Introduction
There are many accounting systems all over the world, which exist in order to help various companies with the management of their businesses. The relative new financial approach is the Activity-Based Costing (ABC). Following Kaplan and Cooper, it is the type of accounting, which helps to solve the financial problems by using different strategies and approaches to each and every separate financial facility on the bases of the consumed materials and information (Kaplan and Cooper). ABC provides proper management of quality for the service industry with mentioning the peculiarities of development and emphasizing activities that conduct the whole businesses. When discussing Activity-Based Costing, it is necessary to go in one foot with innovations in various industries.
Traditional accounting is no longer a sufficient way to support various businesses due to the complexity of covering all spheres of occupancy. This way, ABC exists for dealing with cost reporting, which is achieved from different branches like direct sales, e-commerce and retailing (Activity-based costing). One of such branches is the e-commerce sector of the service industry. For example, eBay provides a wide variety of services for people all over the world. Being dependent on different activities, there is a necessity for eBay to watch after the proper compliance of costing analyses.Describe the company you researched in one to two (1-2) paragraphs.
EBay is the e-commerce company that provides service of connecting customers with businesses as well as consumers among co-workers. Being one of the biggest service companies (Becker), it acts through the Internet all over the world. A wide variety of goods and services are proposed to customers with acceptable prices. Such a service company is popular among both teenagers and adults because of the broad range of production. Dealing with local and international trade, eBay is much diversified in the area covered with online sales. Discuss how a time driven ABC cost system can be implemented in the company you researched and the benefits that the use will yield to the business performance.
Since ABC studies changes in profitability with the use of innovations, it is easy for manufacturers to watch after the tools and techniques to improve their businesses. EBay is very promising to work with the activity-based costing because of the broad diversity of goods and great need of accurate cost information. The company has to provide job order costing, which assists in the management of both direct and indirect costs to different jobs, instead of turning them to departments of multitasking (Ahmed). Having lots of processes to account, eBay should try separation of various jobs for improving the profitability of each project. ABC then can be implemented in the eBay company at the time of dealing with overloaded systems of accounting (the traditional ones). Nowadays the company inevitable moves to such a transition of costing systems due to the broad variety of information to be processed and enhanced for achieving business perspectives.Assess how using an ABC system can provide a competitive advantage to the company in the market space it operates and the resulting impact to the business performance. Business performance of eBay will only be improved with the use of ABC due to the ease of monitoring resources, activities and cost objects. Being a multinational company, it has to cover all the patterns of people`s preferences and needs with their further satisfying. The system of providing services may be enhanced by the implementation of proper analyses of resources required to fulfill any needs of a certain activity (Jiang 95). Such a costing methodology is useful for big companies, as it separates each good and activity into groups and analyzes them instead of finding the average level of efficiency of products.
The competitive advantage to eBay, presented after the implementation of activity-based costing, is the resulting, significantly improved reputation of the whole company with mentioning the benefits of their work and the impact, carried to society through simplifying the process of buying-selling different goods. Communication- and information-based electronic exchange raises the level of eBay`s efficiency through its growth and great perspectives with goods of great quality. Following Becker, eBay is a leader throughout auctions marketing due to the proper management of advertising and constant supply of goods (Becker). The stock value will be improved along with the increased company stand on the market, which gives great advantages in different forms.
Being a big engine of online shopping, the company is very popular for its brand image as well as for useful data, spread among people massively. Having all of it combined, eBay constitutes the challengeable position on a competitive field of the market space. Businesses all over the world remain demanded because of the proper relation to customer preferences, and the approach of providing e-service assures great profits after targeting and ultra-segmentation of information and goods to be released to the masses.
Examine the potential impact of time-driven ABC costing on services provided online with those provided through traditional channels, considering how this knowledge will impact decisions made by management about these services.
Traditional channels of costing have already become the old ones because of their insufficient results – the companies are much diversified now, while the accounting system is adjusted to standards (Johnson). This way, activity-based costing is a very promising methodology, if mentioning the innovations and the proper abidance by their development patterns. During such a costing, all risks of investments to eBay are mentioned and analyzed by employees with giving lists of potential assessments. Since the main market of the company is the USA, the company has great perspectives of being spread all over the world by improving the online service industry.
