Accounting for Strategic Management - Ave-Co Plc - Case Study Example

The Ave-Co Plc seeks a solution. This executive report presents two mind maps and the following analyses to the management team: first, the problem faced by BH (both control and finance). Second, the strategic management accounting issues, relevant to the BH case, discussed in a selected peer-reviewed journal. Strategic management accounting incorporates the concept of strategic management, the elements of management – planning, implementing and controlling, and the use of financial information to aid sustainable decision making (Ramljak & Rogosic, 2012, p. 56).

Based on the above definitions of strategic management accounting, after the acquisition of the Boutique Hotel by Ave-Co, the 14 Hotels were divided into three regions headed by regional managers. First, each manager had an autonomous management authority over a region. Therefore, decisions such as price determination were done without prior consultation with the parent company. To some extent, the authority given to the respective regional managers contributed to the decline in the financial performance of the Boutique Hotel. The reason is the regional managers, by acting independently, could lose sight of the overall objective of the company (Ma & Tayles, 2009, p. 473-480).

Second, every manager should answer to another higher authority. This helps keep the managers' interests and actions in line with the overall objectives of the company. The regional managers of Boutique Hotel were acting independently, thus were under no pressure to improve the financial performance of the organization. Therefore, the mentioned reason partly led to the decline in the financial performance of the organization (Ramljak & Rogosic, 2012, p. 94-97).

The two points discussed above were concerned with the control issues in the organization. Next in line are issues concerning Ave-Co’s finance department. The financial department of the parent company had the dual responsibility of servicing both the parent company and the Hotel. However, there was little interaction between the Hotel managers and the finance department, which inhibited the sharing of financial information. Consequently, effective financial analysis and the implementation of efficient financial strategies were stalled. This led to the decline in the financial performance of the Boutique Hotel (Cadez & Guilding, 2012, p. 484-488).

The above mind map summarizes the concept of strategic management accounting. The article is on the implementation of strategic management accounting in the U.K. Hotel sector. Strategic management accounting is widely being adopted in the UK hotel sector to aid planning, market assessment and competitor analysis. The article evaluated the use of strategic management accounting in the UK by examining six hotels (Collier & Gregory, 1995, p. 2-16). The research methodology adopted is a field study research, which was aided by a series of interviews where possible. The analysis has also been conducted using financial information of the sample organization where such information was easily obtained. From the sample of six hotel businesses, large ones with several subsidiaries both in the local and international market has adopted a strategic management accounting system thus, had a competitive advantage. On the other hand, small hotel businesses operated locally had not implemented the system. Such organizations were experiencing competition problems (Collier & Gregory, 1995, p. 2-16).

            The report contains the key issues that affect the financial performance of the Boutique Hotel. The issues have been well presented in two categories. The first category is the control issues of the company. To summarize the report’s content regarding the issue, Boutique Hotel lacks strict managerial control since the regional managers were given total control and were able to set their own prices. In addition, the report clearly explains how the control issue has contributed to the decline in the financial performance of the hotel (Case study, 2014).

The second category is the finance function. There is no interaction between the company’s manager and the parent company’s financial department. The occurrence inhibits the formulation of effective financial strategies for Boutique hotel thus, contributed to the decline in the financial performance. Even though the article does not directly associate strategic management accounting with financial performance, it has been selected. The research process undertaken to compile this report involved the search for an article that clearly distinguishes the performance between hotels that have adopted strategic management accounting and those that are still reluctant to adopt the system. The process has been induced by a lack of interaction between Ave-Co’s financial department and Boutique’s managers and the desire to uncover its effect on the company’s performance (Case study, 2014).