the impact of accounting information on management’s decision making vinamilk case study

THE IMPACT OF ACCOUNTING INFORMATION ON MANAGEMENT’S DECISION MAKING – VINAMILK CASE STUDY TRUONG THUY CHUNG BACHELOR OF BUSINESS ACCOUNTING HONS HELP UNIVERSITY COLLEGE October 201

THE IMPACT OF ACCOUNTING INFORMATION

ON MANAGEMENT’S DECISION MAKING –

VINAMILK CASE STUDY

TRUONG THUY CHUNG

BACHELOR OF BUSINESS (ACCOUNTING) HONS

HELP UNIVERSITY COLLEGE

October 2011

THE IMPACT OF ACCOUNTING INFORMATION ON MANAGEMENT’S

DECISION MAKING – VINAMILK CASE STUDY

By TRUONG THUY CHUNG

Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfilment of the Requirements for

the Degree of Bachelor of Business (accounting) Hons

OCTOBER 2011

DECLARATION

I hereby declare that the graduation project is based on my original work except for quotations and citations which have been duly acknowledged I also declare that it has not been previously or concurrently submitted for any other course/degree at HELP University College or other institutions The word count is 10,036 words

_

TRUONG THUY CHUNG

Date: 17 October 2011

ACKNOWLEDGEMENT

First and foremost, my sincere gratitude is dedicated to my supervisor – Ms Nguyen Van Anh Thanks for your strong support, guidance, intuitive comments and also motivation through the process of completing this thesis

In addition, I would like to send my gratitude to the International School and HELP for giving me an opportunity to conduct my study in my favorite area

Thanks to all my family and friends for your supports, helps and motivation and made it possible for me to complete this study

THE IMPACT OF ACCOUNTING INFORMATION ON MANAGEMENT’S

DECISION MAKING – VINAMILK CASE STUDY

By TRUONG THUY CHUNG

October 2011

Supervisor: Ms Nguyen Van Anh

This thesis “The impact of accounting information on management’s decision making – Vinamilk case study” is conducted to provide some purpose tools and select the appropriate information for decision making of the Vinamilk Company This study also emphasizes on the important of accounting information in making decision In addition, accounting tools such as cost accounting system, price and competition and profitability provide the useful information manager to make the financial and economic decision as well The core method to implement the research is qualitative research The data is

collected in secondary sources and case study

TABLE OF CONTENTS

Declaration i

Acknowledgement ii

Abstract iii

Table of contents iv

Chapter 1: Introduction … 1

1.2 Back ground……… 1

1.3 Problem statements………2

1.3 Structure of paper……… 4

Chapter 2: Literature review……… 6

2.1 Decision making process………6

2.1.1 Planning process……… 8

2.1.2 Control process………9

2.1.3 Limitations of Drury model………9

2.1.4 Long term and short term decisions……….10

2.2 Management accounting and decision making……… 10

2.3 Defining the cost terms……….11

2.4 Tools for decision making……….12

2.4.1 Cost accounting system……… 12

2.4.2 Price and competition……… 14

2.4.3 Profitability……… 15

2.4.4 Financial ratio……….16

Chapter 3: Methodology……….19

3.1 Qualitative research……… 19

3.2 Case study……… 20

3.3 Data resources……… 20

Chapter 4: Analysis………23

4.1 Company presentation……… 23

4.1.1 Vision, mission and objectives……… 24

4.1.2 History………25

4.1.3 Organization and management structure……… 26

4.2 Analysis case study……… 27

4.2.1 Accounting tools are used in Vinamilk………27

4.2.1.1 Cost accounting system……… 28

4.2.1.2 Pricing and competition……….32

4.2.1.3 Profitability……….37

4.2.1.4 Financial ratio……….40

Chapter 5: Conclusion………46

5.1 Summary………46

5.2 Recommendation……… 47

5.3 Limitation and further research……… 47

Reference……… 49

Chapter 1: Introduction

1.1 Back ground

The Vietnam Dairy Products Joint Stock Company (Vinamilk) was established in 1976 and it has grown to become the leading corporation of the dairy industry, currently has 75% market share of milk in Vietnam Vinamilk always provides with the quality products, most nutritious and delicious for health Vinamilk always satisfies and be responsible for customers by diversifying products and services, quality assurance, food

hygiene and safety with competitive prices, business ethics of respect and obey the law

