BENCHMARKING AND MANAGERIAL ECONOMICS

Benchmarking And Managerial Economics

Benchmarking And Managerial Economics

While other branches of accounting is concerned with the considerations of accounting information of business enterprises for the use of external decision makers, managerial economics is focused on the realm of enterprise-related accounting information for the use of a different set of decision makers - the enterprise's management itself. Therefore, managerial economics is the branch of accounting thought and practice concerned on providing useful information to decision-makers within the enterprise. These decisions relate to the development of resources and the exploitation of the opportunities available for the enterprise. (Altshuller, 2005)

The boundaries of managerial economics are not rigid. The one thing that managerial economics and financial accounting have in common is their focus on the enterprise and its activities. Their difference, on the other hand, lies on the decision interests of the class of decision makers that they served. Additionally, most of the decision models that have evolved for management use and for which benchmarking supply the necessary information inputs have been developed within the disciplines of managerial economics and managerial finance. These models are described as part of the managerial economics due to its vital role in supplying the relevant information for decision-making. Without it, it would be hard to understand the models of management decision.

Management decisions can be divided into two types. They are the long run and the short-run decisions. Long-run decisions are defined as decisions whose outcomes commit the enterprise or have direct influence on its numerous future-period activities. The long run is thought of as a span of time sufficiently long for the planning, implementation and running of the enterprise's significant project or program. Short-run decisions, on the other hand, are decisions whose outcomes commit the enterprise or directly influence its actions for perhaps only a year at most. The latitude available in the selection of short-run alternatives is restricted considerably by the commitments made by the enterprise in past long-run decisions. (Bestefield et al., 2004)

Given the objective of profit maximization in the long-run, the success of the enterprise (management) in the long-run hinges on the ability of the management in the identification and implementation of the most promising product lines, projects, and programs within its capabilities, as well as its environmental and money-capital limitations. The active seeking of opportunities is the first requisite to success. It is done to assist, either in providing new and better products/services, or in the development of new and better means of production. The former requires at least some minimal level of involvement, in the research of present markets and consumer/industrial preferences, plus on the research on product development. On the other hand, the latter requires at least some involvement with industrial engineering as well as organizational, institutional, and behavioral research. All of these are essentially information- seeking activities contributed by specialists other than benchmarking. The benchmarking' contribution comes into play in the selection of the most promising set among the identified ...