Management Decision Making - Coursework Example

Management decision making Management decision making Management is basically the coordination and organization of business activities to attain set objective. Any organization that is led by an effective management team will experience maximum productivity, low turnover, a rise in bottom line outcomes and a high stature of talent. This report has critically evaluated the application and limitations of internal and published financial reports that can be used in decision making. The report further proceeds to examine the use of financial and non-financial information for controlling, planning and decision making. The report has also examined little management accounting techniques. Finally, the report has attempted to evaluate some current techniques that are appropriate for strategic management accounting. The report is generally to be used within Spacenet.inc; a well-established ICT firm based in Brussels. The board of associations and the management depend on financial reports to be able to cognize the economic situation of the board and to help the whole team in the process of decision making. For the purposes of improving the usefulness of financial information in the perspective of the decision making process, financial statements should be analyzed (Young, 2003). In that perspective, financial statement analysis can be described as the process where data is converted from financial statements into meaningful information for the organization quality evaluation by use of diverse analytical methods, which is very essential in the entire process of rational management. The function of financial report analysis is to identify good characters of Spacenet.inc so that the management can apply most beneficial characteristics. At the same time such reports also help an organization to recognize its weaknesses and take the necessary actions. A good financial strategy should consider both strength and weaknesses of the company. The use of internal financial statement prepared for top management provides the information they require in monitoring the organization’s operation and aid in decision making. Published reports rely on internal financial reports to inform investors, lenders and suppliers about the firm’s financial position. One limitation of both internal and published financial report in decision making is that the data given is based on the market at that particular time (Young, 2003). Subject to the nature of the market, change may be observed very quickly, so top managers are not supposed to assume that figures as per the last reports will be stagnant or increase. Since the company has just managed to sell five million units of a product during the first year does not guarantee that it will sell the same unit or more. What if a competitor introduces a competing product with reduced price? Such financial reports also reveal how much the company earns per year in its sales. Sales may drop, but financial planners should be in a position of identifying a pattern over decades of sales data. Unluckily, since such statements are simple for every person to understand, is the same way it may be easy for an individual to hide some information related to finance. It becomes tricky for the company’s decision makers when they observe negative results just in case they made a decision that was based on false assumption. The organization makes use of both financial and non-financial reports and is aimed for the use of internal users who apply the information to arrive at decisions that aid in achieving goals and objectives of the company. Financial information used by the organization includes return on capital employed, sales growth, market share and profits. Non-financial information entails level of customer satisfaction, quality of production, customer loyalty and the performance of competing goods and services. Both financial and non-financial business reports are used for controlling, planning and decision making. In managing the organization and instigating an internal control system, both financial and non-financial reports play a great role. The reports are said to be beneficial when the information that has been obtained from them serves system users in a robust way. Effective reports are supposed to systematically avail information that has a potential outcome on the entire company management. In general, the use of both financial and non-financial reports becomes a vital factor in bringing change into a competitive business environment, for managers to plan, control and reach some decision. One major challenged that was discovered the choosing of ultimate concept of the reports to be implemented by the company that in turn may negatively or positively affect the organization and hence it is still a major challenge. If a specific concept of both the reports used by the organization affects the process of management in a negative way, it helps the management to identify the factor behind that negative effect. The negative may be as a result of adoption of improper accounting report Researches have revealed that successful use of both financial and non-financial needs a fit between three main factors (Young, 2003). First of all, the report should be obtained with dominant take in the perception or origination of the situation. Secondly, the system that is in use for accounting should be fit when challenges are normally being solved; this is the technology being used by the Spacenet.inc. Lastly, the accounting information should fit within the culture; this is to say the norms and system values that characterize the firm. The level of use of management accounting techniques especially the new ones should be emphasized, and all the concerned authorities should give the needed attention to this matter. In order to coup with the rapidly changing technologies and at the same time manage challenges as a result of vigorous global competition, Spacenet.inc need to apply some newly developed management accounting techniques such as target costing, process reengineering, just in time and top quality management among others. Management accounting techniques plays a very great role when it comes to decision making for they create a competitive advantage for the business. Decisions made are based on some techniques that are traditionally designed depending on quantitative data. Studies in both the United Kingdom and United States revealed that most firms are always slow in adopting such techniques; this may derail the effort of the Spacenet.inc in achieving its goals. Management uses complex organization data to help in identifying vital points and quarantine underperforming and weak systems. Management techniques also uncover opportunities that are hidden under processes and routines. In case well exploited, the modern management accounting techniques may provide the company’s management with the help to be more efficient in most of its operations and at the same time being much more productive in its end results (Hankins & Baker, 2004). Most organizations are adopting these new techniques in order to cope with the ever changing market nature; this should also apply to Spacenet.inc. Consumers also keep on changing their preferences; hence it is high time the Spacenet.inc venture into business that would keep the client coming back. The following are some few techniques that are in use currently; Just in time JIT One of management formed operating philosophies that Spacenet.inc uses is Just in Time. The JIT option may also be used in merchandising Spacenet.inc. The JIT operating viewpoint stipulates that all resources including personnel, facilities and materials be acquired and utilized in the right manner. According to JIT notion, raw materials are supposed to be acquired and be taken into production, manufactured parts are availed for assembly and the products are completed in time to be ferried to the consumers; this is especially meant to cater for hardware manufacturing segment. Total Quality Management (TQM) This is the most familiar approach to continued improvement. There are two main characteristics of TQM: First, a focus on customer service and secondly, systematic problem-solving by the use of teams made up of frontline employees (Young, 2003). TQM is a tactic to advance the effectiveness, flexibility and competitiveness of the entire organization. It is a way of organizing, planning and understanding each of the activity and entirely depends on every single person at each level. Theory of constraint (TOC) A constraint is something that prevents an individual from getting one or more of what s/he need. Every organization at least faces a constraint, including Spacenet.inc. TOC maintains that managing the constraint in an effective manner is key to success. TOC also maintains that an analogy is always drawn between an organization processes: the most weakest choice is always pinpointed first and then finally, improvement exertions are shifted over to that particular option for the purpose of bringing huge benefit. This very simple sequential procedure avails a powerful strategy for ever continuous growth in the company. Bibliography YOUNG, D. W. (2003). Techniques of management accounting: an essential guide for managers and financial professionals. New York, McGraw-Hill. HANKINS, R. W., & BAKER, J. J. (2004). Management accounting for health care organizations: tools and techniques for decision support. Sudbury Mass. [etc.], Jones and Bartlett. Read More