In generally, management accounting usually provided the decision-making functions to the managers It involves functions through from planning, organizing

to test the evaluation stage The function of decision is applied continuously during operation of the business The decision making process is the choice of many different alternatives In which each option is considered including accounting information, particularly information on the investment costs to achieve optimal business benefit Each action plan is a different situation, with the type, amount, expense items and other investment income But they only have one thing in common that are associated with accounting information Therefore, the management is required to consider carefully making a right decision However, in order to make a right decision, the management should have the tools to help them distinguish the proper accounting information relating

to each plan Based on this, the plan chosen will give the highest profit or lowest cost

In recent year, there are many companies which have gone to bankruptcy because of the mismanagement So today, the management is required to train more with experienced and professional’s skills Moreover, the management is also able to see right things to

make decisions and choose the plan that set out on the basis of selecting the appropriate information

This thesis “The impact of accounting information on management’s decision making – Vinamilk case study” is conducted to provide some purpose tools and select the appropriate information for decision making of the Vinamilk Company Besides, the necessary of this thesis not only serve for the commercial organizations but also non commercial organizations which need the accounting information to survival and development The commercial organizations such as private companies, joint venture, and limited companies need the accounting information to determine the production and business efficiency in the period While non-commercial organizations such as clubs, associations with the main objective is social activity, charitable activities which need accounting information to determine the level of service And State institutions also need accounting information to assess the provision of security and social services

To sum up, accounting information is a key factor which plays an important role over the activities of an organization and impact on decisions to achieve the level of the target set

1.2 Problem statements:

 Which are accounting tools available used to support decision making process?

Accounting tools play a vital role in business decision making process Management accounting consists of a set of tools that have been proven to be useful in making decisions involving cost data, price and profit The costing system provides to the obtainable knowledge of costs, and it builds the basis for numerous decisions like as determining prices, estimating the profit Profitability is used especially for making decisions relating to suspended operations of organization Nowadays, accounting tools

apply differ from organization A tool that proves to be very effective in an organization, however, it may fail in another organization Different information is required for different purposes, so the organization must focus on the different accounting tools to support the decision making process

 Which accounting tools are applied in Vinamilk? How does the company use

those in the decision making process?

As mentioned above, Vinamilk uses an old way of classifying costs, which considers all administration and selling cost as fixed costs and all production costs as variable although within the production costs there would be fixed costs, like depreciation Thus labor costs of the production are also seen as variable In addition, Vinamilk produces a lot of vary products and buys the ingredients such as milk from outside supplier Milk imported nowadays accounts 70% raw materials of Vinamilk Hence, the manager has to evaluate and calculate the cost in the future due to the management cannot consider the price of materials in the future Furthermore, Vinamilk manages indirect cost and overhead cost, selling costs and administrative costs as well Base on costing system, manager should determine the price Vinamilk uses both of cost plus pricing and target costing such as it decides first how much it costs and then its department works together with the production to stay within this cost structure Prices of competitors and their reaction also effect on prices for the valuation of the company Consumers assess the value and price of a product based on price and value of similar products A strategy of high prices, high profitability levels, may attract competition, while a strategy of low cost, low-can discourage the competition or do they withdraw from the market Companies need to know price and quality of the opponent This can be done in several ways Companies can send personnel to study and compare the prices of the competing

products Companies can search by price of competitors, looking to buy their equipment and analysis The company may ask the buyer to see how they feel about the price and quality of competitors Another tool often used in Vinamilk is profitability, which is defined as the price customers paid minus the cost of production In Vinamilk, they split

up the products in different groups of product and they also distinguish the cost of the machine for each product Hence, they can calculate the gross profit for each product group every month By this system, Vinamilk knows which products are profitable In order to attaining a better profit, the managements also made the most difficult decision

in his career Vinamilk maintains high profit margins; this suggests that the ability to manage costs and price of company is very good

Furthermore, besides information of managerial accounting provided, the managers should consider the financial information such as financial ratio in order to understand the business activities of company

1.2 Structure of paper

The paper is conducted to find out the accounting tools which are applied in Vinamilk and how these tools affect to the decision made by the company This paper contains five chapters as follow:

different accounting tools and steps for decision making is recommended The methodology will provide the process of how this study is conducted After collecting data and information, the analyzing process would be implemented in chapter 4 Finally, the chapter 5 will draw the conclusion as well limitation and recommendation

