A Managerial Accounting Investigation

of a Global Apparel Manufacturer from

an Asia Public Listed Company

Accounting Final Exam Equivalent Project (FEEP), Year 2023

FOONG MIN JIE MBS221008

University of Technology Malaysia (UTM)

AHIBS, Fakulti Pengurusan, Universiti Teknologi Malaysia, 81310 Johor Bahru,

Johor, Malaysia

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Table of Contents

Abstract....................................................................................................................................3
Background...............................................................................................................................3
1. Background of Organization.................................................................................................3
2. Background of Interviewee...................................................................................................4
3. Findings.................................................................................................................................5
a) How do organizations/ SMEs plan their business and what type of objectives do
they pursue?................................................................................................................5
b) How do organizations/ SMEs determine the cost of their products and services
and what type of costing systems do they use?..........................................................7
d) How do organizations/ SMEs measure their performance?..................................10
4. Discuss Findings with Literature Support: Criticize, Compare and Contrast with
Management Accounting Literature.......................................................................................14
a) Criticism on Business Plan and Objective...............................................................14
b) Criticism of Costing - Activity Based Costing (ABC) and other costing system.......15
Other Costing System................................................................................................16
c) Criticism on The Budget........................................................................................16
Benchmarking I - Budgeting Review – NIKE...............................................................16
Benchmarking II - Budgeting Review – Adidas...........................................................17
Benchmarking III - Budgeting Review – Levi’s............................................................18
d) Criticism on performance measurement - Balance Scorecard (BSC) in CIGL..........18
Precaution of Using Balance Scorecard (BSC)............................................................19
Limitation – Self Criticism to the Report....................................................................20
Potential Future Study Extension...............................................................................21
5. Conclusion..........................................................................................................................22

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Abstract

This paper illustrated and how a multinational company (MNC) apply management
accounting (MA) in their branch office operation. The study is based on a semi
structured interviews with a key manager in Singapore. Most of the MNC have well
integrated MA into planning, set objectives, input of costing system. Moreover,
component in MA can be used to indicate with metrics, to monitor performance
annually for company. Meanwhile, this is exploratory research with limited to only
one interviewee and the reported sight may be one-side-bias. Limited industry and
supply chain were studied. However, more than 15 literatures reviewed has been
conducted, to extend the study and discussion. Not all similar industry (garment
making) was applying the same MA practice as the interviews company did. This is
arguably important because these enterprises use these techniques in a way that is
different from the traditional approach used in bigger corporations. On top of
providing and assessing empirical evidence on a debate that has been so far largely
theoretical, and on the back of the relative weight of micro and small enterprises in
any given economy, this paper target to share on the realisation on the need to further
the study of the decision-making process.

Keywords: Management Accounting, Activity Based Costing, Balance Scorecard,

Labour intensive industry, small business, Supply Chain Management, Apparel
Manufacturing.

Background

1. Background of Organization

This study was conducted with of Crystal International Group Limited (CIGL), a

Hong Kong Exchange Listed Company (Stock Code:2232). It was founded in Hong
Kong by Mr. and Mrs. Kenneth Lo in 1970. At the inception, it started only from a
workshop with a few sewing machines and knitting looms producing sweaters.

CIGL is now at a scale of 20 factories spanning across 5 countries.

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With a workforce of approximately 80,000, CIGL deliver over 470 million pieces of
apparel a year to the best-in-class apparel brands in the world, offering them the right
product at the right time at the right cost.

The company has a strong reputation for delivering high-quality products and services
to its clients, and it has achieved this through its relentless commitment to excellence
in all aspects of its operations. The company has a highly experienced and
knowledgeable workforce that provides its customers with top-notch products and
services. The company prides itself on its ability to offer its clients flexible and
responsive solutions that meet their specific needs and requirements.

In terms of financial performance, Crystal International Group Limited has

consistently delivered strong results over the years. The company has a solid financial
foundation that has enabled it to invest in research and development, as well as in
other growth opportunities. In addition, the company has been able to maintain a
positive cash flow, which has allowed it to fund its operations and continue to grow
its business.

The company's management team is committed to ensuring that it continues to

operate at the highest level of efficiency and that it remains at the forefront of the
industry. Crystal International Group Limited is continuously seeking new ways to
improve its operations and to better serve its customers. The company's goal is to be
recognized as a leader in the apparel manufacturing industry and to maintain its
position as a trusted and reliable partner to its customers.

2. Background of Interviewee

Mr Kok Choy Chung is a chartered accountant. After graduated from Monash

University, he has 10 years of experience in accounting industry. He has been
working for accounting firm Big 4 such as: KPMG. He is an Accounting Project
Manager in Finance Department in the reporting company. His key role is to manage
on the company financial profile and report closely with HK headquarters.

