Just-In-Time Inventory

Just-In-Time Inventory

Management Accounting, JIT Inventory and Marketing

Just-in-time inventory is a term used by management accountants. Almost everyone has heard about management accountants at least once, but who are they, what do they do? Management accounting is primarily directed at internal users of a firm, unlike financial accounting which aims to answer questions external users may have. Just-in-time inventory has many advantages, such as extra storage space due to lower and lesser inventories. In merchandisers selling food, it also means less risk of the produce to go bad. Still, even in clothing manufacturing just-in-time inventory may free up much needed space. Storage space is expensive and adds to fixed costs, such as manufacturing overhead, also sometimes called factory overhead. The following short business essay covers some concepts taken from management accounting, as well as some basics in marketing. Most undergraduate students in commerce, management or business degrees and programs would go over these theoretical constructs at some point of their academic careers.

Management accountants know exactly how much metal or other material should be used to construct this bench. Image: Elena

Just-in-time inventory, just like other accounting concepts may be applied to one’s everyday life. For example, some people go to the pharmacy and buy three bottles of shampoo at the same time. At times, because the shampoo is on sale, other times because they simply fear running out of a product. Applied to real life of individuals, buying one bottle of shampoo when the last has been used up would represent just-in-time inventory. Whether buying extra products or waiting until one really needs the products represents, of course, a purely personal choice. Interestingly enough, resellers and retail stores often try to give incentives to customers to buy more. The strategy is evident in retail clothing establishments when sales are advertised as ‘buy one get one half price’ and so on. However, while the sale may be attrative and indeed save money on the purchased shirt, a consumer may end up with items he or she did not or does not need, simply because of a shrewd and effective marketing strategy.

Forex

Forex

Forex, also known as FX, stands for Foreign Exchange. Forex is the largest financial market in the world and trades in international currencies. The Forex Website has a lot of educational resources, including Webinars, video tutorials and other ways to learn about trading, identify trends and perform financial analysis.

The method of operation on Forex is buying one currency while simultaneously selling another, several major pairs of currencies exist. Typically, traders take advantage of the differences between the currencies and the volatility of the market to earn a profit. Indeed, over ninety-five percent (95%) of traded currencies in the world comes from speculation for profit on the foreign exchange platform. The market is an over-the-counter one, which means that it lacks a central exchange.

Interestingly enough, most traders concentrate on the most traded currency pairs, the biggest, called The Majors; these pairs include the US Dollar, Euro, Canadian Dollar, Australian Dollar, Japanese Yen, Swiss Franc and British Pound. Approximately eighty-five percent (85%) of daily trading relates to these major currency pairs. The market is open twenty four hours (24h) from Sunday at 17:00 to Friday at 17:00 and has an impressive daily turnover of over three trillion US dollars (US$3.2 trillion).

Free Hugs manifestation in Montreal. Photo: Elena

By the same token, most tourists notice that they can take advantage of another country’s lower currency. Indeed, their purchasing power suddenly rises when they are in another country with a weaker currency. Economically, the situation is a good one for the country with the weaker currency because it stimulates exports. From economics, it must be remembered that exports form part of the equation to calculate GDP.

On the professional side, there are two main schools of thought for traders. Thus, traders may be referred to as fundamentalists or technicians. However, as if often the case with seeing the world in black and white, rather than in shades of grey, most smart and successful traders use a blended approach. Therefore, it seems reasonable to include in one’s financial analysis price charts, economic data, as well as political and social environments which can influence price action.

Management, Marketing and Organizational Behaviour

Business Essay: Management, Marketing and Organizational Behaviour

If I had asked customers what they wanted, they would have said ‘a faster horse’ – Henry Ford

Management

Many students have to write essays in business. The purpose of the present business essay is to outline marketing, managerial and organizational behaviour theories. Business, commerce, administration and management studies are a popular cluster of majors across the world. Admission to the mostly associated professional degree, the MBA, Master of Business Administration, requires both an academic and working experience-based background. The situation is similar with the many professional accreditations common in the field (accounting: CPA – Certified Public Accountant, CA – Certified Accountant, CMA – Certified Management Accountant, CGA – Certified General Accountant; finance: CFA – Chartered Financial Analyst).