Chapter 2: Literature review

Nowadays, financial information and non financial information provided by management accounting can help managers in making decisions as well In order to clarify the relationship between management accounting and decision-making, the both

of concepts will be proved independently in the following

2.1 Decision making process

Before explain the concept decision making process, the decision should be determined

A decision is a choice leading to a certain desired objective (Holsapple, pp 35 – 36)

A person or other different participants that are included in decision-making can be called decision makers Individual decisions can be made by a computer or a single person while the various decision makers can be divided into independent and negotiated decisions The first one is that the single person who has the power to decide and the other people can greatly influence how the decision will be In negotiated decisions, the different decision makers will share the right of making a decision That means the people have practically equal rights and discuss their different ideas in various meeting and organization decisions The second one is that the right of making a decision is unequally shared due to the organizations hierarchy and the management between the decision participants is highly structured

Table 1 will give more information about the types of decision makers:

Distinguishing

traits

Authority Vested in one

person

Vested in one person (deciding participant)

More or less equally shared

by all participants

Can be distributed unequally among participants Formal

Can be quite structured

Table 2.1: adapted from Holsapple, C.W., Whinston, A.B (1996) p 69

Making decision is the one of main functions of the managers The management often faces some decisions such as what to produce? How to produce? How to distribution? In order to successful in making decision, the managers need have relevant information in some circumstances

There are many types and context of decision and the outcome of decision often depend

on the decision maker In some model of decision making process, every decision has to follow some common steps These steps can be applied for decision making process usefully (Holsapple , p.71)

Figure 1 indicates the diagram of decision making process There are seven stages in Drury’s model The first five stages show the planning or decision making process It is

described as making choices between options and it is mainly decision making activity The final two stages present the control process that should measure and correct the detailed performance of the alternatives chosen (Drury, p.6-9)

Figure 2.1: Adapted from Drury C (2000), p 6

2.1.1 Planning process

1 Identify objectives: This is a first step of planning process; the managements need to

identify the specific of the goals or objectives of organizations They will give to decision makers some guidance or directions and enable decision makers to estimate the action desirability compared to another action In economic, maximizing profitability of company’s owners and shareholders wealth should be a main objective

2 Search for alternative courses of action: This is not only the most important but

also difficult step in the decision-making process The management has to look for alternative ways of action that enable goals to be achieved Thus the organization has to look at its environment for challenges and opportunities

3 Gather data about alternatives: The managers should access the potential growth rate

of activities, potential areas of company in order to gain market share and cash flow

Furthermore, the decision makers have to differentiate between certainty, uncertainty problem that are difficult to control such as inflation, competitions strength etc Data and information are gathered by both short term and long term decision

4 Select alternative courses of action: The decision making includes the choosing

between competing alternative courses of action and best satisfies objectives of the company For example, if the profit maximization is main objective, all options should

be planned in terms on differences in profit The option that seems to achieve the goal best then it should be selected by the decision makers

5 Implement the decision: This is final steps of planning process After choosing the

best alternatives, the decision would be conducted through the planning process The management has to consider carefully and communicates with other people in the organization who work closely together before to implementation decision

2.1.2 Control process

6 Compare actual and planed outcomes: This is the first stage of control process The

managers should compare actual implementation and budgeting, and then determine what the difference is An accountant has to set up presentation reports which provide feedback by comparing results with plans

7 Respond to divergences from plan: After the alternatives chosen should be frequently

checked and if the results of the decisions made differ from the designed one, corrective actions should be taken

2.1.3 Limitations of Drury model

There are several reasons criticized Drury model Firstly, the right decisions are easily and clearly identifiable Secondly, it does not include factors, like emotions, imagination, memories, culture and mindset of the decision-makers Finally, it is built on

the idea that each step can be clearly separated from the other that does not correspond

to the reality of decision making (Langley, pp.261-264)

2.1.4 Long term and short term decisions

The decision can classify into long term and short term decisions Long term decision refers to the decision that impacts on the longer periods of time (Ibid p 8) In organization, long term decision may be a capital investment such as buying machinery, building factory and so on On the other hand, short term decision is the decision that affect on one year or less than one year (Ibid p 233) This decision is based on currently data and be easily to changes The one of example of short term decision is determining

of acceptation or rejection order

2.2 Management accounting and decision making

According to investorwords.com, accounting is defined as the systematic recording, reporting and analyzing of financial transactions of a business There are two types of accounting which are management accounting and financial accounting In this project, management accounting would be focused Management accounting refers to the process of preparing management reports and accounts that provide accurate and timely financial and statistical information required by managers to make day to day and short term decisions (www.businessdictionary.com)

