Study Of Comprehensive Budget Management Based On Value Chain: L Company Case

With the development of budget management theory and practice, the traditionalbudget management drawbacks began to reveal themselves. The academia began tocombine budget management with the value chain theory, strategic management,operation management, the balanced scorecard principle and budget management,which opened up a new prospect of the budget management and enriched the budgetmanagement mode greatly. These all laid a good foundation for the practice. Inpractice, budget management’s role in the enterprise management system has beenhighlighted gradually. More and more companies begin to explore suited budgetmanagement modes under the guidance of budget management theory. Traditionalmode of budget management, which takes product as core, is no longer adaptive to thedevelopment of enterprises, since management goals of enterprises have graduallychanged from profit maximization to maximize value. Only comprehensive budgetmanagement based on value chain can solve this problem and ensure enterprises’development in the long run. It sees process and operation as the core, takescomprehensive consideration of enterprise internal operation and the relationshipbetween enterprises, suppliers and customers, eliminates non-value added work,reframes and simplifies the process to achieve value maximization of the value chainoverall.This article takes the L company as an example, using literature review, fieldresearch and inductive analysis method, found that L company has a series ofproblems in current budget management. Such as budget targets do not accord withthe enterprise long-term development targets, the lack of a formal budget managementorganization, unreasonable budget establishment method, insufficient budgetimplementation and control, imperfect gauges of budget performance and theignorance of value chain effect in the process of budget management, etc. All theseproblems set barriers to the action of budget management seriously, and thedrawbacks of the current budget are gradually catching managers’ eyes, especiallywhen unexpected events occur and cause excessive inventory, and the executionresults appear to be far more from budget targets. Therefore, under the guidance ofvalue chain theory and comprehensive budget management theory, based onpredecessors’ research results and research thoughts, using discover problems, analyze and solve problems and draw the conclusion as the main line, considering thecharacteristics of L company’s production and its strategic position in the group, thewriter wants to analyze L company’s internal value chain, external value chain andenterprise value activities and assignments, and build an entirely new system ofcomprehensive budget management system, in order to integrate the limited resourcesof the enterprise and search for further cost-saving and value-added spaces, andeventually make budget management work duly and promote enterprises’ long-termdevelopment.Through the research in this article, on one hand, can improve the deficiency ofcurrent budget management, explore the application of the theory in practice, enrichtheory and sum up experience, while, on the other hand, provide experiences andreferences for more enterprises which applying comprehensive budget managementsystem based on value chain. The innovation of this paper reflects in taking thesupplier as the fifth level when established budget goals and performance targets,except for those four levels——financial, customer, internal business processes,learning and growth, involved in the balanced scorecard. In this way, the budget goalcan be more detailed, the budget examination content can be more comprehensive,and the accomplishment of the budget can be more accurately understand.