The Subprime Mortgage Crisis - Essay Example

Management Accounting Report Part A The subprime mortgage crisis of 2007-2008 affected many businesses, most in the developed and the developing economies, considering that it swept the whole economic and financial platforms of the countries affected, which then transferred the same to the developing countries, through reduced business, which in turn reduced the returns earned by such businesses from the exports to the developed countries (Hoque, 2005 p477). This occurrence has forced many businesses and organizations to devise different strategies through which they can adapt to the existing business environment, and thus increase both customer and organizational value. This has been achieved through: Enhanced marketing/outreach efforts The business environment is ever changing and very dynamic. Therefore, while running a business, the management has to focus both on overcoming the current economic hurdles as presented by the existing business environment, as well as focusing on how the anticipated future challenges can be overcome. One of the most vital tools for enhancing business survival in a challenging and competitive business environment is enhanced marketing/outreach efforts (Hoque, 2005 p472). This strategy ensures that a business keep reaching new customers and markets, while ensuring that it still keeps the current market base well informed on its product or service range. Promotion and advertising are strategies that helps a business to remain relevant and competitive, considering that the more the number of people who knows about the existence of the business and its products, the higher the chances of such a business getting more customers. Considering that enhanced marketing/outreach efforts covers both the existing and the prospective clients, a business that advertises and promotes its products is better placed to overcome competition, than a business that does not make any efforts to make more people know about its existence and its offerings (Cullen, et al., 2013, p12). Therefore, in order for organizations to increase both customer and organizational value, enhanced marketing/outreach efforts, aimed at both the current customer base and the potential customer zones, in essential. Knowing and focusing on business Niche Competition in the business environment serves to disorient many business organizations, leaving most of them unsettled on the products or services they would actually offer, or the main client base they are targeting to serve. This is because, the business try to evade the competition by shifting to a different market or product/service offering, where they feel that they may not be faced by stiff competition (Matt, Chenhall, & Euske, 2007 p17). However, considering that the business environment is very dynamic; they end up being faced by the same competitive challenges, thus disorienting the business even further. However, when a business focuses on knowing and serving its niche market, it will understand fully the needs of the customers, and thus tailor-make its products or services to match the specific needs of the niche market (Cullen, et al., 2013, p7). This way, the business is able to cultivate customer loyalty and goodwill, which in turn enhances the repeat purchase from the customers, and thus helps the business to overcome the forces of competition that could face the business (Kloot, 1997 p47). Development of supplier/vendor retention and recruitment programs While the customer is the most important focus for any business organization, the suppliers and the vendors play a very pivotal role in enhancing the success of a business (Matt, Chenhall, & Euske, 2007 p21). The competition in the modern world is not only for the markets and customers, it is also about the sources of cheap and efficient raw materials for a business, and also about a smooth channel of distribution, since all these aspects plays a vital role in enhancing the success of a business, while determining how effective such a business is in the market. Therefore, through the development of supplier/vendor retention and recruitment programs, a business is able to secure the sources of its supplies, and thus shed off competition, which could be fighting for the same supplies (Drury, 2012 p13). Additionally, the implementation of a program that retains the suppliers and the vendors serves to enhance the supply chain for a business, eliminating the unnecessary hurdles, inconveniencies and logistics that come with change of the suppliers and the vendors (Hoque, 2005 p477). Through maintaining a smooth and effective supply chain, an organization is able to plan and control its costs and profitability, and thus is able to overcome the challenges associated with the supply chain management, which have always caused business problems in cost management, and maintenance of efficiency of the supply and distribution channel of an organization’s products (Cullen, et al., 2013, p7). Thus, the development of supplier/vendor retention and recruitment programs enhances the position of a business in the markets, by ensuring that the supplies to the customers are never affected, which in turn gives business a competitive advantage, over the organizations with logistical and supply chain inconveniencies (Cullen, et al. 2013, p2). Collaborating with consultants and researcher The competition in the business environment has become so stiff, such that it is difficult for organizations to continue operating in the same product and service offering. This has created the need for diversification in the product offerings, so that a business is involved in the offer of various commodities, just to minimize the risks associated with a single product offering (Cullen, et al., 2013, p13). However, differentiation can only be achieved through the development of novel product or services, which are new in the market, and thus capable of attracting customers to the business, both existing and new