During the past three decades, companies operating in various sectors of the economy have experienced various changes in the scope of their operations. The service and manufacturing sectors have encountered dramatic changes in their business environment. Competition from companies operating in the same industry whether in the same jurisdiction or in global markets has resulted in situations where companies embark on revolutionizing their management to enable companies to remain relevant and competitive in today’s extremely competitive global environment. Consequently, a considerable reduction in product life cycle due to advancing technological trends has posed a considerable test to meet customer’s expectations and demands. To remain relevant and competitive, satisfying customer demands are the first priority for companies.
Moreover, adoption of new management techniques and systems to curb operational costs forms the foundation of strategic management accounting. Actually, competition has reduced profit margins significantly; hence, a shift in attention is essential to embrace the aspects of management accounting. This paper seeks to provide an in depth analysis of the significance of management accounting in advancing the relevance and competitiveness of organizations. The paper will explore the progresses of the Google company through adoption of strategic management accounting to embrace smartphone production.
Definition of Strategic Management Accounting
Firstly, management accounting utilizes data from actual accounting statistics of an organization to produce information for managers who perform strategic analysis to formulate business decisions(Epstein & Lee, 2011). Management accounting is a systematic process that involves measuring, analysis, interpreting and communicating information to other management levels in order to fulfill an organization’s objectives. Strategic management accounting refers to devising a course of action that an entity needs to pursue in line with its mission and vision. An important aim of strategic management accounting is to ensure that the organization retains a competitive advantage over its competitors, which may either take the form of diversification of products, improving customer relations or development of new products. Depending on the evaluation and recommendations of management accountants, an organization must focus on the long term.
Function of Management Accounting
The role of management accountants has undergone shifts to embrace a more advanced role of execution and decision-making. Management accounting assists the management of an entity to carry out their job more effectively and efficiently. Management is concerned with the following general functions directing, planning, controlling and organizing. Management accounting assists in carrying out the above functions in the following ways: providing data, proper classification and compilation of accounting data, specification of goals encompassed in the company’s objectives and carrying out research within populations to ascertain the needs of customers. The management accountants work closely with the stakeholders of an organization who serve an oversight function.
Advantages of Managerial Accounting
Management accounting is indispensable in the organization as its importance range from saving the organization resources, which are channeled to other projects that may be profitable. However, information obtained in management accounting analyses the cost of resources and operations to allow directors of the company understand the costs of running the business. If quality is not compromised, the management may decide to use cheaper resources. Budgets are important to any organization because they guide a business on its expenditure based on historical information. Budgets improve the cash flow of a business through analysis of cash expenditure provided in the budget.
An increase in financial returns is made possible by management accounting. Preparation of projected forecasts related to sales and customer demands helps the management implement decisions and necessary changes to encompass these changes and increase returns. Moreover, the information prepared by management accountants plays an important role in the implementation of business decisions meant to propagate the organization’s structure(Baines & Langfield-Smith, 2003).
Change in Management Accounting
Changes in management accounting are not uniform. This is because organizations operate in different industries, which encounter different challenges. Influence in the change of management accounting has been because of external and internal factors pertinent to the organization. Change in the scope of management accounting practices has been attributed mainly to technology, competition, organizational strategy and design(Atkinson, Banker, Kaplan, & Ypung, 2001). Due to the numerous functions of management accounting highlighted above the scope of operations is very large as it spans across all aspects of the organization.
Financial accounting and information contained therein is very important to management accountants. Lack of a well-designed finance accounting system would paralyze the activities of managerial accounting, which depends entirely on the authenticity and accuracy of this information. Cost accounting, budgetary control, inventory control and revaluation accounting form the foundation of management accounting.
Incorporated in 1998, Google, a search engine company, is the most renowned search engine entity, which controls more than fifty percent of internet searches in the world. The search engine presents internet browsers with numerous information for the query typed in the search engine. With millions of results generated, Google has a strong hold in the market despite competition from Yahoo, MSN and Microsoft. In addition to their search engine success, Google has developed core applications, which are meant to be simultaneous with the search engine. Gmail, Google maps and Google Earth applications have increased in fame and have become a significant addition to Google’s portfolio.
