MSc Strategic Accounting - Essay Example

?MSc Strategic Accounting Table of Contents Part A 3 Strategic Cost Management (Strategic Costing) 3 A Brief Overview of Strategic Costing 3 CriticalReview of Literature 3 Part B 12 (a)Identification of the Key Factors 12 (b)Development of a Balanced Set of Performance Measures for Bradtech 13 (c)Consideration of Other Important Issues 14 References 16 Part A Strategic Cost Management (Strategic Costing) A Brief Overview of Strategic Costing Strategic Cost Management (Strategic Costing) can be regarded as one of the effective and strategic oriented management accounting methods. The strategic costing technique tends to offer significant benefits to the organisations in terms of clearly exploring accounting information associated with the growth as well as the execution of the organisational core business strategy. The technique proactively supports the organisations through highlighting non-strategic directions that occur in different practices of the management accounting process. Due to the fact that the strategic costing technique firmly implies long-term future oriented attributes, it can facilitate the organisations to reduce different types of accounting uncertainties (Cadez & Guilding, 2008). Critical Review of Literature With respect to the significance of the strategic costing, Cadez (2008) has mentioned that the notion of strategic costing has become a widely used technique for the organisations in case of proactively performing their range of accounting practices. In relation to the present fiercely competitive scenario of the global business environment, the organisations seek to integrate well-built Strategic Management Accounting (SMA) techniques in order to efficiently attain their strategic goals (Cadez, 2008). Contextually, it has also been found from the study in Qucosa (2006) that the concept of strategic costing constitutes a broad focus beyond the notion of controlling or reducing organisational costs associated with its range of business operations. Moreover, the nature of strategic costing also encompasses cost information which is significantly recognised as one of the major attributes of making exceptional organisational decisions. In this regard, the study of Qucosa (2006) has further depicted a conceptual framework with respect to the major characteristics of strategic costing. Fig: Concept Strategic Cost Management (Qucosa, 2006) Philosophy: The philosophy of strategic costing can be considered as one of the major attributes which ensures to improve revenue as well as cost of the organisations. The concept of strategic costing significantly emphasises upon enhancing organisational productivity, capitalising in terms of profit enhancement along with augmenting customer satisfaction (Qucosa, 2006). Attitude: The concept of strategic costing constitutes a proactive attitude which ensures to encompass all the costs associated with the organisational processes that result from the management decisions. In this regard, the attitude of strategic costing involves six important elements such as holistic nature, market orientation, anticipatory approach, continuousness, participative and cross-functional attributes (Qucosa, 2006). Techniques: Techniques can be recognised as the major attribute that exists within the concept of strategic costing. The concept of strategic costing firmly involves reliable techniques that are implemented by the organisations in order to accomplish their desired goals or obtain overall needs (Qucosa, 2006). The notion of strategic costing can also be considered as an effectual curriculum for the organisations. In accordance with the viewpoints of Banerjee (2006), it has been revealed that an effective practice of strategic costing tends to facilitate the firms to frequently analyse and recognise their major cost drivers, thus helping them to minimise costs and increase the overall value of the firms. Such types of management accounting programme plays a vital role for the organisations in terms of preparing budget parameter as well as it also facilitates the firms to build effective structures for procurement activities. Moreover, the technique not only facilitates the organisations to minimise their costs but it also enables the firms to prepare effective management accounting structures which further enable to attain long-term competitive position (Banerjee, 2006). The concept of strategic framework mainly constitutes an effective framework which facilitates the organisations to obtain better control as well as to efficiently perform their range of cost related activities. In this context, Shank and Peterson (2005) revealed that the strategic cost management technique framework has firmly incorporated three major components in terms of analysing the overall performance of the organisations (Shank & Peterson, 2005). The components include core functions, value-added activities as well as core supportive resources of the organisation. Core Functional Activities: The initial component of the strategic costing includes the core internal functions of the organisations. The component comprises major initiatives wherein the management of firms tends to define the primary roles and practices that are executed to implement strategic decisions, product enlargement plans along with research and development initiatives (Shank & Peterson, 2005). Value-Added Activities: The component significantly focuses on added substantial value of the organisational business operations. For instance, manufacturing, sales and marketing, technical assistance along with customer service initiatives can be considered as the value-added activities of the organisation (Shank & Peterson, 2005). Supportive Resources: The final element of the strategic costing framework constitutes the additional activities performed by the organisations’ internal resources that tend to offer major support for the organisations. The major internal resources significantly include the general administration, human resource management along with finance and IT facilities of the organisation (Shank & Peterson, 2005). Origin of Strategic Cost Management Technique The notion of improving and strengthening the management accounting processes has been rapidly becoming an extensively executed practice for the global organisations in order to attain competitive positions in their respective business industries. Moreover, the continuous integration of technological advancements has also compelled the adoption of adequate measures in terms of investing in strategic management accounting within the