietnam where the challenging are much more than opportunities, as well as analyze and explain the change area of methodology and organization of company, after accounting information implementation. In this research, have finding for both theorical and practical are more importance. Beside, according the accounting information will lead to different profits to a company, therefore choosing a suitable accounting information is very important for managers. In additional, focuses on some of these tools, including the costing system, profitability, costing tools and budgeting, which will be presented in this thesis. The costing system contributes to the available knowledge of costs, building the basis for several decisions, like determining prices. Profitability is used especially for decisions concerning discontinuing operations, whereas budgeting deals with the evaluation of investments. This financial information supports decisions making. Various decision-making models have been identified in literature to examine this process of decision-making. Out of this pool a sequential model was chosen to illustrate the decision-making steps in SAMSUNG ELECTRONIC CORPORATION. This model divides the IV decision-making process into several stages that follow each other. However, it will be illustrated that the decision-making process in SAMSUNG is a bit more complex and cannot be easily squeezed into these steps. It will become apparent in this paper that this process is influenced by many people, making it difficult to determine one final decision-maker as well as a certain decision-making point. Besides, experiences, feelings, preferences and other qualitative factors can have an impact on decisions in SAMSUNG COPORATION. Nevertheless, financial information affects the decision-making process. In the role of management accounting information is interwoven and integrated in the whole decision course, having the ability to influence the process at almost every stage. V TABLE CONTENT DECLARATION OF ORIGINALITY AND WORD COUNT……………….…i TABLE OF CONTENT………………………………………………………..…..ii ABSTRACT……………………………………………………………………..….iii TABLE OF CONTENIS…………………………………………………………….v LIST OF FINGURES & CHATS…………………………………………………..v Chapter 1 Introduction ................................................................................... 1 1.1 Introduction ............................................................................................. 2 1.2 Problem statement .................................................................................... 2 1.3 The objective of research ............................................................................ 4 1.4 Structure of research ................................................................................. 5 Chapter 2: Literature review ........................................................................... 7 2.1 Managerial decision making process ............................................................. 7 2.1.1 Planning process ..................................................................................... 8 2.1.2 Control process .................................................................................... 10 2.2 The importance and impact of accounting information on decision making process ................................................................................................................. 11 2.2.1 Accounting information and its role in decision making process..................... 11 2.2.2 Management accounting and decision making ............................................ 12 2.3 Financial statements, the importance source of accounting information for manager in electronics industry. .................................................................................. 14 2.4 Tool for decision making .......................................................................... 17 2.4.1 Cost accounting system .......................................................................... 18 2.4.2 Pricing and competition ......................................................................... 20 2.4.3 Profitability ......................................................................................... 23 VI Chapter3: Research and Methodology ............................................................. 25 3.1 Research objective ................................................................................... 26 3.2 Research approach .................................................................................. 26 3.3 Data collection ........................................................................................ 27 3.3.1Primary data ........................................................................................ 27 3.3.2 Secondary data ..................................................................................... 28 Chapter 4: Case study ................................................................................... 29 4.1 Samsung background ............................................................................... 30 4.2 Company vision and strategy ..................................................................... 31 4. 3 Case study analysis ................................................................................. 31 4.3.1 Accounting applied in Samsung Company ................................................. 31 Chapter5: Conclusion and recommendation...................................................... 47 5.1 Conclusions: ........................................................................................... 48 5.2 Recommendations ................................................................................... 49 5.3 Limitation of study. ................................................................................. 49 5.4 suggestions for future research .................................................................. 50 VII LIST OF TABLE AND FIGURE Table 1: Structure cost of the Samsung Company.................................................33 Table 2: the different prices of electronics customer of three companies Samsung, Sony and LG.......................................................................................... 35 Table 3: the different price of two companies Samsung and Sony.........................37 Table 4: competitive positioning of Samsung in DRAM market............................39 Figure 1: target costing............................................................................................22 Figure 2: revenue structure of product.....................................................................43 Graph 1: adapted from DRURY’s model (2000).................................................... 8 Graph 2: adapted from DRURY’s model (2000).....................................................19 VIII Chapter 1 Introduction 1.1 Introduction 1.2 Problem statement 1.3 The objective of research 1.4 Structure of research Chapter one cover the whole picture about the idea of this paper, these help manager and user easy to link each other between the accounting information and management decision making process. This also covers the structure and introduction about the topic as well as related issues. 