Strategy, Managerial Accounting


A business characteristically invests considerable time and money in developing or creating its strategy. Employees, harried with day-to-day tasks, sometimes fail to see the requirement to take on strategic planning. It is difficult to see the connection between strategic endeavours and the day-to-day corporate activities and tasks associated with delivering goods and services to customers. But, this strategic planning ultimately describes the organization. Specific strategy setting can take many forms, but commonly, includes elements pertaining to the definition of core values, objectives and mission.

Core Values -- An entity must clearly consider and define the norms by which it will play. Centre values can cover a broad spectrum involving concepts of fair play, human dignity, employment/ promotion/compensation, quality, customer service, ethics, environmental awareness, and so forth. If an organization does not make its members to understand and focus on these significant elements, it will soon find participants becoming solely "profit-centric." This behaviour inevitably results to a short term focus and potentially illegal practices that provide the seeds of self damage. Remember that management is to build business value by making the right decisions at right time; and, decisions about core values are very essential.

Mission -- Many companies attempt to plan a pithy statement about their mission. For example: "At IBM, we strive to lead in the making, development and manufacture of the industry's most advanced information technologies, including computer systems, networking systems, software's, storage devices and microelectronics. We transform these advanced technologies into value for our customers through our professional and experienced solutions and services businesses worldwide."

Such mission statements provide us a snapshot of the organization and provide a focal point against which to match logics and actions. They provide an significant planning element because they define the organization's purpose and direction. Interestingly, a number of organizations have avoided "missioning," in fear that it will limit the opportunity for the expansive thinking. For example, General Electric purposely states that it does not have a mission statement, per se. In its place, its operating philosophy and business objectives are visibly articulated each year in the Letter to Shareowners, Employees and the Customers.

In some sense, although, GE's logo reflects its mission: "imagination at work". Perhaps the subliminal mission is to pursue opportunity anywhere it can be found. As a result, GE is one of the world's most diversified entities in terms of the range of the products and the services it offers.

Objectives -- An organization should also consider its specific objectives. In this particular case of GE:

"Imagining, building, solving and leading - are four  that express what it is to be the part of GE. Their action-oriented character tells something about who we are - and should supply to energize ourselves and our teams around leading modify and driving performance."

The objective of a business organization should include delivery of goods or services while providing a return which means driving performance for its investors. In absence of this objective, the organization serves no purpose and/or will stop to exist.

The whole strategic structure of an organization is established by how well it defines its values and purpose. But can the managerial accountant help in this process? At first glimpse, these strategic issues seem to be broad and without accounting context. But, information is needed about the "returns" that are being obtained for investors; this accounting information is essential to determine whether the profit objective is being achieved. Actually, however, managerial accounting goes much deeper. For instance, how are core values policed? Consider that someone have to monitor and provide information on environmental compliance. What is the most effective technique for handling and properly disposing of harmful waste? Are there alternative products that might cost more to acquire save for cost less to dispose? Which system must be established to record and track such material, etc.? All of these issues desire "accountability." As another case, ethical codes likely deal with bidding procedures to obtain the best prices from capable suppliers. What controls are required to monitor the purchasing process, provide for best prices, and audit quality of the procured goods? All of these issues rapidly evolve into internal accounting tasks. And, the managerial accountant will be heavily concerned in providing input on all phases of the corporate strategy.

Posted Date: 7/21/2012 3:07:36 AM | Location : United States

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