Mr. Kok Choy Chung is an experienced accountant in the apparel business with a
background in managing financial operations and ensuring business performance.
Throughout his career, he has gained a deep understanding of the industry and has
honed his skills in budgeting, cost analysis, and performance measurement. With his

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strong foundation in accounting and business management, Mr. Kok is able to provide
valuable insights and recommendations to apparel businesses looking to improve their
financial operations.

As a seasoned accountant in the apparel industry, Mr. Kok understands the unique
challenges and opportunities that come with running a successful business. He has a
keen eye for detail and can quickly identify areas for improvement and develop
strategies to optimize financial performance. Whether working with small, medium,
or large-scale businesses, Mr. Kok can provide customized support and advice that is
tailored to each company's specific needs.

Mr. Kok's expertise and experience make him an invaluable asset to any apparel
business looking to improve its financial performance and boost its bottom line.
Whether working with a new business or one that has been established for many
years, Mr. Kok is able to provide the guidance, support, and expertise needed to drive
success and ensure continued growth.

This interview was conducted on 12 January 2024.

3. Findings

Business Plan and Objectives

a) How do organizations/ SMEs plan their business and what type of objectives
do they pursue?

The studied company Crystal International Group Limited (called as CIGL in the

following context) plan their business by using 3 writing sales tools: Sales Forecast
from Tier 1 Customer (apparel brand buyers), Market Projection from analyst, and
then developing a 5-Year-plan.

Features of Business 5-Year-Plan

This plan is usually in writing and outlines the overall vision, mission, and goals of
the organization, as well as specific qualitative and quantitative objectives and
strategies for achieving them within 5 years. For example, the 5 Year Plan of 2023
covers the fiscal year of 2023-2027. The plan is usually reviewed and updated on an
annual basis to ensure that the company is on track to achieve its objectives.

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Objectives of Business Plan

The objectives that CIGL is set to provide a best and competitive apparel
manufacturing services in terms of speed, cost, volume, and lead time to the end
customers. The plan is usually reviewed and updated on an annual basis to ensure
that the company is on track to achieve its objectives. Key objectives of CIGL
business plan include:

Short term objectives (Current Year)

 Increasing revenue and profitability

 Expanding market share and customer base
 Improving operational efficiency
 Developing new products and services

Long term objectives (Three years onwards)

 Improving employee satisfaction and retention

 Enhancing brand awareness and reputation
 Expanding into new markets or geographical areas
 Developing strategic partnerships and alliances

Indicators to monitor the compliance

To achieve these objectives, like CIGL, organizations and SMEs often develop
specific strategies such as implementing new automation technologies, investing in
employee training and development, engaging in marketing, and advertising
campaigns, and forming strategic partnerships and alliances. They also develop
performance indicators to measure their progress towards achieving these objectives
and use this data to make informed decisions about how to improve their operations
and achieve their goals.

Crystal International Group Limited (CIGL) has a system of performance indicators

in place to ensure compliance with its business plan. These indicators are regularly
reviewed and used to measure the company's progress towards achieving its
objectives. Examples of these indicators may include revenue growth (USD/year),
customer satisfaction, employee engagement, and other relevant metrics that are
specific to CIGL's industry and business operations. It will be collectively

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documented into finance department, in the form of balance score card. Some of the
business growth indicator such us Compound Annual Growth Rate (CAGR),
Turnover will be published in Annual Report of the same fiscal year, and reporting
during the Annual General Meeting (AGM).

b) How do organizations/ SMEs determine the cost of their products and

services and what type of costing systems do they use?

Activity Based Costing (ABC)

CIGL as a labour-intensive production industry, which is heavily relying on Activity-

Based Costing (ABC) - a cost accounting system that assigns costs to specific
activities based on the resources they consume, such as labour, materials, and
overhead. ABC has been widely used in various industries to better understand the
true cost of products and activities. As per Chen, H. (2005), In the apparel
manufacturing industry, ABC can provide valuable information to companies such as
Crystal International Group Limited, allowing them to make informed decisions about
pricing, product design, and production.

Traditional cost accounting methods, such as process costing or job costing, often do
not accurately reflect the true cost of production. These methods allocate costs based
on the total cost of production, divided by the total number of units produced.
However, this approach can result in an incorrect cost allocation, as it does not
consider the resources consumed by each product or activity.

In contrast, ABC allocates costs based on the resources consumed by each product or
activity. This provides a more accurate picture of the true cost of production and can
help companies identify areas for cost reduction and efficiency improvement. For
example, if ABC reveals that the cost of procuring raw materials is significantly
higher than expected, companies can explore alternative suppliers or negotiate with
current suppliers to reduce costs.

