Category Archives: Business Articles

Value Decision Making Paper-A Study

RUNNING HEAD:  Value Decision for JMI

 

Value Decision for JMI

By Stephanie J. McGowan

MGM624-0701B-02-PH1-T1

February 26, 2006

 

            JetSet Machinations (JMI) upper level managers are interested in reducing cost and increasing profit, and managerial accounting is willing to present and apply value chain management to accomplish this task. The value chain is a set of activities and resources necessary for the creation and delivery of a product to its customers.  (Williams, J) There are six value chain functions in which management can find accounting information and which decisions can be made to assist in the value chain effort.  Value chain includes the following:  research and development, design and engineering, production and distribution, and customer service.  (Zimmerman, R. 2006).  “Value added activities “add to the product’s or service’s desirability in the eyes of the consumer, Non-value added activities do not add to the product’s desirability.” (Williams, J) The goal is to drive out cost and satisfy the needs of the customer.  (Williams).  When accounting information is collected throughout the value chain questions can be answered to assist management in understanding and resolving solutions for JMI’s accounting methods. 

             Value Chain Analysis has three essential steps which includes the following:  the breaking down of a market or organization into its key activities; the identifying of current activities where a business has a competitive advantage; and the utilization of activities for the business which will help improve or sustain a competitive advantage. (tutor2u) What is JMI’s competitive advantage? Since, JMI produces shoes for travel, and they are certainly comfortable, the company may want to fund better production methods or design special styling of shoes, perhaps the shoes have an orthopedic advantage over other shoes purchased from JMI’s competitors.  Accounting may ask research and development in conducting a survey to find out if customers really appreciate comfort of shoe style instead of design.  What will it cost to provide this comfort? 

             Managers are often called to make decisions in resource and development.  Target costing begins at the onset of a new product and service and includes planning and market analysis.  The engineering of the product is important and the question of how to improve on the product remains a constant goal.  How can JetSet Machinations improve on its travel products?  Value chain engineering speeds up the development and the perfection of a product because every department works together simultaneously becomes multi-functional. (Williams) The fact that a product can be improved upon is also included and what funds can be expended to make this improvement. 

             Each part of the value chain incurs its own unique demand and cost.  Accountants for JetSet Machinations, Incorporated will want to assess its current cost and predict what its future cost will be.  This organization wants to know what should be considered in determining the cost to make the product and also to bring the product to the consumer.  What is fair and profitable for the consumer and all the stakeholders?  This knowledge will help determine the price for the product.  It is also understood that when changes in the marketing mix occurs, the changes will influence the cost of JMI’s products. This influences the concept of cost and demand.  The question of having just one cost system to provide the cost information in a competitive market needs to be answered.  Inventory control and production and cost metrics for the product must be considered.  All the expenses belonging to each group of the value chain must be studied.  (Stephens, J. 1992).

             Questions can also be address in the value chain for customer service.  Some questions address how does the value chain add value to the customer, or basically what does the customer get when he/she buys the product?   Profit is important to an organization and the most important goal is to help create value for the customer.  According to Ronald J. Baker, an organization must price for the customer and understand the five Cs of value: 

             1) Comprehend value to customers
          2) Create value for customers
          3) Communicate the value you create
          4) Convince customers they must pay for value
          5) Capture value with strategic pricing based on value, not costs and efforts

 These five components assist in determining how an organization can become more profitable.   (Baker, R. 2005)

             This is why the whole value chain is studied and the cost structure is looked upon as a whole.  Sometimes it is necessary to shift to another point in the value chain perhaps maybe product design instead of customer service. (Stephen, J.). An example would be if managerial accounting uses marketing or product design to attract the right customers because they may be able find a solution to the product quicker than distribution could. (Stephen, J.)   One of the questions that can be answered by product design is about product safety, such as the soles of the shoes to prevent any slippage.  What will it cost to provide this safety?  Research and development will probably look at various materials suitable for JMI to use in its productions of travel shoes.   Accounting can also ask this question to determine if JetSet should seek out other locations for their warehouses to cut down on transportation expense and storage space.

