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Management control systems help organizations align their activities with strategic goals through financial and non-financial measures. They encompass performance appraisal, risk management, and control frameworks like Balanced Scorecard and EVA. Modern approaches emphasize Lean systems, JIT, and TQM for efficiency and quality. Transfer pricing plays a role in global optimization, influencing taxation and internal trading decisions.
Organizations function as systems, requiring controls to achieve objectives.
Systems Theory distinguishes between closed and open systems, with businesses being open systems that interact with their environment.
Types of Controls: Feedback (corrective) vs. feed-forward (preventative).
Purpose: Steering companies through changing environments to ensure success.
Performance Targets: Must balance financial and non-financial factors.
Control Systems: Designed based on organizational structure (functional, divisional, matrix, network).
Responsibility Accounting: Managers are accountable only for areas they control.
Traditional Management Accounting: Includes budgeting, variance analysis, and cost appraisal (NPV, IRR, ROI).
Limitations of Traditional Methods: Often inflexible, short-term focused, and ineffective in dynamic business environments.
Beyond Budgeting: Budgets may limit flexibility and discourage innovation.
JIT & TQM: Reduce waste, improve efficiency, and enhance quality.
Lean Accounting & Strategic Management Accounting: Emphasize cost reduction and external business environment analysis.
Balanced Scorecard: Evaluates performance from financial, customer, internal process, and learning perspectives.
Economic Value Added (EVA): Measures value created for shareholders.
Transfer Pricing: Used in intra-company transactions, affecting taxation and global financial optimization.
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