Determining the real costs of doing business in a global market

Companies are recognizing that to be successful they have to compete in the “global marketplace.” Identifying new market opportunities, evaluating international manufacturing and sourcing alternatives, and analyzing the profitability of sub‐business units are fundamental to taking advantage of the changes taking place. The significant risk companies must address is the qualify of the information they are using to make decisions. We are all aware of the phrase: “Garbage in, garbage out.” The truth is that many accounting systems are not designed to provide information to answer the questions managers face in today's market. Worse, the information is still used and catastrophic decisions are made because the accounting information indicates it is the smart thing to do. This article describes some of the risks of existing cost information. The article also provides a case example to highlight the risks of using your existing accounting system to make international decisions, as well as the opportunities and value that quality management accounting information can provide.