Accounting and Finance for Managers Assignment Example | Topics and Well Written Essays - 2750 words

Accounting and Finance for Managers - Assignment Example their was no empirical evidence to indicate that ABC eliminated unnecessary overhead costs and improved the profitability of companies post-implementation (Shim & Stagliano, 1997; Foster & Swenson, 1997; Chenhall & Langfield-Smith, 1998). During the last century, accurately accounting for overhead costs posed a major challenge for management accountants. Conventional allocation methods tended to distort product costs and Activity-Based Costing emerged as a realistic alternative to address this problem. This paper provides a brief overview of the origins of ABC and explores the theoretical foundation of ABC as a management and cost control system. The paper then discusses the major strengths and limitations of the ABC model and provides a practical example of how ABC has been fully integrated into the strategic management systems of a successful manufacturing company in Qatar. Activity-based Costing has gone through three distinct phases in its development. Each phase has its origins in one of the following theoretical constructs; the Japanese management movement, the total quality management and continuous improvement framework and Six Sigma modelling. The application of these theoretical models to the development of ABC is discussed below. Activity-Based Costing began to draw the attention of European and American companies in the early 1980s. Firms in the manufacturing and technology sectors in Japan were gaining global pre-eminence with respect to their product quality and significant profit margins while competitors in the West struggled to contain costs and to develop innovative manufacturing processes. Turney (2005), notes that companies such as Toyota and Sony were heralded as global leaders and as a result, their internal organizational processes were analyzed in minute detail and replicated by their competitors in the West. It soon became apparent that the traditional accounting methodology of allocating overhead costs uniformly across the various

Technology, Strategy and Innovation Essay Example | Topics and Well Written Essays - 1000 words

Technology, Strategy and Innovation - Essay Example In Europe, firms with less than 10-49 employees are termed small firms, whereas firms with 50 to 249 employees fall under the definition of SMEs. SMEs usually tend to have greater market power than small firms and constitute around 99% of the total global enterprises (Shapira, n.d.). Despite their strength in numbers, a heavily competitive and globalized business environment is causing SMEs to struggle in order to compete effectively with large corporate companies. Particularly so because large companies have greater resources to influence the market power of SMEs. Their vast resources of manpower, materials, machines and money can be used to counter any competitive threat from SMEs. Under such circumstances, innovation in new products and business strategies becomes the only way for SMEs to survive. According to Fagerberg (2004), innovation is the process through which firms create and develop knowledge to develop new and improved products and services. On the other hand, Bordia et al. (2005) define innovation as the ability to define and develop new products and services and deliver them to market. According to Susman et al. (2006, p.16), innovation usually takes place in products, processes and markets. This paper discusses the importance of innovation in SMEs and how it is practiced. Innovation in small enterprises Innovation in firms is usually practiced through six channels: product, process, activities, non-technological, organizational, and marketing. The chart below provides a comparison of the popularity of various innovation channels in SMEs and large organizations. (Shapira, n.d., p. 2) From the chart, it is evident that process and organizational innovation in large organizations is carried out on a larger scale than in SMEs. In all other innovation channels, SMEs are not far behind large organizations. Product and process innovation together are termed as technological innovation because utilization of new technology is an essential characteristic of both. Product innovation utilizes new technology to develop innovative products. The iPhone is a good example of product innovation. When all other mobile phone manufacturers were concentrating on manufacturing traditional mobile phones, Apple came out with a touchscreen phone and created history. Many people have the illusion that technological innovation is the sole monopoly of large organizations. However, such innovation is possible in SMEs too. Bennet (1994, p.147) points out that smaller organizations are even more technologically advanced than the larger ones. It should be noted that when Hotmail was first introduced by Sabeer Bhatia and Jack Smith it was an innovative service. After witnessing its popularity and realizing its potential, Microsoft acquired Hotmail later. Companies such as Google and Apple are busy acquiring the patents of many innovative products and services from SMEs. In short, product innovation in SMEs is not facing any barriers. On the other hand, pr ocess innovation in SMEs is taking place at a slower pace. Process innovation refers to improvements in production and delivery methods. Six Sigma implemented at Motorola is an example of process innovation. The core of process innovation is to eliminate or reduce costs of production, reduce waste, improve marketing and logistics operations, etc. Process innovati