ABC can also help companies in the apparel manufacturing industry to improve their
product design and development process. By understanding the cost of different
stages of the production process, companies can make informed decisions about

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which products to design and produce. For example, if ABC reveals that the cost of
producing a particular type of clothing is significantly higher than expected,
companies can explore alternative design options or materials that would reduce costs.

In terms of accounting, ABC provides more accurate and relevant information for
financial reporting and analysis. ABC provides a more detailed understanding of the
cost of production, which can help companies better understand their financial
performance. In addition, ABC can help companies to identify areas for cost
reduction, which can improve their profitability and competitiveness.

The implementation of ABC in the apparel manufacturing industry, such as Crystal

International Group Limited, involves several steps. First, the company needs to
identify the activities that consume resources, such as the procurement of raw
materials, production, and distribution. Next, the company needs to determine the cost
of each activity, including the cost of labour, materials, and overhead. The company
then needs to allocate the cost of each activity to each product or service based on the
resources they consume.

In conclusion, ABC is a valuable tool for companies in the apparel manufacturing

industry, such as Crystal International Group Limited. ABC provides a more accurate
picture of the true cost of production, allowing companies to make informed decisions
about pricing, product design, and production. In addition, ABC can help companies
identify areas for cost reduction and efficiency improvement, improving their overall
performance and competitiveness in the industry.

To fully realize the benefits of ABC, companies need to carefully design and
implement the system, involving all relevant departments and stakeholders. In
addition, companies need to continuously monitor and evaluate the performance of
ABC, adjusting as needed. With a well-designed and properly implemented ABC
system, companies in the apparel manufacturing industry can gain a significant
competitive advantage and improve their overall financial performance.
c) What type of budgets do organizations/ SMEs prepare and how do they
elaborate them?

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CIGL Organization Budget

Apparel manufacturing companies, such as Crystal International Group

Limited(CIGL), rely on a variety of budgets to plan and control their operations. Four
of the most used budgets in this industry are operating budgets, capital budgets, sales
budgets, and cash budgets. In this section, we will provide an overview of each type
of budget, its purpose, and how it is used to support the decision-making process in
apparel manufacturing.

Operating budgets are comprehensive plans that outline a company's expected

revenue and expenses for a specific period. According to Horngren, Datar, and Rajan
(2019), operating budgets are critical in helping companies monitor and control their
day-to-day operations and ensure that they remain on track to meet their financial
goals. In the case of an apparel manufacturer, the operating budget will include items
such as raw materials, labour, overhead, and selling and administrative expenses. This
type of budget is used to ensure that the company has sufficient resources to meet its
production and sales goals, while also controlling its expenses.

Frequency Review: By Season: Spring Summer or Fall Winter, depends on buyer

demand.

Capital budgets, on the other hand, are plans for the acquisition of long-term assets,
such as equipment, buildings, and property. According to the same authors (Horngren
et al., 2019), capital budgets are essential in ensuring that companies have the
resources they need to meet their long-term growth goals. In the case of an apparel
manufacturer, a capital budget might include items such as new machinery and
equipment, facility expansions, and technology upgrades. This type of budget is used
to plan and control the company's investments in long-term assets and ensure that they
are aligned with its strategic goals.

Frequency Review: By Year, depends on company plan to expansion or consolidate.

Sales budgets are plans for a company's expected sales for a specific period of time.
According to Horngren et al. (2019), sales budgets are based on market demand, past
sales trends, and other relevant data. In the case of an apparel manufacturer, the sales
budget is critical in determining the company's expected revenue, as well as its
inventory requirements and production schedules. This type of budget helps

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companies plan for future sales and ensure that they have sufficient resources to meet
their production and distribution needs.

Frequency Review: By Month, depends on customer allocation of order.

Finally, cash budgets are plans for a company's expected cash inflows and outflows
for a specific period. According to Horngren et al. (2019), cash budgets are critical in
monitoring and controlling a company's cash position and ensuring that it has
sufficient funds to meet its financial obligations. In the case of an apparel
manufacturer, the cash budget will include items such as accounts receivable,
accounts payable, and other cash inflows and outflows. This type of budget is used to
ensure that the company has sufficient cash flow to meet its financial obligations and
maintain its operations.

Frequency Review: By Quarter, depends on operational work in process (WIP) and

cash flow.

