Managerial Accounting And Globalization Management Essay
Managerial accounting or management accounting is a field is concerned with the use and provisions of accounting information to manager within the company or organizations, in order to provide them with the factors and knowledge in making informed business decisions that will facilitate better equipped in management and control functions. In management accounting, globalization is recognizes as the important in terms engaging concerns of their stakeholders. The dialogue developed between the company, their customers and stakeholders allow them to better understand how their business goals can be achieve and to realize new perspectives aligned with their concerns (Sparrow, Brewster & Harris, 2004). Organizations continued their objectives to implement an open dialogue with different stakeholders with the aid of globalizations and its factors, including non-governmental organizations, the media, clients, financial and industry analysts, environmental advocacy groups, and employees. On the other hand, the company paves the way for innovation to achieve concerns and needs of its clients. Such a time management accounting reinforces the strategic partnerships and engagement as necessary component. They work collaboratively with leading sectors and institution that help them respond to the current challenges brought by economic status and development (Ehrhardt, 2008).
Globalization is generally seen but not exclusively, as an economic process (Sparrow, Brewster & Harris, 2004). The level and pace of global economy change is still at its early stage, yet the pace of change of the economy is rapidly accelerating. This challenge is posed to international managerial accounting to be become more complex and strong. Also, it has provided significant opportunities for organizations in reconfiguring their strategies in their respective supply chains as well as the globalization of their production systems. This issue shall discuss the various strategies used by firms worldwide in dealing with the idea of globalization and their respective measures with regards to their operations as well as their managerial accounting which is the very vital resource in coping with the mentioned idea (Sparrow, Brewster & Harris, 2004).
Managerial accounting professionals should adapt on the very broad view of globalization. According to Ernst (1997) in an ideal world, an organization conducting business internationally is actively engaged in strategic planning and strategic management. It will regularly conduct and analysis scan of its strengths, weaknesses, opportunities and threats. The results of this analysis are their tool in the development of its global strategies aiming for global success. When this strategic planning goes international, the organization begin to concern regarding managerial accounting issues. Managerial accounting has one of the most critical issues in the organization that need to be addressed in able to compete with the international marketplace (Parker, 1998).
Many aspects of managerial accounting are affected both by globalization and the differences in national culture. The managerial challenge in a complex international organization was described in terms of harmonizing two opposing forces rather than making two binary either/or choices. Culture is another frame that impacts various aspects of the human resource management. The overview of managerial accounting practices in different cultures has brought about trends that were seen in the practices in the United Kingdom, United States, Japan and Lithuania. These differences and some similarities are also reflected on other countries. Managerial accounting changes have taken place in the UK as a reflection of membership in the European Union (EU) and the change in regulation form the UK government. Other factors such as globalization and strong pressure in cutting operational costs downwards have triggered this change. In the latter part of the year 2000, the US economy is slowing (Hagel et al, 2008).
Though there are a lot of workers available, managerial accounting has been a continuous challenge especially in areas wherein skills is a shortage. The managerial accounting is continuously being diverse. Organizations are continuing to experiment in variable compensations and high performance systems in enhancing productivity. The changes in the use and provisions of accounting information to manager within the company or organizations practices in Japan have seen to be slow and incremental (Sparrow, Brewster & Harris, 2004). Japanese organizations are carefully avoiding traumatic breaks from the past. They have a strong sense of corporate obligation in providing jobs, income and security. Furthermore, employees’ needs are neglected and maximum benefits are obtained of them. On the other hand, there is a shortage of qualified workers, and the growing completion has urged managers of organizations in shifting their attention to the employees’ as one of the key resources in attaining competitive advantage (Ernst, 1997).
Generally, there will be shortages in any global organization as seen in the studies made. This is especially in areas wherein skills are scarce, commonly in the areas of IT. To address this need, firms move toward alternative solutions such as consultancy and hiring expatriates. Though this move is quite costly in terms of salaries and other incentives, it is justified by the worker’s competence and added market value of the company. Another issue in the global use and provisions of accounting information to manager within the company or organizations practice is the addressing of employees welfare, compensation, benefits and incentives. Though the different countries studied showed diverse trends in managing this issue, it is very important to note that the employees are an organization greatest investment. It is very crucial that their needs are well addressed and taken care of. With this, organizations can be assured that employees are content and are committed to long and permanent tenure in the company (Parker, 1998).
The Globalization of Managerial Accounting Systems
Economic globalization is a two-pronged process. These are the globalization of finance and the globalization of production. The common features of these are the heightened international capital mobility. If the globalization of finance has increased dramatically, the globalization of production has grown significantly. The globalization of production comprises both international trade and foreign direct investment (Drury, 2000).
