Management Accounting the Objective of This Study Essay

Management Accounting

The objective of this study is to discuss and evaluate the purpose and effectiveness of strategic management accounting for modern businesses. The answer should be supported with at least one business currently in operation on the London Stock Exchange, discussing the ways in which strategic management accounting can support the business in managing the current challenges it faces.

Strategic Management Accounting is addressed in the work of Cheong (nd) who states that modern business environments are increasingly competitive and dynamic. International competition through e-commerce and demand-based supply chain management dominate business. It is important for companies to develop coherent and consistent business strategies and to utilize management accounting tools to support strategic planning, decision-making and control." (Cheong, nd)

Integration of business strategies with the tools used for accounting makes a requirement of companies in identifying precisely what type business they are in so that products, customer types, services, delivery channels, and geographic markets can be identified. Cheong notes the usefulness of matching the strategic business unit with the related business unit strategy." (nd)

I. Involvement of Management Accountants in Strategic Management Processes

The work of Ferriera and Moulang (2007) examine the involvement of management accountants in strategic management processes and state The role of management accountants within organizations is said to be in a state of change and many researchers have called for a greater involvement of management accountants in strategic management processes as means of regaining the 'relevance lost' and increasing the value creation of their activities."

Reported in the work of Ferriera and Moulang (2007) is a postal survey conducted among management accountants in Australian businesses, which resulted in 279 usable observations. Findings include that management accountants' involvement in the strategic analysis stage leads to their involvement in strategic choice and to strategic implementation stages." ( ) Also stated in the findings was a "direct relationship between involvement in the strategic analysis and strategic implementation stages." (Ferriera and Moulang, 2007)

A more fundamental finding is that "only the involvement of management accounts in strategic implementation is associated with organizations' strategic effectiveness." (Ferriera and Moulang, 2007) In a separate study conducted by Granlund and Lukka (1998b) which examined the changing role of management accounts in a Finnish cultural context states findings that evidence exists supporting the idea that "controllers acted as member of the management team and form part of the organization's management." (Ferriera and Moulang, 2007) In addition, the study found that controllers are also viewed as change agents and business advisors." (Ferriera and Moulang, 2007)

Conclusions in the report of Ferriera and Moulang (2007) state as follows:

"Our findings reaffirm the important role that management accountants play in contemporary organisations in strategic management and that it goes beyond the traditional role of scorekeeping. It also suggests that management accountants have expertise and skills that can be utilised in broader areas of the business, particularly in relation to strategy, to the benefit of their organisations.(Ferriera and Moulang, 2007)

II. John Lewis Company on Management Accounting

According to a report from retailer John Lewis Company managerial accounting "is concerned with providing information to managers, that is, people inside an organization who direct and control its operation. Managerial accounting provides the essential data with which the organizations are actually run." (Islam and Ariful, nd) Managerial accountants prepare a variety of reports. Some reports focus on how well managers or business units have performed comparing actual results to plans and benchmarks. Some reports provide timely, frequent updates on key indicators such as orders received, order backlog, capacity, utilization and sales." (Islam and Ariful, nd)

There are also other analytical reports prepared when they are needed for investigation of specific problems such…