To elaborate these budgets, apparel manufacturers like Crystal will typically begin
by analysing historical data and market trends to determine their expected sales, costs,
and other financial metrics. They will then use this data to create budget projections
for the upcoming period. Throughout the budgeting process, the company will need to
closely monitor and control its actual performance against its budget and adjust as
needed to ensure that it remains on track to meet its financial goals.

For CIGL, budgets play a critical role in the decision-making process. By outlining
expected revenue and expenses, capital expenditures, sales, and cash flow, these
budgets provide a roadmap for the company's operations and ensure that it has the
resources it needs to meet its financial goals.

d) How do organizations/ SMEs measure their performance?

For company like CIGL, measuring the performance of an apparel business in terms
of accounting can involve a range of financial and non-financial metrics. These
metrics can help the business to assess its overall health and make informed decisions
about its future direction. The following are some of the common ways that apparel
businesses measure their performance.

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Financial Metrics: The most basic financial metrics that apparel businesses use to
measure their performance include revenue, profit, and return on investment (ROI).
These metrics provide a quick snapshot of the business's financial performance and
can be used to compare performance over time or against industry benchmarks. For
example, an apparel business might track its revenue growth rate, comparing it to the
growth rate of its competitors, or to the average growth rate of the industry.

Cost Metrics: Cost metrics are another important way that apparel businesses
measure their performance. These metrics can include raw materials cost, labour
costs, and overhead costs. By tracking these costs, the business can determine its cost
of production, which is crucial for determining the price of its products. For example,
an apparel business might compare its raw materials costs to those of its competitors,
or track changes in its labour costs over time.

Customer Metrics: Customer metrics are another important way that apparel
businesses measure their performance. These metrics can include customer
satisfaction, customer loyalty, and customer retention. By tracking these metrics, the
business can assess the strength of its customer relationships and determine the
effectiveness of its marketing and customer service efforts. For example, an apparel
business might track its customer satisfaction scores over time or compare its
customer retention rate to that of its competitors.

Operational Metrics: Operational metrics are another important way that apparel
businesses measure their performance. These metrics can include production
efficiency, order fulfilment speed, and product quality. By tracking these metrics, the
business can assess the efficiency of its operations and determine areas for
improvement. For example, an apparel business might track its production efficiency,
comparing it to the efficiency of its competitors, or assess its order fulfilment speed
over time.

Balance Scorecard: The Balance Scorecard is a strategic planning and management

system that is widely used by businesses in many industries, including the apparel
manufacturing industry. The Balance Scorecard provides a comprehensive view of an
organization's performance by considering a range of financial and non-financial
metrics. The metrics used in a Balance Scorecard can include financial metrics,
customer metrics, internal processes metrics, and learning and growth metrics.

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Overall, CIGL as a world apparel maker use a range of metrics to measure their
performance, including financial metrics, cost metrics, customer metrics, operational
metrics, and the Balance Scorecard. By tracking these metrics and analysing the
results, apparel businesses can gain valuable insights into their performance and
identify areas for improvement.

A Consolidate Matrix Example: The Balanced Scorecard (BSC)

CIGL uses BSC to measure their performance across multiple areas of their business.
The BSC framework typically includes four main perspectives: financial, customer,
internal process, and learning and growth.

1. Financial Perspective: The financial perspective focuses on the financial

performance of the company, such as revenue growth, profitability, and return on
investment. For an apparel manufacturer like Crystal, this may include measures such
as sales revenue, gross margin, and inventory turnover. These indicators are important
to evaluate the company's overall financial performance and to ensure that it's
generating enough revenue to cover its costs and to generate profit.

2. Customer Perspective: The customer perspective focuses on understanding

and meeting the needs of the company's customers. For Crystal, this may include
measures such as customer satisfaction, market share, and customer retention. These
indicators allow the company to evaluate how well it is meeting the needs of its
customers and to identify areas for improvement. For example, if customer
satisfaction is low, the company may need to improve its product quality or customer
service.

3. Internal Process Perspective: The internal process perspective focuses on the

company's internal processes and operations, and how they contribute to the
company's overall performance. For Crystal, this may include measures such as
production efficiency, lead time, and on-time delivery. These indicators allow the
company to evaluate the efficiency and effectiveness of its internal processes, and to
identify bottlenecks and other areas for improvement.

4. Learning and Growth Perspective: The learning and growth perspective

focuses on the company's ability to improve and innovate over time. This may include
measures such as employee training and development, technology investments, and

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new product development. These indicators allow the company to evaluate its ability
to adapt to changing market conditions and to develop new products and services.

By using the BSC framework, Crystal can gain a comprehensive understanding of its
performance across multiple areas of the business and identify areas where
improvements are needed. The BSC is a powerful tool that allows apparel
manufacturers like Crystal to align their strategy, objectives, and performance
measures, and thus to improve their overall performance. It's important to note that
the BSC is not a one-time event, it should be used on a regular basis to ensure the
company stays competitive in the industry.

