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Planning And Control In Distribution Organisations Notes

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Lecture 5: Planning and Control in Distribution Organisations Topics

* Complex Organisations and De-Centralisation


* National Culture and MCS


Complex Organisations and De-Centralisation

* Complex organisations are large, distributed geographically, technologically and culturally

* Their size and complexity make controlling them a challenge The Contingency Theory of Management Accounting

* Contingency theory assumes that:
? The bigger the organisation is, the more diversified its activities are
? So the more de-centralised it will tend to be

* Growth and activity diversification are coupled with geographical distribution Management Control Systems in Complex Organisations
* Remotely accessible, shared, databases seem to be perfect for MCS in globally distributed organisations

* They transmit and disseminate real time performance-related information across the organisation

* Van der Stede (2003) - Study of MCS design
? Found that subsidiaries in countries with more individualist cultures generally have looser budgeting processes than those in more collectivist cultures

* Tight vs. loose linkages between budget-based performance indicators and evaluation and reward

* RAPM = Reliance on accounting performance measures
? In high environmental uncertainty where a managers target can be rendered unachievable by unforeseen events, low RAPM is appropriate Enterprise Resource Planning Systems (ERP) Enterprise Resource Planning System (ERP)
* Systems such as SAP
* ERP systems are aimed at integrating activities across functions and geographical areas
? Combined into a single, integrated software platform, which runs over a shared database (Davenport, 1998)
* ERP are argued to be the 'best practice' modules that address process and business requirements of most organisations
? Modules are customizable but with rigid templates
? 'best practice' is attractive to organisations but rigidness is not (Taylor, 1998)
* Involve massive and significant organisational and contextual change (Davenport, Taylor, Callaway, AlMashari, O'leary, Brooks)
* Requires organisation-specific customisation to become operative

* Calls for changes in the organisation itself
* Implementation takes a long time, during which performance may suffer
* Majority of large companies have attempted to install ERP in last 10 years
? More than an issue of technical expertise or social accommodation
# It is an ongoing and dynamic interaction Newman and Westrup (case studies)
? 5 themes emerged:
# Increased visibility
# Locus of accountability
# Mediation of work using ERP
# Skills of accountants
# Abstraction and embodiment
? ERP individualised and socialised accountability
# As opposed to previous hierarchical accountability (Armstrong 1985) Pros and cons of ERP Newman and Westrup journal article
? "All we can focus on now is just driving out and using it as well as we damn well can and getting the benefits out of it"
? "Pressure from shareholders is enormous"
? Threat of being called to account and show the 'efficiencies' that can be attributed to the new ERP system
? Well-implemented ERP projects are shown to result in cost reduction, revenue enhancements, improvements in management reporting and control, improved efficiency and timely access to more accurate information (Fahy, 2001)
? 'best practices' introduce substantial rigidity and complexity... and accrued costs - Irani, Poston and Grabski, Love
? Researchers reported negative outcomes of multiple ERP projects FoxMeyer, Siemens, Panasonic, Bruno Magli - (Robey, 2002)

Course Notes Page 13

Key Points

* Complex organisations

* Contingency theory of MA

* MCS in complex organisations


* ERP implementation in US

* ERP implementation in Japan

* How did role of MA change?

* National culture and MCS

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