The situation is less clear-cut when it comes to managers, although theoretical constructs are abundant. Managerial theories often examine the growth and development of an organization through time, such as with leadership crises and related stages. An article published in the Harvard Business Review (HBR) also outlined the newcomer advantage was likewise defined as a factor in attaining commercial success, making profits being the goal. Organizational behavior is a close sub-discipline bordering on industrial psychology.

Porter (2008) establishes five strategic forces that impede profitability in business: savvy customers, powerful suppliers, market entrants, alternatives and strong rivals. The author proceeds to enumerating possible strategies to overcome these obstacles, reviewed in more detail elsewhere.

For managers, there are many fish in the sea. Image: Elena

Human resource management is an important process in a firm’s functioning, and Dunn & Short (2008) looked at when entrepreneurs feel they need to get external resources in the personnel management. Function were defined as hiring, termination, training, motivation, performance evaluation, compensation and other employment related actions. Successfully managing human resources may even bestow a competitive advantage. Organizations of all sizes must engage in HRM (human resource management) but smaller firms tend to be more informal. In their study, they found that smaller businesses with less than 11 employees tend to see HRM as less of a priority than larger small businesses (those with 11 employees or ore but fewer than a 100 employees).

Marketing Theories

Almost any introductory level marketing course will start with the explanation of the marketing mix, or the 4Ps, mainly place, promotion, product and price. However, besides this core aspect of the social discipline, professional marketers look at many aspects to promote a business or a non-profit organization, goods and services, or even an idea.

As Crane et al. (2011) explain, the most important questions a producer must answer to be successful is what does the customer want. As a brief reminder, for marketing purposes, need are defined as deprivations of basic necessities, while wants are the form those needs take according to one’s culture and past experiences. Thus, the goal of the marketer is to find out what they are, and then shape the customer’s wants. Typically, a marketing plan must be developed, implementation of which facilitates commercial growth. Also, there are four lines of growth: product development, market penetration, market development and diversification. Diversification, in turn, could be related or unrelated to the industry the organization is currently in. Competitive advantage and points of differences must also be kept in mind. Additionally, Eliaz & Spiegler (2011) write that in modern, given the quasi-infinite number of available alternative, positioning (differentiating a product from those of competitors and influencing how it is perceived by consumers) became even more significant for success. The authors also point out an amazing fact: marketing cannot change consumer preferences, as they are set. One assumes that the statement is not to be understood simplistically, but as related to truths such as impossible need creation (no matter how amazing an advertisement, a bald person will refrain from buying hair conditioner).

The sea provides many opportunities. Image: Elena

Naturally, it is impossible for a company to satisfy everybody. Therefore, the focus should be on the target market or target audience, those customers most likely to be interested by the product offered.

Interestingly, Crane et al. (2011) note that companies have undergone major changes in this century and the last. For example, in the beginning of the 20th century the focus was on production, then it turned to sales, and finally centered more on the market and the customer. The latest development, and the most important of these is believed by many, to be the transition the social media marketing era. Today, most organizations try to develop an online presence of some sorts. Further, popularity of social networking platforms such as Facebook, twitter and MySpace have resulted in a sort of customer based marketing. On these sites, as well as on YouTube, blogs, wikis, podcasts and other resources, individuals can act as remote promoters (or demoters) of brands they like (or dislike). Of course, this new ability at mass broadcast by the public has also created problems for some companies who have less control on commentaries published about them. But there is also a positive side. To illustrate, most software publishers offer tutorials on their websites which both facilitates use of their programs (increasing customer satisfaction) and enhances customer experience (a key point in the new marketing era). Logically, product placement on popular television shown or brand endorsements by celebrities represent additional means corporations possess to advance their offerings.

Given increased emphasis on customers and customer relationships building and management, information became even more important. Countless psychologists and marketers engage in trend research everyday. CRM (Customer Relationship Management) software to keep databases organized has gained prominence, while KM (Knowledge Management) is now a business and management field in its own right. Nonetheless, relationships differ, and purchasing behavior may vary according to state (Kumar et al., 2011).

Organizational behaviour theory predicts that personal attributes influence individuals’ behaviour in organizations. Image: Elena

Regardless of theories, to succeed a product must appeal to customers. For instance, the textbook authors give examples of failed products (such as Coca-Cola’s C2 or Pepsi’s Blue), which went away despite good marketing campaigns because people simply failed to enjoy it.