             JMI must create a business development plan which covers the cost for tools, equipment, labor, and future improvements.   JMI will look to its suppliers and try to negotiate the best possible cost.  In distribution of the product, JMI must ask how much they are willing to spend in shipping their products.  A strategy devised by Mike Scimeca of Florida CirTech in Sarasota, who provided chemicals and metals for the circuit board industry was to ask his supplies for advice.  He asked them how they saved money in transporting via trucking and found out he could save cost if his freight traveled at a cheaper weight classification.  He reduced freight cost by 15%.  (Mochari, I. 2000).

             Engineering is also important in the value chain because it helps develop and construct new products that should be innovative.  This is aided by information that is collected.  How will JMI gather this information?  The most likely answer will be a good informational system that tracks maintenance, locates materials necessary to build a better product.   Inventory can also be check to make sure everything is in stock in order to meet production scheduling and customer demand.  Scheduling must conform to customer needs and demands.  What if a specification should suddenly change, the method of the value system which cohesively blends each part of the value chain will be ready?   Multi-dimensional inventory management is one way to do this and a company believes in each part of the value chain communicating with the other.  Some of these features include the following as taken directly from the Information Solutions website: 

 • Comprehensive real-time communications across your value chain, including customers, suppliers, subcontractors, logistics providers, plants and other facilities–with EDI, XML and traditional communications such as FAX

• Robust capacity planning, scheduling, management and resource management tools for multiple methods of managing customers, labor, tooling, supply sources, shipping and plant equipment

• Multiple advanced statistical forecasting tools to measure demand and supply chain performance without relying on after-the-fact reports

• Comprehensive order-to-cash processes for accurate, real-time drill-down into information from Payables and Receivables across other business operations

• Multifunction analytical tools to enhance user productivity and provide exception based

insight into operations and simplified reporting for departmental and managerial needs

 One of the questions that may be asked by accounting is if JMI should deal with the same suppliers or seek out other suppliers to save money and be exposed to new product and materials?

             In conclusion, there are many questions that can be answered by accounting because of the methodologies of the value chain system.  It is this synchronization that works together to help in customer resource management, value, profit and cost savings for JMI and its stakeholders.

(NOTE):  The companies listed are fictitious and part of a class study.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

 

 

Baker, R. (2005), Who’s in Charge of Value in Your Firm?,  Retrieved on 26 February 2007        from the World Wide Web: http://accounting.smartpros.com/x49410.xml.

 

Infor, discrete manufacturing, Solutions for the Metal Fabrication Industry, Retrieved on 26         February 2007 from the Find White Papers website:    http://www.findwhitepapers.com/index.php?option=com_categoryreport&task.

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Mochari, I., (2000), A Can’t-Miss Plan for Cutting Cost, Inc.com, Retrieved on 26 February        2007 from the World Wide Web: http://www.inc.com/articles/2000/05/18907.html.

 

Stephens, J., et.al. (2002)  Cross-functional Interface of Marketing and Accounting: Value Chain             Analysis, Retrieved on 25 February 2007 from the World Wide Web: 

            http://www.bsu.edu/mcobwin/majb/uploads/pdf/vol13num1/stephens.pdg.

 

Tutor2u, strategy, value chain analysis,  Retrieved on 25 February 2007 from the World Wide      Web: 

            http://www.tutor2u.net/business/strategy/value_chain_analysis.htm.

 

Williams, J., et. al., (2002), Costing and the Value Chain, Chapter 18, Online Learning Center,    Retrieved on 25 February 2007 from the World Wide Web:  http://highered.mcgraw-            hill.com/sites/0072396881/student_view0/chapter18/chapter_summary.html.

 

 

 

Marketing Metrics

The Marketing department applies metrics,  measures, and determines how successful a business can become.  Metrics is a marketing tool which is utilized to measure advertising and direct mail responses, customer relationship management (CRM), market share and Return on Investment (ROI).  In order to provide the results of these metrical evaluations, marketing will come up with a suitable marketing plan, show how this marketing plan is applied, provide recommendations for improvement, and name the most important metrics.