business processes. In this regard, the strategic cost management or strategic costing technique has been widely used by the global firms in order to attain better control of the organisational resources and accomplish greater competitive position in the growing business environment. In relation to tracing the origin of the strategic costing technique, it has been witnessed from the study of Cadez and Guilding (2008) that the notion of SMA has been initially termed by Simmonds in the year 1981 which tended to represent a considerable disappearance of the traditional accounting practices. The concept of strategic costing can be regarded as one of the major approaches of SMA which is extensively practiced by the global organisations since the last two decades. The technique is widely recognised as one of the most effective practices, which significantly provides substantial benefits to the organisations to efficiently perform their different operational processes. More significantly, it can also be identified from the study of Guilding & et. al. (2000) that the emergence of SMA has been recognised since the recent few decades. In this context, the concept of SMA has been defined in two major perspectives. Firstly, SMA can be stated as a set of accounting techniques that is highly focused on improving the strategic decision of the overall performances of an organisation. Secondly, the term SMA is also viewed as an effective practice for the organisations in terms of improving the corporate decision-making procedures (Guilding & et. al., 2000). Recent Development In order to determine recent development of Strategic Cost Management Technique, it is apparently observed that the technique has been developed by merging with the principles concerning balanced scorecard (BSC) and activity-based costing. The development of this technique has been mainly observed when it played an important part in evaluating strategy implementation, monitoring any sort of underlying strategies that might require to be revised accordingly and offering strategic perspectives towards making effective operational decisions (Venkataraman, 2006). According to Stenzel & Stenzel (2003), the technique has been developed in recent times by different business organisations especially for meeting varied purposes. These purposes comprise advancing their respective management strategies, directing as well as guiding the organisations towards attaining greater competitive position and most importantly enhancing the strategic position of their businesses by lessening overall business or transaction costs by a greater level. Stenzel & Stenzel (2003) noted that the recent development of Strategic Cost Management Technique has largely supported different organisations belonging to this modern day context towards generating a dynamic as well as an effectual mechanism relating to strategic cost resulting in uplifting the aspects like cost management and resource allocation among others. Thus, on the basis of the above discussion, it can be affirmed from a broader perspective that the recent development of the aforementioned technique might prove to be much beneficial for the modern organisations facilitating them to compete with their major rivals and most vitally attaining superior competitive position (Stenzel & Stenzel, 2003). After acquiring a brief idea about the perception, techniques, origin and recent development of Strategic Cost Management Technique, it can be affirmed that this particular technique would be quite helpful for organisations in creating or sustaining competitive position in the long-term. This can be justified with reference to the fact that the aforesaid technique plays a decisive role in examining the suitable strategic directions for any particular business organisation. According to Gotze & et. al. (2006), the notion of Strategic Cost Management Technique would be able to support the modern organisations towards generating or maintaining competitive position due to certain valuable functions that it possesses. In this similar context, Gotze & et. al. (2006) identified that the technique bears the functions like guiding managerial activities, stimulating the behaviours of every individual attached with any organisation and supporting along with generating cultural values with the motive of aiding the organisations towards accomplishing strategic objectives. As stated by Venkataraman (2006), the technique concerning Strategic Cost Management would be helpful in generating or preserving a firm's competitive advantages because it possesses the capability towards delivering significant along with valuable information to different modern organisations on the basis of certain important aspects. These aspects comprise strategy formulation, assessment of strategy execution and limitations or risks associated with any sort of adopted business strategy. Moreover, Venkataraman (2006) also affirmed that the technique provides valuable information to the organisations belonging to this modern day context concerning certain important aspects. These aspects comprise determining the structure of accounting systems and assessing the role played by the accounting systems influencing the tactical decision-making procedure and strategic change. Thus, on the basis of the above discussion, it can be affirmed from a broader perspective that the technique relating to Strategic Cost Management would be quite helpful in generating or preserving a firm's competitive advantages at large. Part B (a) Identification of the Key Factors Bradtech Limited is fundamentally regarded as a medium-sized subsidiary of a huge manufacturing company based in the United Kingdom which is involved in making substantial portion of specialist components that are being sold to other companies belonging to the UK. In order to recognise the chief factors that Bradtech should pay much attention over the subsequent 12 months, it is to be stated that the company is required to consider certain significant aspects for the purpose of attaining its predetermined business targets by a greater level. In this similar concern, one of the chief factors that Bradtech should pay much attention to over the next 12 months can be increasing its dedicated sales force. This is owing to the reason that though the company is able to produce quality products to the customers, it faces tremendous problems in meeting delivery dates of the products resulting in affecting the company in terms of lessening profitability, work productivity and most importantly losing business reputation. Furthermore, the other vital factor