1 1.1 Introduction Nowadays, in the industry, accounting information is more and more importance. And decisions making is part of our life. In the competitive environment and develop manufacturing, reliability accounting information is important for all business, like manufacturing business, service business and merchandise business. Considering organizational to organization, this is the main functions and actions of management. Decision-making and management are usually regarded as belonging together as management in the company often makes the main decisions of the organization. The diversity managers will make the different decision with the different information and report, so making decision will depend on manager’s policy. To have successful, organization are need to make decisions, also to implement the right ones. A decision is concerned with the selection of an action often out of a number of alternatives. To make the right decision, manager needs any guidance to making decision, which is a part provided by information assemble by management accounting. In fact, there are many factors that influent to the management decision making, but in this contention, put only to the intention on the importance and impact of accounting information in decision making process. 1.2 Problem statement In this project, the main idea related to the impact of accounting information on decision making of manager. The accounting information includes information applied to make ready financial statements that report the effects and financial position of an organization in order to help manager better making decision. Owners and manager use this information to argue about the results and effects of business operations also make decision about their management. External users such as suppliers, tax authorities, creditors also applied accounting information for their 2 decision making, i.e. judging whether the business will be able to return loans, pay for goods sold, whether taxes are paid correctly, etc. Management accounting tool also applied are may have contributed to some scale to the beneficial decision. Thereby, the company needs to analyze their ability, benefit, costing. Besides, they also need to consider to the factor that may be influence such as economy, sociality and environment. So there are some problems statements of the paper as follow will be discuss. First, what is accounting information and which and how accounting tools will be used? Second, how does the organization use accounting information in the decisionmaking process? Third, we examine several reason why accounting information are importance in the decision making process in the case study of Samsung electronics. - If accounting information is adjective by manager that are decision making are under viewing a transformations in the accounting information that shall not affect on his decision. - The notion of accounting information hold by decision maker base on his idea or his opinion on what and how accountants will and accounting system determine weights significant attributes and how characteristic of agents affecting and affected by a decision, this will affect the weight when any information is available given to accounting information in the decision process. 3 - A good of information is an element important to determine the weight of accounting information to the decision maker when decision making process. As deeper analysis of this thesis, this will reply above these questions to orient for the firms want to use accounting information to decision making and which want to adoption or implementation of accounting information. 1.3 The objective of research Accounting information is the main factors that directly affected to the assets, profitability, and development of the company. Moreover, accounting information including information are applying to prepare financial statements which account the results and financial position of a business to help manager make the right decision. Hence, management accountings are playing a smarter role in the performance of the entity. Accounting information is a tool that is very useful; it is used by all most of company in all over the world. For instance, in Toyota motor sale (TMS), they have very successfully in the motor industry because of measuring, evaluating and rewarding performance. Toyota Motor sale’s area and general manager’s are measured and evaluated by accounting information Wagner, the firm group vice president for Toyota sale. Wagner use the performance of a region as a measure of performance of a regional and general manager is checked through various means that includes the balance scorecard. The balance scorecards have become fertile fields of theories and scholastic research, as time past of balance scorecard was altered by various individual and in depending on the need of environment. The balance scorecard was introduced to measure whether the activity of the company is meetings the objective. The balance scorecard use financial and non financial measure. With the balance scorecard TMS was able to see the financial situation and 4 problem of the company and it was able to see how this affects the non financial aspect of the firm. Management accounting has been developed in recent year, and accounting information is more importance with every company, special in developing countries like Vietnam. This research aim is to discuss the practicable use of accounting information. The discussions is about whether use accounting information has an influence on firm’s activities and performance, and how company can accept information in accounting system. The aims of research are to analyzes the chance and threats when choose the accounting information in Vietnam, so, the companies can minimizing the risk for themselves by solving the matter based on the theory of this method. The failure also the success of using wrong and right information of any company also will be considered to avoiding the material will be meet mistake when management makes the decision. 1.4 Structure of research There are five chapters in this research, in each chapter has own major problem. Chapter one introduces about any problem of the research. It identified the research question, purpose, objectives, and the significant and the structure of the project. Chapter two gives the relevance of literature review. Specifically, it gives the information about accounting information, decision making process, management accounting, chapter two also covers the tool of decision making that indicate the impact and importance of accounting information in management decision making process. 5 Chapter three presents research methods. It is orient by theories and data will be collected and analyzed. Chapter four will discuss by the case study: Samsung Electronics Corporation in Vietnam. And the last chapter will summarized the main ideal of research, and conclusion derived contribution of this research to existing body of knowledge. Beside, the limitation of research will be discuss and tells more about the future research opportunities. 6 Chapter 2: Literature review 2.1 Managerial decision making process 2.1.1 Planning process 2.1.2 Control process 2.2 The importance and impact of accounting information on decision making process 2.2.1 Accounting information and its role in decision making process. 2.2.2 Management accounting and decision making 2.3 Financial Statements –The Important Source of Accounting Information for manager in electronics industry. 2.4 tool for decision making 2.4.1 Cost accounting system 2.4.2 Pricing and competition 2.4.3 Profitability 2.5 Requirements of Investors about the Quality of Accounting Information Disclosure In chapter two will provide information about accounting information, managerial decision making process and accounting tools. Understanding about managerial decision making process, cost accounting also accounting information can helps managers know what kind of information and how much of information need to make efficient decisions. 