Success on this front can only be attributed to the innovative business model that involves strategic management and realignment of the organization’s objectives. Google has managed to stay relevant in its operations through the provision of internet savvy, providing individuals with browsing experience amidst competition from established search engine companies. Numerous milestones in the software, hardware and recently smart phone production have consolidated the organization's position in the industry. Moreover, services like advertising, entertainment and publishing increased customer satisfaction over the past few years consolidating the company’s market share and capitalization.
In spite of their worldwide recognition, Google has encountered numerous challenges on their way to being a market leader in the search engine front. These challenges have led to the realignment of its management structure and operations to provide for expansion, growth, customer satisfaction and employee satisfaction. Legal challenges of government and companies have criticized Google regarding copyright concerns while the Chinese government sought to sue the company concerning inciting search results. The management of the company drafted a copyright information document to alleviate future concerns regarding the mandate of the company and digital information.
During the recession, companies listed on the stock exchange posted decreasing values in their stock. Google was merely affected by the recession due to the scope of their operations and portfolio(Schiffman, 2008). In addition to rigorous advertising and a constant urge by people to stay apt with new and information on the internet made Google tolerance to the effects of the recession. Advertisement on Google’s search engine generates million in revenue for the company. Connectivity and communication around the world is improving every day due to the ease of operation and minimal costs of the internet.
The presence of Google and other search engine providers make the internet navigation easy because it streamlines information bases on what the individual needs. As more people regardless of their age group and culture use the internet for research or communication, the demand for search engines increases. Internet enabled phones are used for deciding driving routes, locating places, downloading music and checking game scores. Google has diversified its operations to provide an operating system and mobile applications that are downloadable easily to improve the browsing experience of their customers. This move is strategic because Google has wholly covered consumer expectations and most importantly encompassed populations ranging from teenagers to the elderly.
Technology sporadically changes every day. Google has embraced measure to ensure that it stays abreast with these changes. Of importance to note is that the company seeks to lessen cultural bias by offering a customized search engine in various countries based on their language, hence an increase in market share. As the cost of computers decrease, people in developing countries are gaining access to internet facilities and the personalization of Google according to language the company has an aim of monopolizing the industry fully.
Strategic management accounting in Google company has enabled the company derive strategies of diversification in order to fill in the gaps, in the market. The management of the company has undertaken a holistic interpretation of all areas in the management and customer satisfaction front. Employees are allowed to work on projects that are not in their scope of their job description. This was to act as a motivator in helping individuals innovate new ideas and enable them to be competitive. Google has ventured in acquisitions like YouTube and Google earth. The acquisition has strengthened the market base of the company propelling the brand to bring in significant returns for the company.
Google’s management strategy is based on a strong foundation of differentiated products. It is important to note that these products are interrelated and are utilized simultaneously to make the company’s products holistic. Unique provisions in the form of docs and spreadsheets, Google earth and Picasa augment the advertising channel by expounding on the depth of the brand as a whole. All these is implemented to reinforce the brand’s image, and by maintaining the use of the same prefix for all its products with the notion that the more uses available for consumers, the more they will integrate Google’s services in their daily routine hence more advertisement traffic.
Production of Nexus smart phones and tablet is a Google initiative that seeks to tap into the smartphone business that was domineered by Apple, Samsung and Nokia. The initiative came up due to the potential customer niche. Moreover, since the company has an operating system to its name and a variety of software intended for the smart phone technology, production of mobile phones under the brand Nexus sought to consolidate their presence in the mobile phone production. Moreover, the company depends high performance in computer technology to win over customers.
Strategic management in Google has put the company in a strong financial position. Credit for their numerous campaigns and ideas has not only gained recognition around the world but has strongly indicated the importance of strategic management in management accounting. From the diversification of its products to venturing of new markets, Google has become a world leader in innovation and customer satisfaction hence the increasing need for a shift in strategy. Encompassing these changes forms a basis for transformation in the day-to-day operations of organizations in today’s dynamic world.
Atkinson, A. A., Banker, R. D., Kaplan, R. S., & Ypung, S. M. 2001. Management Accounting. New Jersey: Upper Saddle River.
Baines, A., & Langfield-Smith, K. 2003. Antecedents to Management Accounting Change: A Structural Equation Approach. Accounting Organizationa and Soxiety , 675-698.
Epstein, M., & Lee, J. Y. 2011. Advances in Management Accounting. New York: Emerald Group Publishing.
Schiffman, B. 2008, January 29. As Downturn Looms, google looks recession proof. Retrieved November 10, 2013, from https://wwww.wired.com/techbiz/it/news/google-recession