Topic One

Firms are established because it is profitable to do so.

Firms organise to reduce the transaction costs of repeated and complicated activities involved in creating, selling and distributing goods and services.

There are costs in using the price mechanism; firms can save costs.

Most obvious cost of organising production through price mechanism is negotiating and writing a contract.

Ownership of a firm is seperate from its management as postulated in Agency Theory.

Globalisation

Deregulation

Advances in technology (Metcalfe's Law, Moore's Law)

Outsourcing and downsizing

Pressure on business

Organisational response

Contracting relationships

Information systems ERP, intranet, external

Demand for new technologies

Network/Internet advances

(repeat/cycle)

Set of two or more interrelated components interacting to achieve a goal.

Occurs when components act in their own interest without regard for the overall goal.

Occurs when components acting in their own interest contribute toward the overall goal.

Facts that are collected, recorded, stored and processed.

Insufficient for decision making.

Processed data used in decision making.

Too much information makes decision making harder (Data/Information overload)

• Benefits
• - Reduce uncertainty
• - Improve decisions
• - Improve planning
• - Improve scheduling

• Costs
• - Time and resources
• - Produce information
• - Distribute information

• Relevant
• Reliable
• Existence
• Valid
• Complete
• Timely
• Measurable
• Understandable
• Verifiable
• Accessible

Agreement between two entities to exchange goods or services.

Affects the financial position of the business.

Can be reliably recorded.

'Give-get' exchange

Simple = pencil and paper

Complex = State of the art system, latest computers and information technology.

(Same process)

People using the system

Procedures and instructions (For collecting, processing and storing data)

Data

Software

Information Technology Infrastructure (Computers, peripherals, networks...)

Internal Control System (Safeguard system and data)

• Improve...
• - Quality and reduce costs
• - Efficiency and effectiveness
• - Sharing knowledge
• - Supply chain
• - Internal control
• - Decision making

Identify situations that require action.

Reduce uncertainty.

Provide alternative choices.

Provide feedback on previous decisions.

Provide accurate and timely information.

• Primary Activities
• - Inbound logistics
• - Operations
• - Outbound logistics
• - Marketing Sales
• - Service

• Support Activities
• - Firm infrastructure
• - Human resources
• - Technology
• - Purchasing

Each activity of interest

Resource(s) affected by each activity

People who participate in each activity

• Accurate
• - Provide instructions and prompts
• - Check boxes
• - Drop down boxes

• Control
• - Internal control support
• - Pre-numbered documents

• Paper-based
• - Ledgers
• - Journals

• Computer-based
• - Entity
• - Attributes
• - Fields
• - Records
• - File (Transaction, Master, Database)

• General
• - Summary level data for each (Asset, liability, equity, revenue and expense)

• Subsidiary
• - Detailed data for a General Ledger (Control) Account that has individual sub-accounts (A/R, A/P)

• General
• - Infrequent or specialised transactions

• Specialised
• - Repetitive transactions (sales...)

• Sequence
• Group
• Mnemonic
• Chart of Accounts (Block coding)

Create new data records

Read, retrieve or view existing data records

Update existing stored data records

Delete data or records

• Financial
• Human resources and payroll
• Order to cash
• Purchase to pay
• Manufacturing
• Project Management
• Customer relationship management
• System tools

Integration of organisation's data and financial information

Data is captured once

Greater management visibility, increased monitoring

Better access controls

Standardises business operating procedures

Improved customer service

More efficient manufacturing

Cost

Time-consuming to implement

Changes to an organisations existing business processes can be disruptive

Complex

Resistance to change