Obviously, advertising and related activities must be socially responsible. Also, social marketer refers to marketing that is done to promote something that benefits society at large, or at least someone else than the marketer. To illustrate, McKenzie-Mohr (2000) describes how community based social marketing could bring about more ecologically sound behavior, thusly in time, helping the environment. A similar idea was voiced by U.S. Sen. Claire McCaskill Senator on the Daily Show with John Stewart, who proposed resolving national postal service troubles by a campaign glamourizing the written letter. Potentially, one could argue that such a stance likewise constitutes social marketing.

Organizational Behaviour

Organizational behaviour or behaviour in organizations draws on both management and business studies, and psychology. For example, from one point of view, the field examines structure and which design allows for efficiency and effectiveness. Ancona et al. (2011) differentiate between the two terms as follows:

• Efficiency – achieving most with less
• Effectiveness – ensuring high quality of the end result
• Furthermore, the authors attest that there are several ways of looking at organizational behaviour. 

The alternative perspectives represent the strategic design, political and cultural lenses.

Team work is a key component of organizational behaviour theory. Image: Elena

From a dissimilar viewpoint, psychological insight comes into play when explaining such statements as politicking and socializing leads to faster upward movement along the career ladder. Additionally, cognitive styles and personalities may also play a role in crucial aspects of work related behaviours, such as teamwork.

Likewise, the discipline is highly relevant in other workplace settings. For example, Avey et al. (2010) examined the relationship between leadership, behaviour and self-esteem. The literature reviewed in their introduction showcases several types of leadership: charismatic, transformational, authentic and spiritual. Moreover, the researchers found that ethical leadership is positively correlated with followers’ prosocial actions, a relationship mediated by followers’ self-esteem. Thus, the purpose of the present paper was to discuss business, covering dome of the major theories in marketing, management and organizational behaviour.

References:

Ancona/Kochan/Scully/Van Maanen/Westney (first names unspecified, 2011). Managing for the future: Organizational behavior and processes. Nelson Education Ltd.: Toronto, On.

Avey, J. B., Palanski, M. E. & Walumbwa, F. O. (2010). When leadership goes unnoticed: The moderating role of follower self-esteem on the relationship between ethical leadership and follower behavior. Journal of Business Ethics, DOI 10.1007/s10551-010-0610-2.

Crane, F. G., Kerin, R. A., Hartley, S. W. & Rudelius, W. (2011). Marketing, 8th Can. Ed. McGraw-Hill Ryerson: United States of America.

Eliaz, K. & Spiegler, R. (2011). Consideration sets and competitive marketing. Review of Economic Studies, 78: 235-62.

Kumar, V., Sriram, S., Luo, A. M. & Chintagunta, P. K. (2011). Assessing the effect of marketing investments in a business marketing context. Marketing Science, [forthcoming]: 1-48.

McKenzie-Mohr, D. (2000). Promoting sustainable behavior: An introduction to community-based social marketing. Journal of Social Issues, 56 (3): 543-54.

Dunn, P., Short, L. E. & Liang, K. (2008). Human resource management importance in small business. Small Business Institute Journal, 2: 1-22.

Porter, M. E. (2008). Five competitive forces that shape strategy. Harvard Business Review, January: 1-19

Corporate or Managerial Accounting

Corporate or Managerial Accounting

Managers related establishments are numerous, such as the professional order of COSO (Committee of Sponsoring Organizations of the Treadway Commission). Many students enroll in commerce majors to become managers. Being a manager not only confers prestige, but is also a more lucrative career prospect. Thus, managerial accounting is usually most associated with the professional field of CMAs (Certified Management Accountants), who work within such systems as flow-n-flow-out, the balanced score card and just-in time inventory. Lately, a transformation has been underway in Canada, aiming at bringing all three certifications, CA, CGA and CMA under one roof, or the professional order of CPA.

Becoming a management accountant takes a lot of thought and preparation. Image: Megan Jorgensen (Elena)

Just as marketing studies have their goals, so has management, and accounting techniques can help companies keep better track of materials they use or items they produce. Indeed, it is almost impossible to imagine a successful business without any accountants to keep track of inventory, profits, expenses and so on. However, while most business goals centre on making profits, accountants and bookkeepers must work within established rules such as the GAAP (Generally Established Accounting Principles) or other regulations depending on geographical location and jurisdiction.