The management accounting information plays a vital role in decision making of the managers Accounting can be viewed as the process of identifying; measuring and communicating economic information to permit informed and predicted decisions for the user of information (Horngren pp.18.182) This means that understanding clearly of accounting information will help the management to give out better decisions for the organization Management accounting is a division of information systems of an

organization Managers rely on accounting information for management planning and control activities of the organization (Hilton, 1991) Therefore, the reported and collected accounting information can influence on making management’s decision and it will result in the management to make decisions that are consistent with the organization’s goals Moreover, the decision maker often decides what information is inputted and considers information as relevant for the decision Using accounting information depends on different decisions and it often relies on the choices of decision maker whose may be affected by experience, perceptions and objectives Apparently, accounting information is used for decision-making rises if the information provided is relevant for the decision, and again The increasing decision making is also relies on the decision maker who regards the accounting information as reliable and trustiness

2.3 Defining the cost terms:

1 A cost is known as the resources are in place to complete a special reason It is very

common to determine the amount the cost of money to obtain goods and services (Horgngren, p 133)

2 A cost object is looked as a cost of products and as well as costs of a department or

service (Drury, p 21)

3 Fixed cost and variable cost: Fixed cost refers to the cost that does not increase or

decrease when level of activities decrease or increase So the cost per unit will decrease when the level of activities increase and again On the other hand, variable cost is the increasing or decreasing cost when the activities increase or decrease But for per unit, the level of activity is constant cost, and it will disappear when stop working (Ibid., pp

29 – 30)

4 Direct cost and indirect cost: Direct cost is known as the cost that is easily and

conveniently monitored to the particular cost object under consideration Meanwhile, indirect cost is known as all the other costs that cannot be related to or identified with, a particular cost object under consideration (www.accountingformanager.com)

5 Relevant and irrelevant cost: Relevant costs are those costs that can be affected by

decisions whereas irrelevant costs cannot be affected through a certain decision It may be irrelevant for some situations, but relevant for others Examples of irrelevant costs involve fixed overheads, notional costs, sunk costs and book values (www.businessknowledgesource.com)

2.4 Tools for decision making

In order to make a better decision by using accounting information, management has to rely on the tools of accounting system There are many tools of accounting, but in this thesis, three accounting tools are discussed Firstly, the cost accounting system determines the costs that are accounted in goods produced of company Hence, management needs to understanding about the information of costs that occur in an organization This tool is considered as the most important tool in guiding decision Because the management would be able to set prices and estimate profit based on information about costs Secondly, pricing and competition tool would be discussed It involves the ideas of target costing and cost plus pricing, competition Finally, profitability tool would be recommended

2.4.1 Cost accounting system

Cost accounting refers to a part of accounting that evaluates the overall costs associated with conducting business The main aim of cost accounting is basically providing product costing information for financial statements, control, and decision making

(www.wisegeek.com) A cost accounting system includes two steps, the cost gathering

by classifying costs into categories and the assignment of costs to cost objects The first one refers to the collection of costs by using classification criteria, like the relevance of costs or the cost behavior Different types of costs are available for different decisions Hence, as first step is useful for decision-making to sort out costs as fixed or variable, relevant or irrelevant and direct or indirect For example, when the management wants to make-or-buy machinery, decisions will concentrate on relevant costs in a particular decision situation The second one is cost allocation related to indirect costs that are allocated to a cost object It is related to methods of classifying the direct and indirect cost, and determining which is important for cost accounting system

In generally, there are two main methods of allocating indirect cost: traditional accounting system and activity based costing (ABC) The first one refers to the allocation of factory’s indirect cost to product manufactured That means traditional accounting system allocates the indirect cost to cost centers It is rely extensively on the volume based allocation such as the direct labor hours, number of units produced, or machine hours For example direct labor hours are used as a basis to allocate costs of materials to a cost object (Drury, p 52-53) Otherwise, the second one refers to assign the costs to activity cost centers Activity based costing system is based on cause and effect allocations By identifying the costs driver that cause the cost to changes and assigning the costs to cost objects on the basis of cost driver usage, so the cost can be more accurately traced (Drury, p 221) The major difference between two methods is collecting of the cost driver Traditional costing system relies on arbitrary allocation while activity based costing is based on cause and effect allocation The traditional costing system will be applied when the production process is very simple and clearly,