Worldwide sales permanently grow because of the proper implementation of the knowledge of bases and management with further achievement of great profits. People like to go shopping through the Internet due to the ease of communicating with sellers and performance of conducting orders (Helfat and Peteraf 98) all from the comfort of their home. Worldwide scene of business is greatly affected by Internet service, as one may satisfy all his needs by choosing and ordering any available good for emphasizing his individuality. This way, all preferences and needs are honored and good service is provided to the customer with further assurance in assistance in case of any issues to encounter (e.g. bad quality of goods or conditions of working). Both activity-based and traditional costing are good in the impacts they give, but they greatly differ in the efficiency in today`s broad and much-diversified market.
Traditional costing is good because of its relation to widely accepted principles, but gives great disorders to systems – ignoring non-manufacturing costs results in expenses of a corporation, which are mentioned during the ABC (Johnson). Easy interpretation of costs give employees the ability to monitor the overall economic condition of eBay`s business, but requires great platform of resources, which may not be allowed by companies with restricted (limited) funding. Internal management for big companies should be provided on bases of the ABC because of the great perspectives, assured by technological approach to business-making. Substantial impacts are analyzes from different sides during activity-based costing at the time, when traditional costing neglects supportive costs. The system of traditional costing is good for providing analyze of abidance by widely accepted laws and regulations, but is bad in cases of improving the workability of any company.
EBay as an e-commerce company is very perspective with its well-shaped value through network members. Long-term profits are assured to it as well as those, which can be achieved only after limitation of traditional approach to trade – according to Boyd, shipping, warehouse and overstock costs are lacking at eBay (Boyd). Considering this, people all over the world are free of choice and are able to manage all their buying without mentioning high costing for performance of shipping. Traditional channels of communication are modified in order to expand the sphere of eBay occupancy – e-commerce involves communication at a distance with assuring proper understanding of both sellers and customers. Such a powerful generator of deals becomes the opportunity for people to be the parts of development of the presence at the global market.
Proper ABC provides eBay with the reputation of attention center for both competitors and customers because of the well-developed trademarks: common knowledge of principles of eBay`s working should guarantee constant growth of competitive advantage, which can be only improved with the implementation of activity-based costing strategy. The knowledge of the sphere of occupancy will give eBay sufficient assurance in being at the top of e-commerce service companies and technologies with involving facilities like PayPal, Skype and so on. Having bought Skype as the Internet telephony company in 2005, eBay provided itself with great perspectives, which might improve its functioning (Blau). There are still some issues to encounter, though. It is difficult for both incorporations to change their business strategies in order to achieve great profits and improve the seller-buyer communication.
Conclusion
Nevertheless, if mentioning all the perspectives and progresses, eBay may enhance its business strategy greatly. Activity-based costing (ABC) may provide prosperous competitive advantage for this e-commerce service, as it simplifies the accounting deals with providing studies of improving the whole systems of business-to-business and customer-to-customer relations. Traditional accounting throughout the eBay Company, which is not segregated into separate departments, is becoming an old-fashioned one, as it covers some parts of the business, but lacks in profitability. For instance, ABC involves management of quality of separate jobs with mentioning the need of regular cost reporting. Such an approach becomes efficient while analyzing the impacts, as all spheres of the company`s occupancy are covered with proper analyzes.
Works Cited
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Blau, John. EBay Buys Skype for $2.6 Billion. PCWorld. http://www.pcworld.com/article/122516/article.html . Accessed 21 January 2017.
Boyd, Josh. “In Community We Trust: Online Security Communication at eBay”. Journal of Computer-Mediated Communication, 2002.
Helfat, Constance E. and Peteraf, Margaret A. “Understanding dynamic capabilities: progress along a developmental path”. Strategic Organization, 2009, pp. 91 – 102.
Jiang, Wei. Business Partnerships and Organizational Performance: The Role of Resources and Capabilities. Springer, 2014.
Johnson, Rose. Traditional Costing Vs. Activity-Based Costing. Chron. http://smallbusiness.chron.com/traditional-costing-vs-activitybased-costing-33724.html . Accessed 20 January 2017.
Kaplan, R.S. and Cooper, R. “Make Cost Right: Make the Right Decisions”. Harvard Business Review, 1988.
