Concepts of Throughput Accounting and Theory of Constraints

Financial Management

Kaizen – Understanding the Japanese Business Philosophy of Continuous Improvement

Operations Management

Role of Leaders in Shaping Organizational Culture

Management Principles

Organizational Culture – Development and Importance

Management Principles

Five Important Organizational Cultural Models

Management Principles

Responsibility Accounting

Responsibility accounting is a system under which managers are given decision-making authority and responsibility for each activity occurring within a specific area of the company. Under this system managers are made responsible for the activities of segments. These segments may be called departments or divisions. Responsibility accounting is a system of control where responsibility is assigned for the control of costs. The persons are made responsible for the control of costs. Responsibility accounting implies a system of accounting whereby the performance of various people is judged by assessing how far they have achieved the predetermined targets set for the divisions, departments or sections for which they are responsible. Each person is responsible for his area of operation. Responsibility accounting is similar to any other system of cost such as standard costing or budgetary control but with greater emphasis towards fixing of the responsibility of the persons entrusted with the execution Continue reading

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Concept of Organizational Climate

Organizations are social systems. Organizations combine science and people, technology and humanity. It is not possible for every organization to have the same type of technology and people and so the organizations differ in their characteristics and internal environment. The internal environment of an organization may be called the organizational climate. Organizational climate, a guide for dealing with people serves as a major influence on motivation and productivity of individuals and total work force.  Organizational climate may be noted as the ‘personality’ of an organization as conceived by its employees. The organizational climate usually has a major influence on motivation, productivity and job satisfaction. The organizational climate is the major motivating factor responsible for satisfaction and dissatisfaction of employees in an organization and affects the quantum of employees’ turnover and satisfaction. It refers to the entire social system of a working group. Campbell defines organizational climate as a “set of Continue reading

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Risk Management in Business

Kaplan and Garrick (1981, p. 12) provide a simple equation for risk, which is “risk = uncertainty + damage”. They believe that it is irrelevant as to what context risk exists in, and that the same equation can always be used to identify and manage risk. However, risk can still be categorized differently depending on what facet of the organization it is affecting. Before a risk management strategy can be decided upon, the risk event must first be identified. An organization should conduct three steps before deciding on the best risk management strategy to use. As risk management can use a substantial amount of resources, clarification and direction should be decided upon before conducting risk management. The three factors are; Identification of the risk: The organization should first review all of the possible risk sources. Furthermore, they could use a risk assessment tool to identify the risk event that may Continue reading

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Achieving a Sustainable Competitive Advantage

“If you don’t have a competitive advantage, don’t compete.” –  Jack Welch A company has a competitive advantage when its profit rate is higher than the average for its industry, and it has a sustained competitive advantage when it is able to maintain this high profit rate over a number of years.  Maintaining a competitive advantage requires a company to continue focusing on the four generic building blocks of competitive advantage – efficiency, quality, innovation, and customer responsiveness – and to do whatever is necessary to develop distinctive competencies that contribute toward superior performance in these areas. “Competitive advantage is at the heart of a firm’s performance in competitive  markets. After several decades of vigorous expansion and prosperity, however, many firms lost sight of competitive advantage in their scramble for growth and pursuit of diversification. Today the importance of competitive advantage could hardly be greater. Firms throughout the world face Continue reading

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Understanding the Insurance Underwriting Process

In order for the insurance companies to make profit and charge the appropriate rate for an insured, they undergo the underwriting process. In simpler words, insurance underwriting is a process of risk classification. The purpose of insurance underwriting is to spread risk among a pool of insured in a way that is both profitable for the insurer and fair to the customer. Insurance companies need to make a profit like many other businesses. Therefore, it doesn’t make sense if they sell insurance for everyone who applies for it. They may not want to charge an excessive high rate to the customer and also it is not good for them to charge the same premium to every policyholder. Insurance underwriting enables the company to weed out certain applicants and to charge the remaining applicants premiums that are commensurate with their level of risk. The insurance underwriting process consist of evaluating several Continue reading

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Classification of Cost of Capital

The cost of capital define as the minimum rate of return a firm must earn on its investment in order to satisfy investors and to maintain its market value. It is the investors required rate of return. Cost of capital also refers to the discount rate which is used while determining the present value of estimated future cash flows. The major classification of cost of capital are: Historical Cost and future Cost: Historical Cost represents the cost which has already been incurred for financing a project. It is calculated on the basis of the past data. Future cost refers to the expected cost of funds to be raised for financing a project. Historical costs help in predicting the future costs and provide an evaluation of the past performance when compared with standard costs. In financial decisions future costs are more relevant than historical costs. Specific Costs and Composite Cost: Specific Continue reading

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