Advantages of a balanced scorecard:

Overall, a balanced scorecard helps companies focus on performance measurement in

more than one area. It considers items that can sometimes get overlooked in a
company such as internal processes and current customer satisfaction. Here are some
of the biggest advantages of using this method in your business:

Brings structure to business strategy

Different departments within an organization may have their own way of measuring
performance and what they consider to be important in terms of metrics. With a
balanced scorecard, different leaders and departments can still individualize their
performance measurement, but it all falls within a set structure that can be understood
across the organization. It gives a common place to everyone in the company to
measure success.

Makes communication easier

Communication across team members and departments becomes easier when

everyone is speaking the same language. In other words, having a streamlined
performance measurement system means that it’s easier to talk about strategy and
progress within the organization.

Facilitates better alignment

With a balanced scorecard, members of the organization can easily link their
objectives and goals at different levels of the company. It takes the guesswork out of
trying to understand everyone’s responsibilities and it gets teams and departments

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synced up under one structure. This also leads to having a much clearer picture over
projects and initiatives, which hopefully turns into a shorter turnaround time with
more optimal results.

Connects the individual worker to organizational goals

A balanced scorecard helps employees “keep their eyes on the prize” so-to-speak in
terms of goals. Individual workers may find it helps their own performance when they
can see the greater purpose behind the goals and objectives they’re aiming to hit. It
also has the added benefit of helping employees find purpose in the organization, thus
keeping them engaged in their work.

4. Discuss Findings with Literature Support: Criticize, Compare and Contrast

with Management Accounting Literature

a) Criticism on Business Plan and Objective

As with any business plan, the budgeting method used by Crystal may have certain
criticisms or limitations that need to be considered. After comparing from Otley, D.
(2010), below is an overview of some of the potential criticisms of Crystal's
budgeting method:

Inflexibility: Crystal's budgeting method may be rigid and not able to adapt quickly
to changes in the market or the business environment. This can lead to missed
opportunities or potential losses.

Lack of Realism: The budgeting method used by Crystal may be overly optimistic or
unrealistic, leading to an overestimation of revenue and an underestimation of costs.
This can lead to difficulties in achieving the budgeted goals and an unrealistic picture
of the company's financial performance.

Focus on Short-term Goals: Crystal's budgeting method may place too much
emphasis on short-term goals and not enough on long-term planning. This can lead to
a lack of focus on future growth and development, which may impact the company's
overall success.

Limited Feedback: Crystal's budgeting method may not provide enough feedback or
information about the company's performance. This can lead to difficulty in

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identifying areas for improvement and making informed decisions about future
planning and budgeting.

Lack of Collaboration: The budgeting process used by Crystal may be limited to a

small group of individuals, rather than being an inclusive process that involves all
relevant stakeholders. This can lead to a lack of buy-in and support from employees
and other stakeholders, which can hinder the implementation of the budget.

It may be necessary for Crystal to adjust their budgeting method to address these
criticisms and to ensure that they are able to achieve their financial goals and improve
their overall performance.

b) Criticism of Costing - Activity Based Costing (ABC) and other costing system

While ABC offers many benefits to companies in the apparel manufacturing industry,
there are also some limitations to consider. Anderson, S. W., & Young, S. M. (1999)
reported that these could be included:

 High implementation costs: Implementing an ABC system can be time-consuming

and costly. This includes the cost of software and hardware, as well as the cost of
training and consultation. Companies also need to allocate resources to gather the
necessary data, as well as to design and implement the system.
 Complexity: ABC can be complex, requiring a significant level of expertise to
properly design and implement. Companies also need to continuously monitor and
evaluate the system, adjusting as needed.
 Resistance to change: Implementing a new cost accounting system can be
challenging, especially if employees are resistant to change. Companies need to
manage the change process carefully, communicating the benefits of ABC and
addressing any concerns employees may have.
 Lack of flexibility: ABC can be rigid, making it difficult to accommodate changes
in the production process. This can result in a need for constant adjustment, which
can be time-consuming and costly.
 Data quality: The accuracy of the data used in ABC is critical to its success.
Companies need to ensure that they have accurate and relevant data to support the
system, and they need to regularly update this data to keep it current.