Metrics is the measuring of results and a part of marketing efforts.  Metrics is  necessary in order to focus on justifying the efforts of marketing and to prove to management that marketing is of value to the agency.  (Hamilton, L., et.al.) .  Metrics provides a scorecard which includes focusing on priority areas or what is important at a glance.  It is an instrument  to watch,  manage, improve, and reward performance, and it helps to improve every process and procedure.  Metrics  determines what is important and what needs immediate attention.  (Cognos).  It can also allow marketing to see more than one result at a time when all key performers get together for one review.

Metrics also allows seeing below the data and the reason for the results.  Finally it allows one to take immediate corrective action to identify problems before they happen so that changes are made before something negative happens.  (Cognos).  All of this helps marketing to align a certain team strategy within the marketing mix, communicate goals, and watch how well advertising performs.  It provides a picture of  how goals are reached.  (Cognos).

When a scorecard is implemented, marketing will be able to help ensure ownership and prove accountability for performance.  Scorecards are  created along with diagrams, and when they needed this information is used again and again to help provide consistency and  definition of targets.  Status indicators will also show the progress against each target which marketing is trying to improve.  (Cognos).  Certain areas or locations  need  improve and marketing will work from there.

Metrics  it helps  to focus on profitability and not just revenue, because it gives a common sense approach.   A bank-based financial service company may track loan performance and not just the dollar value. A company gathers previous loan history information and after reviewing this data,  improves  credit and product policies.  A company will find out how fast loans in the past have matured, how they are paid,  and/or how they became delinquent.  All of this helps to cut financial loss.  Business intelligence aids their efforts.  Any significant changes could be monitored and improved and this helps a company see its general weaknesses.  (Cognos, p6).

E-mail is an important avenue for employing metrics in marketing because it delivers what is measurable.  E-mail statistical metrics includes terms such as Open Rate, Click-Through Rate (CTR), Bounce Bank rate and so forth.  Open Rate is the total number of emails opened in HTML format divided by total of emails delivered or distributed.  Click-Thru Rate (CTR) is the number of clicks on links in the email divided by the number of emails opened and indicates how many people interact with your e-mail.  Bounce rate is the total number of e-mails not delivered and bounced back to the sender which means the e-mail is blocked.

The three metrics involve measures the success of e-mails.   It is up to the company to measure all or one or two of these.  Making the subject line attractive will often get the reader to open the e-mail, but this is not overdone because it can look like spam.  Stay clear of using words like 30 day free offer which appears as spam-like material. (Giardi,I).   Log analysis tools will also provide important feedback and is used to measure the results of an e-mail campaign.  They include number of emails broadcasted and opened, number of clicks which include embedded links, and the number of e-mail addresses that bounch back and why.  (Hamilton, L.)

A new web presence can develop a new presence in the market place.  A website can help define the project and programs,  and show target audiences.  It also can define important goals and decide future projects.  Websites are studied  for presentation of ideas including, logos, layout, and photos.  Types of viewers of the website will also be measured.  The more one knows about our customers the more success a business will have.  (Hamilton, L).

A business may emphasize branding metrics to help make its brand known in the market place, and its campaigns will be base on brand awareness metrics. The brand marketer wants to help create an experience about brand on the website.  Metrics differentiate between the clicks and which ones are important.  Marco Derksen has developed a type of branding metrics called BEI (pronounced “buy”) or Branding Effectiveness Matrix and is useful in comparing campaign results.  In this instance a company will  use and measure  its new brand and the brand’s impact.  This is part of the behavioral  mapping strategy.

A visitor interacts with a brand on a web site and what the viewer’s positive or negative impression is measured.  These results are subject to change as the viewer visits the website.  Improvements are made  until the site can offer the user a positive experience.  So how does this work?  The site does the branding and replaces a  measurement of brand effectiveness.  This is done by using BEI methods such as page views, information request, and newsletter subscriptions which is used quite frequently today.  One company that uses BEI is Chevrolet which has a brochure request, a dealer locator, or a “Contact Us” form.  McDonalds uses a restaurant locator site, and a visit to the “Treasure Planet Happy Meal Site”.  (Derksen, M.) To put it quite simply websites impact brands.