ones. The development of new product or services requires that intense research is undertaken, to come up with a product that will meet the needs of the customers, yet possessing different features from the already existing products. This is where the services of the research and consultant firms become necessary, since such firms are in constant touch with the customer and the customer needs information (Barrow, 2013 p4). Therefore, through collaborating with such firms, an organization is able to get accurate and adequate information regarding the developing needs of the customers, and the kind of products and services that can be developed to meets such needs. This enable an organization to tailor-made its products and services to the specific needs of the customers, while also offering unique products or services, based on the research and consulting information use. This way, a business is able to gain a competitive advantage in the market it serves. Part B The role of management accountants and the management accounting function within an organization is to provide the mangers with accounting information, to enable them to make informed decisions regarding various issues that could be affecting the business organization (Jarvenpaa, 2007 p112). Therefore, to increase the customer and the organizational value, the management accountants and the management accounting function assists the organization through the following roles: Duo accountability functions The management accountants and the management accounting function are tasked with duo function responsibility, where they are required to take care of the accounting accountability of the activities of an organization, while at the same time preparing the organization for the future financial path (Barrow, 2013 p6). While the financial accounting functionality within an organization is to ensure compliance with the financial standards of accounting and reporting, the management accountants and the management accounting function delves deeply into the performance variance analysis, to unearth the factors behind an organization performing the way it does financially (Kloot, 1997 p49). The financial accountants just prepare the books of accounts and ensure compliance with the required standards and regulations, but they cannot analyze the financial performance further. This is left as a responsibility of the management accountants and the management accounting function, to analyze the financial records of a business in relation to the cost and revenue aspects, and thus come up with a comprehensive strategy that focuses on minimizing the costs, while maximizing on the revenues of the business. This way, the management accountants and the management accounting function of an organization helps drive the success of the business (Matt, Chenhall, & Euske, 2007 p23). Providing forward looking information The role of the management accountants and the management accounting function is to provide forward looking information, as opposed to the historical information that is provided by the financial accountancy function of an organization (Jarvenpaa, 2007 p112). Thus, the management accountants and the management accounting function plays the role of preparing a business organization for the future occurrences, through the provision of accounting information that is forward based, as opposed to focusing on the past financial information of the organization. This allows the organization to adequately prepare for any eventualities that are likely to face the business in the future, since it is already versed with the accounting information that is focused on the coming days (Matt, Chenhall, & Euske, 2007 p22). Forecasting, planning and performance variance analysis The management accountants and the management accounting function within an organization play the role of forecasting and planning for the future occurrences, enabling the organization to be adequately equipped with the occurrences (Drury, 2012 p42). The business environment is always dynamic, and thus makes the future for any business organization uncertain. However, should a business opt to face the uncertainty blindly, then it would be destined for failure, owing to the competitive forces that always play in the business environment. Nevertheless, with adequate forecasting of the future occurrences, and the subsequent planning for them, which is the role played by the accounting management function of an organization, it become possible for the business to walk into the future well prepared, and thus able to overcome the business environmental challenges, as well as the competitive forces (Drury, 2012 p68). References Barrow, L. 2013, Guide to the Management Accounting (26357) Coursework, 1-8. Boeker, W. & Goodstein, J. 1991, Organizational Performance and Adaptation: Effects of Environment and Performance on Changes in Board Composition. The Academy of Management Journal 34 (4), pp. 805-826. Cullen, J., et al. 2013, Reverse logistics in the UK retail sector: A case study of the role of management accounting in driving organizational change. Management Accounting Research, 481, 1-16. Drury, C. (2012), Management and Cost Accounting, 8th edtn, Cengage Learning: Hampshire. Chapter One – Introduction to Management Accounting. Hoque, Z. (2005), "Linking Environmental Uncertainty To Non-Financial Performance Measures And Performance: A Research Note", The British Accounting Review, 37(4): pp. 471-481. Jarvenpaa, M. (2007), "Making Business Partners: A Case Study on How Management Accounting Culture was Changed", European Accounting Review, 16(1): pp. 99-142. Kloot, L. (1997), "Organizational Learning and Management Control Systems: Responding to Environmental Change", Management Accounting Research, 8(1): pp. 47-73. Matt, B., Chenhall, R. H., and Euske, K. J. (2007), "Management Control Systems as a Tool for Planned Organizational Change", Cost Management, 21(5): pp. 15-25. 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