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In conclusion, the application of Activity-Based Costing (ABC) in the apparel
manufacturing industry has the potential to provide significant benefits for companies,
including Crystal International Group Limited. By using ABC, companies can gain a
more accurate picture of the costs associated with each product, process, and activity,
which can help them make informed decisions about pricing, production, and resource
allocation.
Implementing an ABC system can be costly and complex, requiring significant
financial investment and expertise. Additionally, the system can be rigid and
inflexible, making it difficult to accommodate changes in the production process.

Other Costing System

There are several costing systems used by apparel businesses, including job costing,
process costing, activity-based costing (ABC), and standard costing. Each of these
systems has its own advantages and disadvantages, and the choice of the most suitable
system depends on the nature of the business and its specific requirements. Anderson,
S. W., & Young, S. M. (1999).

Job costing, for instance, is used by apparel businesses that manufacture unique or
customized products. This system allocates the direct and indirect costs of production
to specific jobs, allowing for accurate cost determination of each product.

Process costing, on the other hand, is used by apparel businesses that produce similar
products in large quantities. This system calculates the average cost of production by
dividing the total production costs by the total number of units produced.

Standard costing is another commonly used costing system in the apparel industry.
This system uses predetermined costs for direct materials, direct labour, and overhead
costs to calculate the expected cost of production.

In conclusion, the cost of products and services in the apparel industry is determined
by using various costing systems, including the traditional cost accounting system and
the activity-based costing (ABC) system. While the traditional cost accounting system
is easy to use and less complex, it may not accurately reflect the actual cost of a
product. The ABC system is a more accurate and sophisticated method of calculating
the cost of a product, as it assigns overhead costs based on the activities they
consume. Companies like The Gap Inc. have successfully adopted the ABC system to

16
improve their cost management processes and enhance their competitiveness in the
market. This justifies the reason that CIGL has swapped to ABC system since 1980
and maintain ABC as the main cost accounting system till now.

c) Criticism on The Budget

Benchmarking I - Budgeting Review – NIKE

Collier, P. M. (2015) reported an example of a company in the apparel manufacturing

industry that uses budgeting is Nike Inc. Nike is a multinational corporation that is
engaged in the design, development, and marketing of athletic footwear, apparel,
accessories, and equipment. The company uses budgeting as an essential aspect of its
financial planning process to allocate resources effectively, plan for future
expenditures, and track its financial performance against its budget.

For example, Nike prepares an annual budget that outlines its expected sales,
production costs, and SG&A expenses, among others. The budget serves as a guide
for the company's operations and helps it manage its resources effectively. The budget
is reviewed regularly to ensure that it remains relevant and up to date with the
changing market conditions.

Nike also uses budgeting to monitor its performance against its budget and to adjust
where necessary. The company compares its actual results against its budgeted results
to identify any variances and take corrective action if necessary. This helps Nike to
maintain its financial discipline and achieve its financial goals.

In conclusion, Nike Inc is an example of a company in the apparel manufacturing

industry that uses budgeting as an essential aspect of its financial planning process.
The company prepares an annual budget that outlines its expected sales, production
costs, and SG&A expenses, among others, and regularly reviews and adjusts its
budget to ensure its relevance and accuracy. The budgeting process enables Nike to
allocate resources effectively, plan for future expenditures, and track its financial
performance against its budget.

Another example of a company in the apparel manufacturing industry that uses

budgeting is Adidas AG. Adidas is a German multinational corporation that is
engaged in the design, development, and marketing of athletic footwear, apparel, and

17
accessories. The company uses budgeting as an important tool for its financial
planning and decision-making process.

Benchmarking II - Budgeting Review – Adidas

From Heinemann, C., & Petrovic, A. (2007), Adidas prepares an annual budget that
outlines its expected sales, production costs, SG&A expenses, capital expenditures,
and other financial items. The budget serves as a guide for the company's operations
and helps it allocate resources effectively. The budget is regularly reviewed and
updated to ensure that it remains relevant and up to date with the changing market
conditions.

Adidas also uses budgeting to monitor its performance against its budget and to make
necessary adjustments. The company compares its actual results against its budgeted
results to identify any variances and takes corrective action if necessary. This helps
Adidas to maintain its financial discipline and achieve its financial goals.

In conclusion, Adidas AG is another example of a company in the apparel

manufacturing industry that uses budgeting as an important tool for its financial
planning and decision-making process. The company prepares an annual budget that
outlines its expected sales, production costs, SG&A expenses, capital expenditures,
and other financial items, and regularly reviews and updates its budget to ensure its
relevance and accuracy. The budgeting process enables Adidas to allocate resources
effectively, plan for future expenditures, and track its financial performance against
its budget.

Benchmarking III - Budgeting Review – Levi’s

Another real example of an apparel manufacturer from Leung, Y. T. (2003). that uses
budgeting is Levi Strauss & Co. Levi Strauss & Co. is a multinational corporation that
is engaged in the design, manufacturing, and distribution of jeans and other casual
clothing.

