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BFM283 Strategic Management Accounting
BFM283 Strategic Management Accounting
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Course Code: BFM283
University: Aston University
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Country: United Kingdom
Questions:
1. Apply strategic management accounting tools to organisational contexts2. Communicate appropriate accounting information clearly to aid management decision making3. Critically evaluate the usefulness of Strategic Management Accounting Tools
Answer:
Introduction:
The concerned report has been prepared with the objective of studying the diffusion of management accounting innovations in the U.K, New Zealand and Australia. There has been a dearth of innovations in this field for a variety of reasons including the lack of willingness of the top management in order to bring these changes, aversion towards changes, too much emphasis on the usage of computer based accounting systems, which have hampered the growth of innovations into the field of management accounting in businesses. However, in this report, the diffusion of the various innovations in this field have been discussed, with a special emphasis on the role of value chain analysis, with a focus of value chain analysis and its impact on the famous furniture company IKEA.
Discussion:
Innovation in fields of Management Accounting:
There have been innumerable instances of innovations taking place in the field of Management Accounting. These innovations are expected to increase the satisfaction of its users, by delivering standout results and by helping them in using the accounting information in a much better manner. There have been a series of innovations, which has taken place in various corporates in the U.K, Australia and New Zealand.Some of these are the Activity Based Management (ABM), Balance Score Card, Benchmarking, Strategic management Accounting, target costing and many other new kind of innovations of Management Accounting. It has been seen that in that there has been a growing interest in the recent years in the adoption of the new technologies. This recent changes in the stance towards adoption of new technologies is due to a number factors (Dekker 2003). The recent development in the market has led to the need for adopting such new management accounting techniques and practices. It has been seen that the that Activity based costing has been the least preferred methods and benchmarking was one of the most sought out practices among the new range of innovative methods in the arena of management accounting. Although it has been seen that apart from benchmarking, all the other innovative techniques are still lagging behind, however, there has been a general increase in the adoption of these new techniques compared to the previous years (Ross and Kovachev 2009). The different innovative techniques and their adoption and applicability status, have been provided below:
Balance Score Cards: Some individual projects have been identified in the UK, New Zealand and in the USA, but no concrete evidence was found regarding the success of the adoption of the balance score cards. It had been initially introduced in certain agricultural practices in New Zealand, in UK, the food chain centre (FCC) has been using balance score cards and in the USA too, this has been used for ranch businesses (Stevenson, Hojati and Cao 2007).
Benchmarking: Similarly in the case of benchmarking, the tool had its own share of humble beginnings in the agricultural work, which was practiced in the New Zealand, USA and the UK. Process benchmarking has also been introduced and many corporate have been trying to implement it and learn from it, as was done in the case of farming.
Value Chain Analysis:The application of Porter’s value chain analysis has been adopted by the Food Chain centre for transforming the agricultural practices. It has helped it in many ways, by reducing the number of breakdowns, identification of the chief drivers of productivity (Shank and Govindarajan, 2004). The value chain procedure has been an integral part of the supply chain and logistics section, although it has also been adopted in the arena of management accounting, because of its increased utility.
Challenges in the adoption of the new practices:
There has been a steady rise of innovation in the field of strategic and management accounting in the past couple of years. Innovation in the field of management accounting standards has taken place, but there has been no significant amount of work done in the case of implementation of the new kinds of innovations in the practical scenarios of the businesses. There have been significant amount of problems, which has come in the way of implementation of these innovations, in the practical field, some of these problems include, lack of the willingness of the top management of implementing these new strategies, because of lack of monetary benefits or in some cases, because of the attitude of aversion to new changes in their field of work and organisation (Langfield 2008). Moreover, there have been, other significant factors which have contributed to the lack of implementation of these innovations, apart from the lack of willingness of the top management, such as the dominance of the computer based systems of accounting and methods of financial accounting.
IKEA and its adoption of Value Chain Analysis:
The Swedish based multinational group, which specialises in designing and readymade furniture’s, kitchen appliances and other relevant home accessories (Ikea.com, 2018). It has adopted the usage of the value chain analysis. Here each step in the manufacturing of any of its product are regarded as a part of the chain, which ultimately adds value to the product or service, produced. Here the activities are divided into two separate parts, one the primary activities and the other the secondary activities. Different activities such as the operations, inbound logistics, marketing and sales, services and outbound logistics, are framed in such a manner, which helps IKEA, in providing value to its ultimate products.
Conclusion:
The support of the top management and their willingness is the key factor behind the adaption and the successful implementation of the new cost and management practices. In addition to the support, a deep insight into the new techniques is equally important, as it would help in looking out for new innovations and practices. A proactive role is to be played by the top management, which would set the precedent of the introduction and the implementation of many programmes like Benchmarking, Balance Score Card, and Value Chain Analysis. However, it has also been seen that there has also been renewed interest and zeal towards the implementation of these practices. The different agricultural farms and companies of UK, USA, New Zealand, along with IKEA has shown a pathway, which needs to be followed by others as well, for the successful adoption of the innovative practices of management account.
References:
Dekker, H.C., 2003. Value chain analysis in interfirm relationships: a field study. Management accounting research, 14(1), pp.1-23.
IKEA. Prajogo, D.I., McDermott, P. and Goh, M., 2008. Impact of value chain activities on quality and innovation. International Journal of Operations & Production Management, 28(7), pp.615-635.
IKEA.com – International homepage.2018. [online] Available at: https://www.ikea.com/ [Accessed 11 Aug. 2018].
Ikea.com. 2018. Reports & Downloads – IKEA. [online] Available at: https://www.ikea.com/ms/en_AU/this-is-ikea/reports-downloads/index.html [Accessed 11 Aug. 2018].
Langfield-Smith, K., 2008. Strategic management accounting: how far have we come in 25 years?. Accounting, Auditing & Accountability Journal, 21(2), pp.204-228.
Ross, L. and Kovachev, I., 2009. Management accounting tools for today and tomorrow. Chartered Institut of Management Accountants.
Shank, J. and Govindarajan, V., 2004. Strategic cost management: the value chain perspective.
Stevenson, W.J., Hojati, M. and Cao, J., 2007. Operations management (Vol. 8). Boston: McGraw-Hill/Irwin.
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