that Bradtech must prioritise upon over the next one year can be incessantly developing its broad assortment of quality new products for the purpose of compensating the likely decline in its traditional business and attracting along with retaining the existing customers. As the company has been viewed to be facing extreme business market competition especially in the nation where it performs its different operational functions, it is quite indispensable for Bradtech to introduce as well as develop effective business strategies for the purpose of competing with its major rivals. In this regard, Bradtech should effectively utilise its various accessible resources and deliver the products at a much cheaper rate as compared with its chief business market contenders resulting in supporting the company towards competing with the major rivals and most significantly accomplishing greater competitive position. (b) Development of a Balanced Set of Performance Measures for Bradtech In order to develop a balanced set of performance measures particularly for Bradtech, certain important aspects relating to the company can be taken into concern. These aspects comprise learning and growth, internal business procedure, customer finance. From the perspective of performance measure concerning learning and growth perspective relating to Bradtech, the aspects like job satisfaction, training or learning prospects and employee turnover will be measured. Relating to the performance measure dimension concerning internal business procedure associated with Bradtech, the factors like operational adjustments, managerial functions, products or services and the introduction along with the implementation of pioneering technological advancements will be duly measured. With regard to the performance measure concerning customer perspective linked with Bradtech, the significant concerns like the deliverance of quality products with reasonable prices, satisfaction level of the customers and retention rates of the customers will measured. Finally, from the perspective of performance measure concerning finance relating to Bradtech, the important factors like cash flow, financial results based on yearly or quarterly stages and return on investment will be measured. This can be better understood with the help of the following pictorial illustration. Source: (Balanced Scorecard Institute, 2013) After acquiring a brief idea about the Development of a balanced set of performance measures for Bradtech, it can be stated from a broader perspective that the necessary information concerning the performance measures of Bradtech should be collected by emphasising upon the reports of Bradtech’s financial statements on a yearly or quarterly basis. Most significantly, the outcomes will be frequently reported by conducting general meetings on yearly, half-yearly or quarterly basis amid the management team and the senior management officials belonging to Bradtech. (c) Consideration of Other Important Issues Being a manufacturing based company, it is anticipated that Bradtech might face certain crucial issues that should be dealt with quite effectually. It has been apparently observed that certain imperative factors like increased level of globalisation, rising scenario of internationalisation and implementation of pioneering technological advancements have made different manufacturing companies to face several issues. In this similar context, it has been viewed that the manufacturing companies in recent times are incessantly facing certain critical issues concerning labour disputes, ineffective production capabilities, closing of factories belonging to various manufacturing factories and most vitally high retention or staff turnover rates among others. It can be affirmed from a broader perspective that Bradtech must introduce as well as develop effective business strategies for the purpose of mitigating the aforementioned issues by a greater level. This is owing to the reason that the occurrence of such critical issues would eventually affect Bradtech in terms of lessening profitability along with overall productivity, diminishing market share and restricting the company towards competing with its major competitors along with accomplishing superior competitive position. The factors like augmenting the degree of internationalisation activities along with globalisation have eventually urged different manufacturing companies functioning in this modern day context towards experiencing such issues by a considerable level. Bradtech could avail various significant benefits particularly from mitigating the aforementioned issues. The benefits might encompass increasing market share, enhancing as well as raising overall productivity along with profitability and attaining superior competitive position over its chief business market contenders. Thus, on the basis of the above discussion, it can be affirmed that the proper evaluation of the performance measures relating to Bradtech would certainly assist the manufacturing company towards mitigating any sort of vulnerable situations and attaining its predetermined business targets at large. References Balanced Scorecard Institute, 2013. Balanced Scorecard Basics. BSC Resources. Banerjee, B., 2006. Cost Accounting Theory And Practice 12Th Ed. PHI Learning Pvt. Ltd. Cadez, S. & Guilding, C., 2008. An Exploratory Investigation of an Integrated Contingency Model of Strategic Management Accounting. Accounting, Organizations and Society, Vol. 33, pp. 836-863. Cadez, S., 2008. Strategy and Strategic Management Accounting: An Investigation of Organizational Configurations. Manchester Business School Research Seminar, pp. 1-24. Gotze, U. & et. al., 2006. Introduction. Towards A Conceptual Framework for Strategic Cost Management - The Concept, Objectives, and Instruments, pp.1-525. Guilding, C. & et. al., 2000. An International Comparison of Strategic Management Accounting Practices. Management Accounting Research, Vol. 11, pp. 113–135. Qucosa, 2006. Towards a Conceptual Framework for Strategic Cost Management - The Concept, Objectives, and Instruments. Chemnitz University of Technology, pp. 1-525. Shank, J. K. & Peterson, D., 2005. Strategic Cost Analysis for Capital Spending Decisions. Cost Management, Vol. 19, No. 4, pp. 14-20. Stenzel, C. & Stenzel, J., 2003. From Cost to Performance Management: A Blueprint for Organizational Development. John Wiley & Sons. Venkataraman, A., 2006. Abstract. Developing a Strategic Cost Management Model: Combining the Balanced Scorecard and Activity-Based Costing In the Context of Diabetes Education, pp. 1-93. Read More