Levi Strauss prepares an annual budget that outlines its expected sales, production
costs, SG&A expenses, capital expenditures, and other financial items. According to
the company's 2018 annual report, Levi Strauss uses budgeting to help prioritize its
spending and to ensure that it is allocating its resources effectively. The budgeting

18
process also helps the company to identify areas for cost savings and to track its
progress towards its financial goals.

In addition to its annual budget, Levi Strauss also uses periodic rolling forecasts to
update its budget throughout the year. This helps the company to adjust its budget in
response to changes in the market or in its business operations. By using budgeting
and forecasting, Levi Strauss can make informed financial decisions, manage its cash
flow effectively, and achieve its financial goals.

d) Criticism on performance measurement - Balance Scorecard (BSC) in CIGL

While there are so many advantages to implementing a balanced scorecard system

into your workplace, there are also potential roadblocks and disadvantages to
balanced scorecards. Chia-Chi, L., & Mao-Yuan, L. (2006).

1. It must be tailored to the apparel manufacturer

In CIGL experience, they had applied it since 2003. A balanced scorecard is supposed
to provide a framework from which to work from, however, it will still need to be
customized to every organization using this system. This can take up a lot of time, and
while examples are helpful, they can’t be copied exactly due to the unique needs of
every business. Hence, that is why, besides the 4 common sections from traditional
BSC, CIGL also included staff turnover rate and product lifecycle ahead to reflect the
performance of HR and Product development as these two are the key drivers of
apparel industry.

2. It needs buy-in from leadership to be successful

For the balanced scorecard system to be fully effective, it must be implemented from
the bottom all the way to the top of the organization. This means getting buy-in from
leaders, which can sometimes take some convincing, not to mention the learning
curve involved with getting the whole organization to use the new system.

3. It can get complicated

The framework itself of balanced scorecards takes some time and dedication to
understand. There are countless resources and case studies to read from and it’s easy
to get bogged down with the many ways of using this method.

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4. It requires a lot of data

Most of the time balanced scorecards require managers and team members to report
information, which means logging data. Many don’t like this because they find it
tedious and, it can get in the way of doing the work required to meet objectives.

Precaution of Using Balance Scorecard (BSC)

The interviewee – Mr Kok Choy has also followed up with some general advice based
on his experiences: factors that can contribute to the failure of balanced scorecard
implementation in a company.

Balanced scorecard implementation can fail for several reasons, including poor
communication, lack of alignment with company strategy, and insufficient data to
support key performance indicators (KPIs).

Poor communication between departments and stakeholders can lead to

misunderstandings about the purpose and use of the balanced scorecard. If employees
are not properly trained on how to use the balanced scorecard and how it supports the
company's overall strategy, they may not see the value in using it, leading to
resistance and ultimately, failure.

Additionally, the balanced scorecard may not be properly aligned with the company's
overall strategy. If the KPIs chosen to do not accurately reflect the company's
objectives and priorities, they will not provide the desired insight into performance.

Furthermore, insufficient data and resources can prevent a company from accurately
tracking and measuring KPIs. If data is not accurate or not available in a timely
manner, the balanced scorecard will not provide meaningful insights into
performance, and decision-makers will be unable to make informed decisions.

Hence, balanced scorecard implementation can fail for a variety of reasons, including
poor communication, lack of alignment with company strategy, and insufficient data
and resources. Companies must take these factors into consideration when
implementing the balanced scorecard to ensure its success.

Limitation – Self Criticism to the Report

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In any study or research, it is important to consider both the strengths and limitations.
The following are potential criticisms of a study on the role of accounting in boosting
a company's profile:

Reliance on Financial Statements: The study may be criticized for relying heavily
on financial statements and other quantifiable data in determining the success of a
company. However, it is important to note that while financial data is a critical
component of evaluating a company's performance, it is not the only consideration.

Limited Industry Focus: This study may be limited in its focus on a specific
industry, such as apparel manufacturing, and may not be applicable to other types of
businesses.

Unaccounted Variables: This study may overlook important variables such as

market conditions, consumer trends, and changes in the competitive landscape, which
could significantly impact a company's performance.

Lack of Long-term Perspective: The study may not consider long-term trends or the
impact of accounting practices on the company's future performance.

Simplistic Approach: This study may be criticized for oversimplifying the complex
and nuanced relationships between accounting and company performance.

These criticisms highlight the importance of considering multiple perspectives and

factors when evaluating the role of accounting in boosting a company's profile.
Further research is needed to address these limitations and provide a more
comprehensive understanding of the topic.