The globalization of production comes with great promise of a new phase of export growth from developing countries, whose inclusion in the process opens new markets and introduces new technologies. As world trade has expanded, both in absolute terms and in relation to world output, developing countries have maintained their share of world exports and have significantly expanded their share of world exports of manufactured goods. The key driver for the globalization of production is the multinational enterprise (Hagel et al, 2008).
Far reaching changes are currently occurring in the organization and location of the production of industrial goods and services, changes which are bound to have important implications for the welfare, the development potential, and the competitive position of different countries and regions. As competition cuts across national and sectoral boundaries and becomes increasingly global, firms everywhere are forced to shift from exports to international production. This has led to a rapid expansion of international production: new production sites have been added at a breath-taking speed outside the industrial heartlands of Europe, North America and Japan. Yet, quantitative expansion is only part of the story. Of equal importance are qualitative changes: a shift from partial to systemic forms of globalization. In order to cope with the increasingly demanding requirements of global competition, companies are forced to integrate their erstwhile stand-alone operations in individual host countries into increasingly complex international production networks. Companies break down the value chain into discrete functions, and locate them wherever they can be carried out most effectively and where they are needed to facilitate the penetration of important growth markets (Parker, 1998).
In a study conducted by Ernst (1997), regarding the international production networks in the electronics industry with regards to coping up with globalization, it was found out that in order to improve this industry’s specialization, they have established increasingly complex international production networks. These production networks do not only extend national boundaries but also the firm’s boundaries as well. The result is that an increasingly share of the value-added have been externalized. As competition has become globalized as well, it was found out that competition has increased the complexity and intensity of the competitive requirements. Globalization of competition also has had important implications for the organization of international production: it is no longer sufficient to rely on equity investments and outsourcing of basic manufacturing functions. The shift from partial to systemic globalization has led to a creeping migration of higher value-added support activities that are essential for competitive success (Sparrow, Brewster & Harris, 2004).
Similarly, Nersesian (2000) performed an analysis on the globalization of using accounting information to manager within the company or organizations in the textile and clothing industries. In this study, it was found out that these industries are undergoing a rapid process in the globalization of their production. The microeconomic foundations of globalization are clearly at work in this case as well: firms’ motivations and strategies – in particular Italian firms’ desire to restore deteriorating international competitiveness – appear solidly to drive the process. The technical conditions of production and even more so the application of modern telecommunication networks have only made easier the geographical separation between the more labor-intensive assembly phases and the capital-intensive preassembly stages in the clothing industry. In spite of this, the process of international relocation might not be as linear as it seems. Just like in the other industries, clothing and textile have adapted the lean system of production. This means that they practiced just-in-time deliveries, short runs, smaller orders, low-inventories and high quality. Within this perspective, transport costs as well as geographical proximity are given high regard when deciding on a global production system or subcontracting the operation (Parker, 1998).
In a study conducted by Anthony et al (2006) whether the globalization of production brings insecurity among workers, it has been found out that globalization gives firms greater access to foreign factors of production. Thus, this gives a greater ease of substitution away from workers in any given location. This condition results to greater insecurities of management accounting.
Globalization in Midst of a Global Crisis
In the midst of a global crisis, it is very important firms and organizations should employ ways in handling their production through strategies toward globalization. The Organization for Economic Cooperation and Development (OECD) has published in 2008 strategies in addressing the concerns regarding financial crisis. These strategies are strengthening the regulatory framework which can be done through streamlining of regulatory institutions and clarification of responsibilities; stressing and enforcement of prudential and business conduct rules; focusing on the integrity and transparency of the financial market; strengthening capital adequacy rules; strengthening the understanding of how tax policies affect the stability of financial markets; ensuring the accountability to owners whose capital is at risk; establishment of corporate structure for complex financial firms; strengthening financial education programs and consumer protections; rollback of the measures in the financial sector; fostering of corporate structure for stability and competition; strengthening corporate governance; privatization of capitalized banks; ensuring to maximize recovery from bad assets; and reinforcement of pension arrangements (Drury, 2000).
An example to be taken for this section is the strategies used by Malaysia in addressing the global crisis and the use and provisions of accounting information to manager within the company or organizations. The strategy used by this country is unorthodox policy measures which were highlighted by the use of capital controls. This was also complemented by some institutional measures, though some of it was temporary. An example of this is the establishment of an organization which is tasked to restructure debt. Some strategies are long-term in nature, such as strengthening the banking sectors through mergers and initiatives for the liberalization of the financial sector. The center of all these strategy is a development of export-oriented growth (Nambiar, 2009).
The strategy on the use and provisions of accounting information to manager within the company or organizations has consistent delivered a profitable increased supported by a strategic and comprehensive marketing campaign contributed to about sales increase for the future years. The portfolio demand of the group’s support and marketing services remains strong across their independent stores and retailers is a result of this strategy. Their offerings of a high quality, fresh food at reasonable and valued prices continuously attract customers from the group’s main competitors and the target share growth for the drive market in the year ahead