Question

Search online for a recent announcement related to a strategic business decision (new product launch, opening or closing of a business, hiring or layoff of workers, launch of a sustainability program, etc.). Briefly describe the decision and explain the role you think management accounting might have played in the decision.

Answer 1

Solution:

Management Accounting produces reports using the information from the operation, so that it will give the insight into the ongoing performance of the business. The manager uses these reports such Profit Margin and Labour utilization to make important decisions in the daily activities. To have greater Competitive advantage in earning higher profit, these reports help the management in taking right decisions.

Relevant Cost Analysis:

The cost analysis helps the management in taking right decision on what to sell and how to sell. The investment costs are utilised in the right direction so that it will a generate higher return for the Company. The strategic decision taken by the Netflix management to invest money in technology development, for marketing on an e-commerce business model rather than setting up traditional in-store business model has paved way in generating higher profit and competitive advantage over Blockbuster video and other instore movie companies.

Similarly, the strategic decision taken by Amazon to invest in developing Kindle Read App so that they can improve electronic delivery of books. This strategic decision gained them a competitive edge over Borders and Barnes Noble and Eventually Borders have to close down their business.