On Management Information Cost

In the era of knowledge economy, Information, which is same to material and energy, has become an important economic resource. Because enterprises need lots of information both in the inter-enterprises transactions and in the inter-management decision-making, Information has become the basis of economic management and decision-making. However, in relation to people's unlimited needs, information is scarce. In addition, all enterprises due to poor understanding of derivative, and other reasons, there are different levels of information asymmetry problem. Asymmetric information may lead stakeholders to take the following four acts: adverse selection, hidden action and information, signal transmission, signal screening. But any type of acts of enterprises will have costs. Kenneth J. Arrow in the 1980s said the access of information may change uncertainty faced in the field of economic, and uncertainty lie in economic cost. Many acts of enterprises, such as producing, managing, buying, selling, servicing, need information, and would produce information. Both the accesses and the form of information will have certain expenses or losses, costs, which are information cost. The reason of information cost existing is information asymmetry in stakeholders. Management information cost origin from information asymmetry in the process of management decision-making.Management information cost is the cost, which happen in collecting, processing, stockpiling, transferring, using information to decrease the uncertainty of decision-making, or the losses for incomplete information, in the process of management decision-making. The essential connotation of management information cost(MIC) is information costs based on management. MIC is the new form cost, and an important component of information cost. What are the characteristics of MIC? What is the effect of MIC to enterprises? How to measure, to integrate, and to control MIC? Facing those questions, the author started to study MIC, and wrote the paper. After expositing the research status and the reviews about MIC both in China and abroad, taking sustainable development of enterprises as a fundamental objective, and basing on information asymmetry theory, cost management theory, integration management theory, theory of business process reengineering, the paper studied in-depth MIC of contemporary organizations firstly. Then, the paper researched the conception, the characteristics, the content of MIC, and cost and value of management information. Lastly, based on the measurement to MIC, the paper put out the integration and the control strategies. The paper is divided into six segments, except for introduction.Chapter 1, basic theories of the study on MIC. The chapter includes two parts. The first is the theories of information and management information, including connotation and characteristics of information, and concepts and attributes of management information. The second is the basic theories of study on MIC, such as information asymmetry theory, cost management theory, integration management theory, and theory of business process reengineering.Chapter 2, the theory of MIC. The chapter has three parts. The first part is the nature and characteristics of MIC. On the base of IC, MIC is defined as"the cost, which happen in collecting, processing, stockpiling, transferring, using information to reduce the uncertainty of decision-making, or the losses for incomplete information, in the process of management decision-making."The causes, characteristics and significance of MIC are also analyzed. The second part is the MIC based on the angle of information flow process. The author researched the costs from processes of collecting, processing, stockpiling, transferring, using, and feedback of management. The third part is the composition and the identifying of MIC. The author thought MIC is composed of three dimensions, which is length of time, width of project and thickness of expenses. And according to standards of management flow processes, management levels, cost origin, the author discussed the categories of MIC, and gave out four-level theory, that is MIC should be classified into inter-organization MIC, strategic MIC, controlled MIC, activated MIC. Lastly, the author studied the composition and identifying method of management information flow cost, management information system cost, management information organization cost.Chapter 3, the related theories analysis of cost and value about MI. Cost is the origin of value creation, and is the drive power to bring income. The chapter discussed the relationships between cost and value of MI, including general analysis, the analysis based on information economics, options analysis, and time analysis, the analysis of MIC,IT, and organization structure.Chapter 4, the measurement of MIC. The measurement of MIC is the core in both financial accounting system and management accounting system. After analyzing measurement necessity, complexity and feasibility of MIC, the chapter researched importantly measurement attributes, pattern and method. The author thought market price is the basis for measurement of MIC. Because each of historical cost, replacement cost, fair value, net realizable value and present value of future cash flows has different limitations, enterprises may adopt the following pattern: in financial accounting system historical cost is as the measurement basis; in financial analysis and management accounting system historical cost and other attributes exist in together, and the best selected. The chapter also constructed the measurement pattern of MIC on some requirements. Lastly, the author put out two kinds of measurement method: total cost of ownership method and time-driven operating cost method.Chapter 5, the integration of MIC. Integrated MIC is the basis of controlling MIC. Firstly, the author studied integrated cost management and system of integrated cost management. Then, it researched the integration of MIC, which includes the basis, the paths and the model of integration. Lastly, the chapter researched the integration of MIC based on cost origin, which includes premise, principles and paths of management information organization cost(MIOC), management information flow cost(MIFC), management information system cost(MISC).Chapter 6, the strategy of controlling MIC. The chapter discussed four parts. The first part includes the connotation, objectives and characteristics of the strategy of controlling MIC. The paper pointed out the strategy of controlling MIC is composed of two areas that are the strategy in the process of controlling MIC and strategic control of MIC. The strategy objectives of controlling MIC is an complex system, which is to get cost advantages and competitive advantages, and to maximize profits, to create most value and to distribute the best in value constellation, with decreasing MIC and changing the condition which may lead to produce MIC. The second part is strategic ideas and strategic analysis of controlling MIC. Strategic ideas, such as origin management idea, idea at first value, matching control idea, integration idea, all-participative idea, lean cost management idea, affect control the plan, paths and means. Strategic analysis involved environmental analysis, value chain analysis, cost advantages and benchmark analysis, cost-driven and strategic factors cost driver analysis. The third part discussed the selected means and security measures of controlling strategy of MIC. The control means are the'groundbreaking'system, for example, target cost management, responsibility cost management, and activity based costing management. The security measures are the basic security system, including designing time and space system, selecting organizational structure, and constructing control system. The forth part is the countermeasures of controlling MIC.