2.1 Managerial decision making process Decision can be made in any ways depending on different purpose of various group or organization. Based on Drury’s model the steps in this may be used as a whole 7 picture for the decision making process, it is very useful in defiance of decision type and maker. (Holsapple, C.W., Whinstone, A.B). Drury’s model includes seven stages; planning process belong to the decision making process, it may be described as “making choices between choices”. “Control process” is the last step of decision making process, which should measure and correct the material performance of the alternative chosen. Graph 1: adapted from DRURY C (2000) 2.1.1 Planning process In today, the competitive business environment are very high, so the company should be engage the strategic planning process that clearly defined about the objective, strategic, value of the company on both internal and external situation. We will discuss five steps in the strategic planning process: 8 The first steps will defined about the goals and objective, with the guiding direction, the decision maker will estimate the desirability of fixed way of action compared with any another. The objective of the company should be challenging but achievable. Besides, they should be measure so that the company can monitor its progress. And from economic point of view profit maximization for the company’s owner or shareholder assets should be the main objective. The second steps are finding for choosing course of action, manager has to find for chosen courses of actions that make it may be achieve the goals. The change of external environment also usually has more potential risk and new opportunity. So the company must know the ability also the limitation in order to the company can be achieved with a higher profitability success. The most importance and also the most difficult on the management decision making process that is the entity should concentrate on product of themselves and the market development. The third steps is gather data about alternative, to attain the superior profitability, the company should make a competitive advantage. In this step, management accounting information contributes a large importance. Based on the collect of data and costing information, and management accounting can able to predict likely effect on decisions such as the change in value, price change…as potential growth rate, profit in market share, areas of activities, and more important information is compose for every idea. The next step is the select qualify alternative course of action, the selection that “best satisfies the target of an organization” (Idem) will be accepted. The strategy implementations are based on the programs, budgets and procedures. If the main aim is profit maximization, all choice should be listed in terms on differences in profit. 9 The selective that seems to achieve the goal best should then be picked by the decision makers. And the last step is the implementation of decision, it includes defined parameter to be measure, defined target value for those measured, perform measurements, compare measured result to the pre-design standard, and make necessary changes. All decision will be complex investigation and put into through financial plan. 2.1.2 Control process Control process is statistic process and engineering discipline that deals with architecture, mechanisms, and algorithms for maintaining the output of specific process within a design range. Beside, control process is continuous flow between comparing, measuring and action. There are two steps are establishing performance standard such as: compare actual and plan outcome, responding to divergences from plan, With the compare actual, plan outcome: The family budget department provide the present figures for each month to the management group ... As seen in the test part the management team looks at the picture and compares them every month. So the financial department plays an importance role in general issues areas and also in terms of measuring the own performance between the control process. Profit is most commonly used to feedback-tool. It allows for a comparison of different stages and an assessment of their performances. In the next step, responding to divergence from plan: the functions in accounting control are plays a leading role to indentify whether or the firms is moving in the right direction. The managing director further added that sometimes it is difficult to admit a mistake. 10 When management accounting in the company provides information to supports the steps on the process of the decision-making, somehow, they may be seen as collected and classify through the decision making process. Moreover, the control processes also are difficult without the data share out from the financial department, which compares between planned and actual outcomes. Thus, it helps in gathering data about possible selective, and actual financial information about the possible outcomes and finally it gives financial feedback during the implementation and in the future. 2.2 The importance and impact of accounting information on decision making process 2.2.1 Accounting information and its role in decision making process Accounting is commonly concern with recognition dealing and recording the historical financial of the transaction in a company, so the main concentrates on accounting information of present financial events, but not events in the future (Hogget, Edward, & Merlin, 2006). Though, accounting information is not an event in the future, this information is usually used as a leading to later estimates of the any alternative nets effect. Managers on the organization often wish for know which or what kinds are being done thus, this information are very important for manager to do decision for the afterward plans, then they need continuous fast updated information in order to control whether actual performance in objective. Beside, accounting can be identified same as the process of estimating, recording and communicating economic information to authorized informed rules and economic decisions. The basic objectives of accounting are to help persons in an organization make economic decisions. Moreover, accounting information provides the basis elements for decisions making of resource allocation. 11 In the economic activity, Accounting information’s are also seen as financial information. All economic entities for example, government agencies, business, families, charitable entities need information because they are very useful for making economic decisions about those entities activity. The financial information is needed when making economics decision. It concentrates on the real events. For the aim on decision making process, the past is use as an instruct to future estimates of the after-effect of any choices. With the use of both internal decision maker and external decision maker, the accountant may support important in the domain of investigating, interpreting, budgeting, and communicating. 2.2.2 Management accounting and decision making Management accounting is an unusual subset of accounting essential mass up in house needs of business, they offer information about financial also any other information of all levels of management (including CEO, manager, account managers, or general managers) in an business organization to assist them to go their planning, controlling, and decision making responsibility. The activity of management accounting are usually cost volume profit and cost behavior relationship, manager often make decision for financial control and plan through incremental analysis, budgeting, capital budgeting, flexible budgeting for redeem evaluation, the established of manufacturing coast, costing systems, accounting and referring for business segment operation. Decision making on management accounting Decision-making is the main on managerial function. Manager makes decision which can be distributed like marketing, production, and financial. In addition, it also classify like strategic and tactical or long run and short run. A major goal of the 12