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Assignment On Strategic Management Accounting

 

Guidance:

Students are encouraged to be inquisitive and innovative in their approach as to what shouldbe included in this report. The following may be of some use in providing guidance as towhat could possibly be included,

 although this is in no way meant to be prescriptive

.The aim of the assignment is to help you understand how key areas of strategicmanagement accounting are demonstrated in practice by a large, international company.This will include investigating topics from throughout the course linked to the above issues.Some of the principles, concepts and models will be more relevant to your chosen approachthan others and so it is likely that different students will formulate different approaches to theproblems. This is normal, it is not expected that all of the course content will be used in theanalysis, concentrate on that which you feel is most important. As part of your work you might find it helpful to briefly explore the underlying theory behindthe key areas of investigation that you identify before applying them to report.With a total of 3,000 words you do not have a lot of room for long introductions so assumeyou are writing to a sophisticated audience who has a working knowledge of strategicmanagement accounting and is well versed in business theory. Numerical examples for illustrative purposes may be of use

 but should not be the main thrust of the work

. If usedthey should be to provide evidence to support your findings from your other analysis of position and policies. If other sources are used remember to

 reference everything!

Please avoid relying too heavily on descriptive sections reproducing information availablefrom course material or the set text. It is your own logical, evaluation of the situation, theinterpretation of course material and presentation, with critical analysis, of a coherentstrategic plan that will attract high marks.

Strategic management accounting (SMA) is the merging of strategic business objectives with management accounting information to provide a forward looking model that assists management in making business decisions. Unlike management accounting -- which focuses on internal accounting metrics -- SMA strategy evaluates external information regarding trends in costs, prices, market share and cash flow, and their impacts on resources, to determine the appropriate tactical response. The strategic element of management accounting requires enhanced intelligence about competitors, suppliers and technologies.

Management Accounting Triangular Structure

According to a study released by Houghton Mifflin Company there are three primary attributes of SMA: technical, behavioral and cultural. Technical analysis enhances understanding and provides information on the event measured. The behavioral metric promotes actions to achieve the organization's strategic objectives. The cultural element of the triangle establishes a shared set of beliefs within the organization. These three tenets comprise the elements of an effective SMA program.

Strategic Triangulation of Management Accounting

The primary strategic elements of organizations are based on quality, cost and time (QCT). An enterprise uses these factors to differentiate itself from competitors. Each firm evaluates the relative importance of QCT factors predicated on its customer base and the preferences or demands made by its market. In some instances, firms will demand products subject to primary issues of time and cost. Other customers demand quality and are indifferent to cost factors.

Illustrating Strategic Management Accounting

According to research from McGraw-Hill, a study of London-based retail store Tesco determined that the company's primary fixed asset base was its stores. Based on this factor management created strategic partnerships with construction companies to lower costs and maintain quality. In addition, Tesco monitored competitor product pricing to reduce customer prices and gain market share. Tesco also enhanced its technology by offering store cards that track customer purchase patterns.

SMA Focus on Organization Environment

Awareness of competitive conditions is the primary difference between strategic management accounting and traditional management accounting systems. SMA focuses on the company's environment. One environment a firm focuses on revolves around its relationship with suppliers and customers. Another environment involves a company's current and potential competitors. Hence, a firm's intelligence may indicate a need to reduce prices to compete. SMA would evaluate the organization's up-stream (suppliers) cost structure to determine if it can renegotiate with suppliers, or if it must seek suppliers with lower price points.

About the Author

Grant Houston has been writing since 2000, covering various political, business and market events. With a Bachelor of Arts in economics and political science, he has written articles for "Political Economic Review," UmarKit, LLC and Shadow Company. Houston has also authored business plans and consulted with companies on capital acquisition strategies.

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