Potential Future Study Extension

Based on Scapens, R. W. (2010) and Horngren, C. T., Datar, S. M., & Rajan, M.
(2021), some potential future work frameworks for the study of how accounting helps
a company may include the following:

 Conducting a comparative analysis between different industries to understand how

accounting practices can be tailored to suit the specific needs of a particular
sector.

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 Exploring the role of technology in accounting and how it can be leveraged to
enhance a company's profile. This could involve studying the use of accounting
software and how it can streamline processes, reduce errors, and provide better
insights into a company's performance.
 Examining the impact of cultural and regulatory differences on accounting
practices and how they can impact a company's profile. This could involve
looking at accounting practices in different countries and how they are affected by
local regulations, cultural attitudes towards transparency, and other factors.
 Studying the role of ethics and corporate responsibility in accounting and how
they can help to enhance a company's profile. This could include exploring the
impact of social and environmental accounting, as well as the importance of
corporate governance and ethical practices.
 Investigating the role of accounting in driving innovation and competitiveness in
companies. This could include exploring the impact of accounting on the
development of new products, services, and business models, as well as how it can
help companies to stay ahead of their competition.

Each of these future work frameworks can provide valuable insights into the role of
accounting in enhancing a company's profile and help organizations to make informed
decisions about how to best use accounting to their advantage.

5. Conclusion

The utilization of accounting measures and techniques such as cost analysis,

budgeting, and performance evaluation are critical for the success of apparel
manufacturing businesses. These tools allow companies to monitor their operations,
identify areas for improvement, and make informed decisions that can drive growth
and increase profitability.

One effective tool for performance evaluation in the apparel industry is the balanced
scorecard. This framework takes a comprehensive approach to performance
evaluation by considering multiple aspects of a company's operations, including
financial performance, customer satisfaction, internal processes, and organizational
learning and growth.

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In the case of an apparel manufacturing company, the balanced scorecard can be used
to track the cost of production, monitor customer satisfaction with the company's
products, evaluate the efficiency and effectiveness of internal processes, and measure
the company's ability to adapt and innovate. By considering these multiple
dimensions of performance, the balanced scorecard provides a more holistic and
actionable picture of the company's health and allows managers to make informed
decisions that can drive improvement and growth.

While the balanced scorecard can be a powerful tool for performance evaluation, it is
important to implement it in a way that aligns with the specific needs and goals of the
organization. This may require customization and ongoing refinement to ensure that
the scorecard accurately captures the company's performance and provides
meaningful insights into areas for improvement.

In short, the effective use of accounting measures and techniques can help apparel
manufacturing businesses to monitor and improve their operations, drive growth, and
increase profitability. Through the implementation of tools like the balanced
scorecard, companies can gain a deeper understanding of their performance and make
informed decisions that can lead to success in the long term.

Reflection to the Study

After the report writing and interview, the writer has reflected on: How accounting
plays an important role to empower a company, based on this study on a global
apparel manufacturer - CIGL.

The role of accounting in a company is vital in ensuring the financial stability and
success of the business. Accounting provides a systematic way of recording,
classifying, and summarizing financial transactions. It provides a basis for measuring
and analysing a company's financial performance. The following are ways in which
accounting can boost the profile of a company:

Financial Management: Accounting provides a framework for managing the

company's financial resources, enabling the company to make informed decisions
about how to allocate its resources, manage its financial risks, and plan for future
growth.

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Improved Decision Making: By analysing financial data and presenting it in a
meaningful way, accounting helps managers make informed decisions. For example,
by analysing costs and revenues, managers can identify areas where costs can be
reduced, and profits can be increased.

Transparency: Accounting provides a transparent and objective record of a

company's financial transactions. This information can be used to demonstrate the
company's financial stability and performance to stakeholders, including shareholders,
creditors, and regulators.

Legal and Regulatory Compliance: Accounting is an important tool for ensuring

that a company complies with legal and regulatory requirements. For example,
companies must prepare financial statements in accordance with generally accepted
accounting principles (GAAP) and tax laws.

Credibility: A company that demonstrates good accounting practices and provides

accurate financial information is more likely to be perceived as credible and
trustworthy by stakeholders. This can lead to increased confidence in the company,
which can result in increased investment and business opportunities.

Accounting plays a crucial role in the success and financial stability of a company. It
provides a framework for financial management, helps managers make informed
decisions, promotes transparency, ensures legal and regulatory compliance, and
enhances a company's credibility. Companies that prioritize good accounting practices
are likely to see significant benefits, including increased investment, business
opportunities, and overall financial success.

End of the Report

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