How Far Has Management Accounting Changed to Face the Challenges in the Global Competitive Environment - Coursework Example

How far has management accounting changed to face the challenges in the global competitive environment? Introduction This paper discusses how the management accounting has changed to face the challenges of customer satisfaction, monitoring the appropriate quantity of the products that are sold by the organization, understand the quality imperatives of TQM, operational imperatives of JIT, the supply chain management to achieve the imperatives of competitive excellence in the increasing competitive environment so as to ensure long term profitability. With the increasing global competition, management accounting as changed to strategic management accounting to provide the strategic perspective to the contents to address the challenges in the increasing competitive market. The conventional management has changed overtime to face these challenges has discussed below. First, the management accounting has changed to generate the external information to the organization during the times of high competition which is critical for the information management decisions. In the competitive environment, the management requires the information about the customers satisfaction level which helps to increase the long term profitability of the organization (Messner, 2010). Due to the weaknesses that were being experienced with the conventional management accounting of giving excessive information that were only concerned with the internal management of the organization and did not give the information about the external competitive market which was critical for decision making called for the change in the management accounting (Bagnoli, et al., 2008). The conventional management accounting information mainly involved the internal cost accounting of the products or activities of the organization or the center of the organization and never gave the information about the external market. This made the management accounting change to the new strategic management accounting. More organizations are now convinced that for organizations to achieve the long term profitability they need to increase customers’ satisfaction of the organizations products or services (Kothari, 2002). The change in the management accounting has solved the problem through the use of the activity based accounting which examines the customer profitability information and determine how to manage the customer relationships in order to increase the customer satisfaction. Provision of such information in the organization enables the organization to be competitive in the increasing competitive market and ensure long-term profitability of the organization (Salterio, 2011). The management accounting has changed to strategic management accounting, which carries out the strategic cost analysis of the organization. For the organizations to ensure long-term profitability, they have to ensure the customer satisfaction in the organization (Hirshleifer and Teoh, 2009). Therefore, this is achieved through value creation of the products or services of the organization. Through the change in management accounting to strategic management accounting, it attributes costs to value-creating activities across extra-organizational linkages and networks so as to remain competitive and ensure long term profitability of the organization through customer satisfaction (Evans, 2003). It also identifies the cost drivers that relates to the organizations strategic choices and those, which relate to the organizations cost positioning, assess the implication of the cost structures of the organizations strategic positioning options of cost leadership, differentiation, and focus. Management accounting has also changed from the concept of the short-term decision making to the long-term decision making in the organization to ensure that the organizations achieve the long term profitability in the increasing competitive environment. The conventional accounting detached itself from the organizations strategies and strategic planning exercises because it was mainly based on the short -run operational decisions of the organization (Hopper, et al., 2008). The change in the management accounting to strategic management accounting which involve the long term decision making enables the organization to be competitive in the increasing competitive market and to ensure that it achieves the long term profitability. The conventional management accounting of cost and decision analysis tools are used in the short term focus and therefore never a dressed the strategic dimensions of the organization, and this placed the organization in the wrong side in the competitive market and could no-longer achieve the long term profitability due to the lack of account for the benefit to the customers accruing from the strategic decisions of the organization (Neu, 2011). Management accounting has changed from giving the advice on the figures about the internal management of the organization to giving advice and informing to the top management about the potential and actual environmental consequences on their strategic decisions (Free, 2007). The conventional management accounting was only concerned with giving information on matters that affected the internal management based on the values measured. However, due to the increasing challenges in the competitive market, management accounting has changed to strategic management accounting, which also accounts for the long-term decisions of the organization (Ishikawa, 2005). It assists in the determination of the potential consequences of the of the management’s decision on long-term strategic decisions which could result into long-term profitability of the organization. The management accounting has changed to conventional performance measurement and control for both the operational and strategic success of the firm. The conventional management accounting focused on the operational results and did not measure the relative success of the strategic management (Dearman, et al., 2001). This has enhanced the organizations to ensure that, in times of competitiveness in the market, their performances are measured in respect to the customers’ satisfaction (Dearman, et al., 2001). Management accounting has changed from the conventional performance measurement and control system which is financial-based to conventional performance measurement which are both financial and non-financial. The conventional management accounting was initially based on the financial perspective in giving the information related to the management (W, et al., 2013). The conventional management measures that are produced by the organization are neither directly related to the organization nor the marketing and the operational strategies. Therefore in the increasing competitive market the management changed to provide the strategic information both inform of financial or non-financial to the organization which is critical in decision making in the organization to ensure long term profitability and long term performance. The management accounting has changed to ensure that the supply chain was properly managed. This is by ensuring that the raw-materials that are supplied to the organization are of good quality and are sold at reasonable prices. This is to ensure that the products that are produced by the organization are of good quality and sold at favorable prices which are affordable and result into customer satisfaction (Hohler, 2013). Therefore, good quality products produced due to good supply management ensures good customer satisfaction hence long term profitability to the organization, and it also increases the competitive edge of the organization in the market. Management accounting has also changed from the factory floor, and product costing to costing of a product or quality attributes provided by the company to satisfy its customers. The management accounting has changed to the use of the Just-In-Time system in its operations imperative to increase the quality of the products that are manufactured by the organization (Chen, et al., 2007). Just in time is a system that orders for the raw materials that are to be used by the organization in producing specific goods or products that are ordered by the customers. The products are produced only after the placement of an order by the customers. This ensures that products are produced according to the customers description hence ensures customers satisfaction (Bhimani, 2006). Change of the management accounting to the use of the Just In Time system help to ensure that all the products produced are of improved quality which makes the organizations customers be satisfied and, therefore, attracts and maintains the already existing customers for long term profitability of the organization in the increasing competitive environment (Fons, 2012). Management accounting has changed to the use of the Total Quality management (TQM) which ensures that the qualities of the products that are produced in the organization are of good quality which will satisfy the customers need. The change in the management accounting to the use of the QTM ensured that no defective products were sold to the customers to remain competitive through attracting new and maintaining the existing customers (Wali and Boujelbene, 2010). Therefore, the use of TQM to ensure customer satisfaction is one of the changes that the management accounting has taken to realize long term profitability in the organization. Lastly management accounting has changed to link the performance measurement system with the corporate vision, mission and strategy. The conventional management accounting was only meant to give performance measurement which could not illustrate much on how the organizations long term strategies were being achieved (Macintosh and Hopper, 2005). The incorporation between the management performance with the corporate vision, mission and strategy show whether the organization is achieving its long term set strategies such increasing the long term profitability in the competitive environment through providing customer satisfaction. Management accounting has changed to the use of the Activity Based Accounting and the use of Balance Scorecard as strategic performance measurement systems. These links the companies short term decisions with the long term strategy and are enabling mechanisms that translate the organizations strategy into action (Kamla, 2009). Increase in competition has made the issue of customer satisfaction more significant to ensure long term profitability of the organization. The Activity based Analysis often provides information which leads to the customers’ satisfaction through improved relations (Bierer and Götze, 2012). On the other hand balance score card are used to determine the drivers of profit and the success rather than the earlier model that required the understanding of the causes of the revenue and the cost In conclusion, the increasing global competitive environment in the business arena has called for customers’ satisfaction in order to remain competitive and achieve the long term profitability in the organization. Therefore, companies to improve long term profitability they need to create good customer satisfaction. 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