To find a return on its investments, metrics justifies its marketing budget and can determine which marketing activities are better suited over others.  It is good to know how a business’ spends its marketing budget.   What is the cost for coupons, direct mail or media options?  To increase profit at lower risk the following is employed and includes agent base modeling taken from the Professional Marketing Development Workshop on Measuring and Improving Marketing Effectiveness:

  • Agent-Based Modeling – A bottoms up model of the consumer including choice, segmentation, equity and competitive differentiation
  • Marketing Mix Modeling – A statistical approach deriving ROMI coefficients between marketing drivers and consumer/customer response
  • System Dynamics – A top down approach to determine relationships along the purchase funnel
  • Conjoint Analysis/Discrete Choice Modeling – A consumer oriented approach based on how consumers make choices between product features, brands and price

It is important to track Return on Investment data because this is a way to gain qualitative facts and discuss improvements.

A  metrics system will be established, and use the findings to open new stores, after making sure the stores are stocked with the right merchandise to   synchronize with the right marketing plan.  A business will set up sales goals and establish  locations with new customers.  This in turn provides a chance for  greater revenue, and leads to greater success.    Sales volume is tracked to decide what opportunities are available for more sales.  Looking at its past performances,  a business will find out what consumers need or if these needs have not been met.

Looking at industry standards is also helpful  as well as past performances because it needs to improve in branding.   Matt Plaskoff of Plaskoff Construction states that he uses the following to improve on his sales:  “We set up our scorecard to show our plan and forecast based on how many days we are into our month and how many leads or prospects we have generated. We track our ratio of bids (or prospects) so we can make sure the tool we are using for figuring our metrics is meeting or exceeding our plan.” He also believes in raising a sales goal if the goal for the previous month was not made to make up for any loss in sales.  (Plaskoff, M. (2003).

It is important for businesses to measure everything that needs  measuring including the overall response rate to the media, percentage of cards filled out and returned, hits on web-sites, cost to market, number of product/design registrations (which indicates future purchases of a product), net sales,  and return on investment.  (Hamilton).  Pleasing the customer is also an important avenue in regards to customer relationship management which helps to focus on running to the customer to fulfill their needs.  It is important to know what the customer needs.

Metrics will also include compiling geographical locations, social customs, and different types of customers who buy different types of furniture.  What will the customers buy and where are these customers located?  Marketing seeks to only forecast success and will use metrics to make that possible.

References

Cognos, Smart Companies Get Ready, Retrieved on 12 February 2007 from the World Wide Web:

http://www.cognos.com/products/thankyou/wp_smart_companies.pdf.

Cognos, The Next Level of Performance, Metrics Track Your Performance, Retrieved on 12 February 2007 from the World Wide Web:  http://forms.cognos.com/?elqPURLPage=941&offid=od_cognos8&mc=07GLXXITFS_GAW_DEMO_Cognos8-web_gaw_metrics_

Derksen, M., (2002), Branding Metrics for Search Engine Marketing? Marketing Facts, Retrieved on 12 February 2007 from the World Wide Web:

http://www.marketingfacts.nl/berichten/branding_metrics_for_search_engine_marketing/.

Giardi, I., The Importance of Email Marketing Metrics, OPT Influence Permission Email Marketing & Advertising, Retrieved on 12 February 2007 from the World Wide Web:

http://www.opt-influence.com/?The-Importance-of-Email-Marketing-Metrics&id=152656.

Hamilton, L, et. al., Marketing Metrics:  Where to get them:, Advertising & Marketing Review, Retrieved on 12 February 2007 from the Colorado Technical University Website:

https://campus.ctuonline.edu/MainFrame.aspx?ContentFrame.

PMD Professional Marketing Development Series, Measuring and Improving Marketing Effectiveness, Marketing ROI and Metrics Workshop, Retrieved on 12 February 2007 from the World Wide Web:

http://www.romiworkshop.com/WhitePaper.html.

Plaskoff, M., (2003)., Sales and Marketing Metrics, Professional Builder, Retrieved on 12 February 2007 from the World Wide Web:

http://www.housingzone.com/probuilder/article/CA462460.html.