On the other hand, activity based costing will be used when the process of production is more complicated and used more cost driver However, using activity based costing will

be more expense and low benefit

Figure 2.2: Traditional costing vs Activity based costing (source from internet)

2.4.2 Price and competition

A price is expressed in the currencies of commodity value or in other words is the number of money pay for goods Price is also considered an important competitive factor in attracting customers of all businesses Pricing decisions can categorize into short term and long term decision The first one refers to the price made for the day to day decision or in short time decision Otherwise, the second one is that the price would

be determined for the long time of products Pricing decisions making are one of the most important decisions that the management have to face (Horngren) The results of the making pricing decision for new products or responds to price of competition are

very important because if a company wants to be survival and develop in the future, it has to have a reasonable price policy The price decision has to not only affect to the market demand but also attain the company’s objectives There are some factors that affect to pricing decisions such as legal requirements, competitors actions and customer demands There are two common tools for pricing: target costing and cost-plus pricing The target costing is known as an effective tool to keep the customer value while reducing costs Before products are designed, the target costs are established based on estimated selling price of the product and the company's profits Meanwhile, cost plus pricing refers to the adding an amount or a percentage of the cost of production and product distribution This is tools for the company to make the maximized profit

Competition is way to use other word for company rivals producing similar products or services Companies usually use resources effectively, business opportunities to win other companies in order to ensure the development of business There are many methods of competition: price competition (lower prices .) or non-price competition (advertising .) or competitiveness of a business, an industry, a country is the level at which, under conditions of free market and fair can produce commodity products and services to meet the demands of the market and creating jobs and raising real incomes respectively Competition is the gain of market share The nature of competition is the search for profit which is higher than average profits of enterprises The outcome of the competitive process is the average profitability of the industry which trend to effect in depth, then lead to the price may be reduced (Michael Porter, 1980)

2.4.3 Profitability

Profitability is defined by the ability to make a profit meanwhile profit can be defined as the difference between total revenue and total cost Planning of profit is often conducted

during the budgeting process Profitability will be achieved when the right decision was made by the management and cost control is also good There are some accounting tools related to profitability are:

Gross profit is defined as the difference between net sales and cost of good sold (Horngren C et al (2002), p 59)

Operating profit is known as is the difference between total revenue and total cost from production and business activities of enterprises This profit is created before the payment of interests and taxes (Prakash, (1979), p 2)

Working capital is an index used to measure financial performance as well as financial capacity of a company in the short-term Working capital is also assessing the ability to pay short term debt obligations of companies (www.investorwords.com)

2.4.4 Financial ratio

Financial ratios are calculated from one or more kind of information from a company's financial statements Financial ratios also give a financial analyst and management an excellent picture of a company's situations and the trends that are developing (www.finpipe.com) There are some common categories of financial ratio such as:

1 Liquidity ratios

It indicates the entity’s ability to meet its current obligations There are two common used liquidity ratios are current ratio and quick ratio

Current ratio is calculated as current assets divided by current liabilities It includes all

current assets and current liabilities and is considered acceptable if it is 2 to 1 or better

Quick ratio is defined as quick assets divided by current liabilities Quick assets are

defined as cash, accounts receivable, and notes receivable – it is determined by current assets minus inventory The quick ratio provides better picture of the entity’s liquidity

position if inventory contain obsolete or slow moving items If the ratio is greater than 1 generally shows that the entity’s liquid asset are sufficient to meet the cash requirement for paying current liabilities

2 Capital structure

Debt to equity is calculated by the short term and long term debt divided by the

shareholder’s equity This ratio provide information on solvency of the entity

3 Operational capability

These ratios indicate how effectively the entity’s assets are managed Therefore, the ratios related to account receivable and inventory of company

Receivable turnover is defined as credit sales divided by receivables The ratio

represents that how many times accounts receivable are turned over during a year

Inventory turnover provide information on the inventory and is calculated as cost of

good sold divided by average inventory In this case, the average inventory equals sum

of beginning and ending inventory divided by two This ratio indicates that the frequency with which inventory is consumed in a year The higher ratio is the better liquidating inventory

4 Profitability ratio

It indicates the entity’s success or failure for a given period A number ratios measure the profitability of an entity, and each ratio should be interpreted by comparison to industry data