To illustrate, like most professions, management accountants have their own professional organization: the Institute of Management Accountants (CIMA). According to a work published in the journal, the balanced scored card approach may have more benefit s than just those benefits traditionally described in school. Also, like foreshadowed above, corporations often utilize systems such as just-in-time inventory, ERP (enterprise resource planning) and the balanced score card. Thus, according to the CIMA (2010) the balanced score card is one way management accountants bring value to business firms.

A chief or senior management accountant may become a Controller or Comptroller (British spelling). Image: Megan Jorgensen (Elena)

Further, the Harvard Business Review (HBR) is notorious for publishing articles outlining theories that later become classics of managerial concepts. For instance, Porter (2008) talks about market forces acting on commercial success or how customers, suppliers and competitors should be taking these into consideration when shaping one’s business strategy. All in all, the notorious publication has a wide array of articles outlining business strategy and other useful information for entrepreneurs and business owners. While it is unlikely to make an unsuccessful business work simply by reading about strategy, keeping informed and remaining in the know represent good habits to have as contributing to eventually post significant business profits.

Frigo & Anderson (2011) react to the financial crisis surrounding the events of subprime mortgages and subsequent bank collapses that started taking place somewhere around 2008. The authors do so by looking at risk management. Enterprise risk management (ERM) is a significant area for business to look at in attempting to achieve commercial success. The issue has gradually gained international recognition, with the International Organization for Standardization (ISO) issuing a set directives on how the process(es) should be carried out. In addition, credit rating agencies such as Standard & Poor’s and Moody’s have demonstrated interest in a firm’s ERM system. As one knows from introductory economics courses risk loving individuals significantly differ in their investing strategies from risk avoidant, or even risk-neutral individuals. Investment strategies greatly depend on the risk tolerance of the investor.

Accounting is present in many areas of life, including saving to buy a house. Image: Megan Jorgensen (Elena)

Just like parcours (a popular topic, consisting of a potentially dangerous sport of running across buildings, depicted in cartoons such as American Dad episode Stanny Boy and Frantastic and mystery and thriller television series) in music lyrics and cinematography, management and business studies is a popular subject in movies. For example, in the controversial movies Friends With Benefits, featuring Justin Timberlake (singer) and Mila Cunis (That 70s Show with Ashton Kutcher) he is a successful Website manager, while she’s a savvy headhunter. Management studies can be quite elaborate and specialized. For example, managing resources in ecology (e.g. Bestelmeyer, 2011). Thus, the purpose of the present business essay was to outline some of the major theories in managerial accounting today.

Real Estate

Real Estate

Real estate is an integral part of finance. Real estate courses are given as part of Bachelor of Commerce and Bachelor of Business Administration for a reason, and it is because real estate is closely related to the field of finance. Finance, in turn, is a field of economics concerned with financing, investing, monitoring and managing resources. For example, corporate finance is division that looks at the management of large sums of money required to keep corporations afloat.

However, when one talk about real estate, one is essentially discussing getting a piece of property, perhaps a house, a condominium or a commercial property. Naturally, real estate does not come cheap and a lot of planning must be involved in purchasing a home, particularly if it is the first and principal residence of a person.

Residential buildings at Humber River, Toronto. Photo: Elena

One of the major steps in becoming a homeowner is obtaining the funds to purchase the property. Interestingly enough, in economic terms, purchasing a house is not considered nor recorded as an expense, but as an investment. Conversely, a car is recorded and considered an expense. One of the reasons to such different treatments of these entities is that a vehicle typically depreciates in value, while real estate tends to appreciate in value over time.

However, many exceptions exist. For example, a house in a deplorable condition is likely to be valued much less than one which was just built. Indeed, new constructions in wealthy and safe neighbourhoods are usually the priciest ones. But regardless of your budget, chances are that you will need a loan. A loan for the purchase of a residential property is called a mortgage. Obtaining loans and mortgages follow the same pattern in that you must demonstrate that you have sufficient income to cover the interest and capital payments. Furthermore, you must be in good standing with credit rating agencies