Management accounting is a branch of accounting that provides the management with information necessary for decision making, planning, and controlling and information to safeguard the course of an organization (ASCE. 2005). Generally, management accounting entails the different managerial functions of planning, organizing, coordinating, controlling, and motivating. This branch of accounting gives detailed and elaborate reports on information that is indispensable for managerial functions and better management realization. Management accounting report gives this information that is needed by the management for the purpose of ensuring the organization achieves its core objectives. Through the report, the managers are also equipped with the information required in the formulation of policies and programs.
Background of the company
Nissan motor company is an international company that is engaged in the business of manufacturing motor vehicles. It has its headquarters in Japan and manufactures different makes of vehicles. The company manufactures its products in the name of Datsun that fulfilled the needs of many. The company has engaged in a partnership with other firms e.g. Austin motors and ford motors with a bid to take control of the market and gain access to the global market. The company decided to expand its operations worldwide by establishing its plants in Europe and America. The dynamic market has made the management of the company continuously study the trends in the market. The company must therefore become well acquainted with the needs of its target market from around the world. Nissan motors have been ranked as the third biggest producer of motor vehicles with Toyota and Honda being the first and second respectively.
Due to this, the management of the company must be in a bid to increase its market share or retain its position in the market if it has to retain its income share and survive in the competitive industry. This has made the company diversify its production by producing different makes e.g. cars, trucks, Nissan Titan pickups, Infiniti QX56 and Nissan Armada Sports Utility Vehicles, and Nissan Quest minivans among others. The company must also monitor closely the performance and changes that the competitors can adopt in order to cause turbulence in the market. Of further importance is the need to tailor the production based on the economic environment in the world. According to Baker, E. M. (1999) and Barber, B. R. (1996), management accounting information would thus be important in the provision of information for feasible decisions to be made.
Review of management accounting
First, the information on the financial status and income statement of the company reflects a good performance of the company in terms of revenue from the sale. Analysis of the financial statements reveals that the company has achieved a small margin of sales growth. The company should therefore come up with innovative promotion strategies that will ensure that new markets are attracted and that the loyalty of the existing customers is enhanced. The company can achieve this by the urge to come up with new brands that are aimed at attracting a new force. The analysis further indicates that the financial performance is also affected by the rapid changes in the currency market in the global market. The translation effect, therefore, requires that the sales of the company should be made in strong currencies only i.e. the dollar, sterling pound, and the Japanese yen if the volatile financial market is to be hedged.
The legal factors also impact greatly the performance of Nissan. From the financial performance, it is realized that there has been a huge adverse variance in the revenues from certain parts of the globe. Management accountants relate this to the asymmetric legal changes from the different states. The regulation on the imports laws and the import costs that fluctuate differently affects the sales of the products in different regions. Managers must therefore monitor very closely the changing legal frame and develop initiatives and plans that will ensure that there are continued sales from across the board. The company must therefore be dynamic in its operations and take interest in the plight of different needs. It will also be noted that the reporting standards must be harmonized since there is a variation in the reporting of different states. Different tax policies must also be watched if positive results are to be achieved.
Techniques and methods recommended
From management accounting, we can also note that there needs to be a decentralized system of management where some decisions are based on the managers on the ground. The fact that the company is international means that the organization structure is complex and that the information flow takes a long time. This would thus delay the decisions that might otherwise be necessary for the short run. The regional directors should therefore be given discretionary powers in decision making. However, Nissan Company must retain the major decisions at the head office to maintain its brand and identity across the globe.
Another important issue that the company must emphasize on is the need to develop assembling points in the different continents. The aim of this would be to reduce the overhead costs of transportation that reduces the income of the company. In as much as the company has tried to accomplish this, the comp[any must continue to strengthen this, it needs to further open new ones and expand the existing points if the costs are to be reduced. The different assembling points should as well be staffed with competent and experienced assemblers if the quality must not be compromised. This would improve the goodwill of the company in these areas and also act as a promotion strategy. Assembling in different countries reduces the import charges since the products imported would be at a lower valuation.
Nissan Company needs also to look at the geographical and physical characteristics of different regions for the determination of the make of motor vehicles to be made. In this way, the company would be better placed in the determination of the supply according to the demand of the product. As well, this would act as a strategy for the reduction of the pace at which the stock lasts. In the circumstances where stock lasts for long, the company would incur high stock holding costs. It is the responsibility of the management accountants to monitor the different tastes and preferences through the analysis of the variations in demand and supply. Again, the information could be got from the use of different research methods i.e. questionnaire and constant acceptance of the compliments and complaints from their demand.
Moreover, management accounting is concerned with the provision of information on the budget of the organization (Anthony, R. N. 1989). The budgets of the organization can be derived depending on the future activities and the expected changes in the organization’s product demand. The managers of Nissan need to use the previous reports from the management accountant section to equip the management on the budgeting for the coming periods. The variances especially the adverse variances should be corrected by the management team as analyzed by the department. The management of Nissan Company therefore must scrutinize the previous performance of the organization with the objective to perfect their work.
From the records of the management accounting department, the management of the company may predict the changes in the market demand. In an instance where the sales of a particular make have declined, it would be upon the management of the company to modify or come up completely with a new product. The motor make must take into account the technology changes and the design must be one that is fashionable. In addition, the targeted market characteristics must be considered in the production and assembling work (Adler, P. S. and B. Borys. 1996). Different target groups have different preferences and e.g. the needs of the youth and that of the aged in the society may vary. Management accounting report will vindicate this from the statistics that it analyses on the sales of different models.
Nissan Company has used the report of the management accounting for the production of economic cars. When there was inflation on the world fuel prices, the management report was used to help come up with motor vehicle make that are economical in fuel consumption. This made the company absorb the shocks in the sales decline. The need to be environmentally compliant has resulted in the need for the company to produce electric cars which will significantly reduce the emission. All this information has been due to the managerial reports.
The techniques of management accounting have various strengths when used in the analysis. First, they are detailed and elaborate making it possible to dissect information from a wider perspective (Abrams, D. and M. A. Hogg., 1990). This makes the management make viable decisions that lead to the achievement of the organization’s goals. The details of the information justify the management’s actions and ensure minimal resistance hence the easy and faster implementation of the policies. Another advantage of this technique is that it reveals the loopholes and the whole effect of the organization’s decision by showing the quantitative impacts on the managerial decisions. Through this, the management can forecast future operations and take preventive timely actions. Further, management accounting techniques that are used may show the trends in case graphs or pictorial representation is used.
In contrast, the management accounting techniques that are used in the provision of the information suffer the drawback that they are historical I.e. based on historical data. It also lacks the qualitative aspects of management i.e. it is only possible to demonstrate the quantifiable facts. Some quality measures like attitude and motivation may be important in the decision-making of the company. It would therefore be in order that Nissan Company considers both the qualitative and quantitative aspects for decisions.
In conclusion, Nissan Company has performed well in their production. The management accounting reports should be used to ensure pertinent decisions are made. The need to control the fluctuation in the sales over time is crucial through the production of new makes to diversify operations. Global operations require an understanding of the market and the need to integrate the economic conditions around the globe. Managerial accounting reports are therefore mandatory for the decisions of the company.
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Anthony, R. N. 1989. Reminiscences about management accounting. Journal of Management Accounting Research. New York. New York university press.
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Baker, E. M. 1999. Scoring a Whole in One: People in Enterprise Playing in Concert (Best Management Practices). Seattle: Crisp Publications.
Barber, B. R. 1996. Jihad vs. McWorld: How Globalism and Tribalism are Reshaping the World. Ballantine: Operation Crifanac.