Research On Budget Management Of GD Corporation Based On The Value-chain

As the industrial economy transferred to intellectual economy, the operatingenvironment undergoes dramatic changes. For example, increasing uncertainty anddifficulty of risk control. Traditional budget doesn’t meet the requirements of the times. Agreat debate about budget has arisen around the question of persist or to give up. Under theguidance of new management thoughts, scholars began to combine budget with newmanagement tools in order to improve accuracy of budget, enhance and implement thebudget. For example, interactive budget, activity-based budget and BSC’s applicationprocedure in budget. Due to the broad perspective, comprehensive and detailed analysis,budget management based on the value-chain is being highly appreciated. The theory ofbudget management based on the value-chain contains system and contingency view. So itemphasizes the link between value activities, makes a point of coordination of businessactivities. Budget management becomes more flexible so that it adapts to the complex andever-changing environment.Great changes have taken place in the external business environment of power gridenterprises because the government pushes ahead electricity reform. The partition of powerplant and power network and the direct power purchase for the large users show that theprice formation mechanism gradually become clear. Intensified management of threecomponents and integrated systems of five process are advocated by State GridCorporation of China, setting up the management system that meets the requirements ofthe development of modern corporation.Budget management is the best management mechanism that establishes theintegrated systems of materials, cash flow and information flow. Intensified managementof three components and integrated systems of five process are figuring out the value-chainof power grid enterprises. Based on the value-chain, this article discusses the budgetmanagement by studying GD company case. This article firstly summarizes and evaluatesdomestic and foreign budget management theories, then explains the theory foundation forbudget Management based on the Value-Chain. Secondly, the article analyses the situationof GD company’s budget management，pointing out its characteristics and shortcomings.Considering shortcomings of GD company’s budget management and the requirements ofcorporation’s environment, the paper comes up with the budget management based on the value-chain. Based on the analysis of GD company’s value chain, the paper improvesbudget management from the perspective of value chain and puts forward the guaranteemeasures. Lastly, the paper concludes by discussing the existing defects.The research production of the paper is budget management based on the value-chainin thinking method. Firstly, identify enterprise’s value activities and analyze enterprise’svalue-chain. Secondly, add perspective of value activity to original budget system. Thenprepare the budget that involves enterprise’s interior value chain according to the systemsperspective and prepare the budget that involves industry value chain according tocontingency perspective. A floating budget control standards are established in order toenhance the adaptability of value chain budget management to the environment. At thesame time, add non-financial index to the budget evaluation playing a supporting role forthe broad vision of value chain budget management. Lastly, budget responsibility controlensures implementation of value chain budget management.The innovation of this paper lies in the application of the value chain in the budgetmanagement process. Make a budget that involves enterprise’s interior value chainaccording to business contacts, coordinate enterprise’s value activities, add enterprise’svalue. When making a budget that involves industry value chain, take the sales budget forexample quantizing external environment constraints.