Gross profit percentage: is generally a good indicator of potential misstatements and is

calculated as gross profit divided by net sales

Profit margin: the profit margin ratio is calculated as net income of company divided by

net sales This ratio measures the entity’s profitability after all expenses are considered

The fluctuation in the ratio indicates that misstatements exist in the selling, general or administration expense

Return on assets: this ratio shows the return earned on the resources invested by both the

shareholders and the creditors It is calculated as net income divided by total assets

Return on equity: the ratio is defined as net income divided by shareholder’s equity

The ratio measures an entity's profitability by illuminating how much profit a company generates with the money shareholders have invested

Chapter 3: Methodology

The purpose of this section is how to carry out the study and how to analyze the data There are many ways to carry out the research, but in this thesis, the qualitative data collection methods can be used within a case study When to consider the scope of qualitative research, the case study approach are adaptable for exploratory investigations

of management questions And after that, the secondary data is collected to provide

information for the researcher

3.1 Qualitative research

Qualitative research is a type of scientific research It finds to understand a given research problem or topic from the perspectives of the local population it involves Qualitative research is especially effective in obtaining culturally specific information about the values, opinions, behaviors, and social contexts of particular populations The advantages of qualitative research are producing more in depth and comprehensive information Moreover, qualitative research can provide complex textual descriptions of how people experience a given research issue Qualitative methods are also effective in identifying intangible factors, such as social norms, socioeconomic status, gender roles, ethnicity, and religion, whose role in the research issue may not be readily apparent When used along with quantitative methods, qualitative research can help us to interpret and better understand the complex reality of a given situation and the implications of quantitative data However, there are some disadvantages when to use the qualitative research First of all is the subjectivity of the inquiry leads to difficulties in establishing the reliability and validity of the approaches and information Second, it is very difficult

to prevent or detect researcher induced bias And finally, scope of qualitative research is

limited due to the in-depth, comprehensive data gathering approaches required (www.experiment-resources.com)

The core method to figure out the solution to these questions is qualitative research The data is collected in secondary sources and case study The secondary sources involve annual reports, note to financial statement of company, accounting reports, internet source and other books like management accounting books, business activities analysis

3.2 Case study

A case study is one of the methodologies commonly used for qualitative research This research design employs a number of data collection methods, which includes interviews, documentary analysis, and observation (www.qsrinternational.com) Researchers have used the case study research method for many years across a variety of disciplines Social scientists, in particular, have made wide use of this qualitative research method to examine contemporary real-life situations and provide the basis for the application of ideas and extension of methods Case study research generally answers one or more questions which begin with "how" or "why." The questions are targeted to a limited number of events or conditions and their inter-relationships (www.gslis.utexas.edu) A case study is a good option to develop and improve understanding of a complex problem It can add a lot of experience and ideas to knowledge that was gained in previous studies However, the case studies are often not relied on some random observations and can not draw generalizations from a case, so the limitations are the lack of reliability and value of statistics

3.3 Data resources

Collecting the information and data plays an important part in completing this research There are two types of data resource: primary data and secondary data In this thesis, the

secondary data is better choice than ones Secondary data is defined as public data or data collected in the past or outside of company Secondary information sources of internal business are plentiful and can be processed to provide good information for the preparation of the decision For example: receipts, sales receipts, public debt reporting, accounting reports, evaluation of personnel Secondary information sources of outside such as newspapers, magazines, books such as management accounting policies, businessmen management, strategic management, business activities analysis

Secondary data are used for three research purposes Firstly, they fill a need for a specific reference of quotation to demonstrate why the proposed research fills a void in knowledge base Data from secondary source can help to decide what further research needs to be done and can be rich source of hypothesis Secondly, secondary data are an integral part of a larger research study to justify having bypassed the cost and the benefits of doing primary research And thirdly, secondary data may be used as the sole basis for a research study, since in many research situations on cannot conduct primary research because of physical, legal and cost influence

Generally, secondary data has some advantages Secondary sources can usually be found more quickly and cheaply than primary data, especially when national and international statistics are needed Collecting primary data can be costly and time consuming as to be impractical Moreover, most research on past events also has to rely on secondary data sources Similarly, data about distant places often is collected more cheaply through secondary sources On the other hand, secondary data has a number of disadvantages Not all secondary data is readily available or inexpensive Data mining of company databases that are not designed for unstructured searches can be expense because of the large amount of time such as activity consume Besides, the researchers may have less