Financial and Managerial Accounting Systems Order Instructions: Please see
the paper below that the following questions need to be answered from.
Presenters Posting:
Planning, Control, and Accounting Systems: The Role of Global Manager
The purpose of this seminar paper is to present an analysis and synthesis of prior research on the principles of transaction cost economics (TCE) and principal-agent as relating to the managerial functions in a multinational setting. The ultimate responsibility of a global manager is to maximize shareholders’ value through effective business and cost solution strategy (Thomas & Peterson, 2015). A thorough analysis of the transaction and economic activities of the business and managers’ role helps to deepen the understanding of value creation and market efficiency (Demski, 2008). The information discussed in the subsequent text includes the introduction of the TCE and agency theory, implications for the managerial functions – planning, controlling, and accounting systems in the context of cross-border business operations and global marketplace.
The TCE and Agency Theory
Ronald Coase coined the TCE principle from his classic work, The Nature of the Firm (Andreea-Oana, 2009). In that, Coase argued the importance of the firm in the relationship to its activities and transactions as the means to optimal costs solution and efficiency (Marinescu, 2012). The TCE concept is derived from the economic system, productions, and exchange of goods and services and its related transaction costs (Andreea-Oana, 2009). The principle of TCE involves full recognition and understanding of underlying transaction costs and cost drivers to the production of goods and services of a business (Rindfleisch et al., 2010). TCE is relevant to almost every aspect of the organizational function and activities including cultural factors of a global marketplace – from global pricing to product differentiation and adaptation strategy. In an age of fierce competition and globalization (Jensen, 1993) it is vital for enterprises to manage costs and operations through an effective module of cost identification and quantification to enhance its market efficiency and competitive advantage (Marinescu, 2012).
Some major constructs of TCE theory include bounded rationality and opportunism that center on the limited cognitive and self-yield interest of the parties to contract respectively (Andreea-Oana, 2009). The bounded rationality principle recognizes that because of the limited capacity of the parties to the contract it will be difficult to identify, predict, and maximize every aspect of the organization and its associated transactions; and thus, inefficiencies are inevitable of the business processes (Verbeke & Kano, 2012). Hence, globalization does not guarantee market efficiency (Jensen, 1993).
The opportunistic aspect of the TCE concept emphasis on the self-seeking interest of managers at the expense of owners (Cronqvist & Fahlenbrach, 2013). This relationship leads to the agency conflict where the agents try to put their personal interest before the principal in the context of business transactions. The agency theory (AT) proposes the relationship between principals (owners) and agents (managers); managers discharge their relational responsibilities to serve best the interest of owners at a price (Neto, Barroso, & Rezende, 2012). Incentive contracts help guide managers’ performance and behavior towards desirable outcomes and to enhance the global organizational culture of productivity.
Theories Implications and Managerial Functions
The principle of TCE and agency theory have had a broader application and scholarship in the areas of social science research including business, economics, marketing and so on (Williamson & Ghani, 2012; Neto, et al., 2012). Scholars have applied the TCE and agency constructs to the contemporary business world to help influence the efficiency of global economic activities and cross-border cultural dimensions of businesses. (Rindfleisch et al., 2010; Thomas & Peterson, 2015). TCE and agency theory informs and influences the managerial systems – planning, controlling, and managerial accounting, in the sprite of cross-border effects of a multinational enterprise.
The Planning System
As scholars agreed, planning is a basic role of a manager (Brickley, Smith, Zimmerman, & Willett, 2014). Planning entails detail analysis of various strategic business choices and to select the best-fit strategy to operationalize it towards the organizational goal (Ciuhureanu, 2012). Therefore, through planning, a global manager find means to maximize cost efficiency through active participation and engagements of local partners in helping to understand the needs of the market to facilitate planning and designing of business strategy (Thomas & Peterson, 2015). Global managers should be alert and seek better means to save transaction costs on business operations including seeking low-cost contracts and negotiations so to maximize shareholders value and the profit goal of the firm (Brickley, et al., 2014).
Planning also involves cost rationalization of different ideas and strategies; however, whatever the final strategic planning idea is it must be efficient cost driver to ensure sustainable business model and profitability (Williamson & Ghani, 2012). Hence, TCE influences planning activities to ensure manager’s overall strategic plans are cost effective to support core competencies to drive the firm’s mission forward (Williamson & Ghani, 2012). Planning provides an opportunity to review different units and corporate mission to ensure alignment of mission and interests (Ito & Souissi, 2012). This helps to mitigate agency conflicts and waste, reduces duplication of efforts, and improves the economics of scale at the units and corporate level. In a global firm, planning helps to address cross-cultural differences of the individual units via identification and communication strategies (Thomas & Peterson, 2015). Planning set the stage for the global manager to analysis and think through the various forms of differences among the organization (Thomas & Peterson, 2015). Through planning, a global manager may identify the unique business strategy for each specific country and its business operations. For example, businesses are taxed differently from country to country and thus “one-size-fits-all” business strategy might not be appropriate or profitable business strategy (Chapman, Ji, & Li, 2011).
The Controlling Systems
Controlling is another critical functional responsibility of a global manager (Brickley et al., 2014). The control function involves a critical analysis of where an organization is and where they want to be in the context of managers’ decision-making; hence, it is the desire of a global manager to simplify the complex decision process of a multinational enterprise (Thomas & Peterson, 2015). However, that is not always the case; global managers should seek ways to control the complex systems of a global firm and to also help correct and direct actions and behaviors of its people to the desired targeted goals (Chapman, Ji, & Li, 2011). Through the TCE principle, global managers could identify and quantify each enterprise activities and functions (transaction costs) to the last dollar (Marinescu, 2012). The principle of TCE helps to set measurable goals and limits to guide and control the behaviors regarding cost efficiency to achieve the overall goal of profit maximization. Administrative controls (i.e., internal rules, local policies, and regulations) on costing and pricing could be an incentive to motivate or drive employee behavior towards efficiency and lower costly contracts at different organizational locations (Thomas & Peterson, 2015; Williamson & Ghani, 2012).
Planning and cost controlling are some of the practical challenges facing global managers today; in light of globalization and competition, businesses should establish an effective controlling cost to remain competitive (Badem, Ergin, & Drury, 2013). Strategic accounting control systems facilitate product costing and variance analysis to ensure proper cost allocation, pricing, and tighter cost evaluation to maximize shareholders value (Juras, 2014). However, developing and implementing effective management control systems rest on strategic management goals and how those goals are communicated and executed (Brickley et al., 2014). Strategic goals – financial, controlling, and planning are usually communicated and executed within an organization three primary ways; the top-down, middle-up-top-down, and bottom-up approach (Ito & Souissi, 2012). Each approach has potential to create synergy and maximizes the success of a multinational firm and its stakeholder’s value through their unique strengthen and opportunities (Ito & Souissi, 2012).
The Managerial Accounting Systems
Managerial accounting systems provide an excellent strategic tool for analyzing and measuring strategies (Demski, 2008). Managerial accounting techniques such as cost volume profit, activity-based-costing, balanced scorecard, and others help facilitate most of the managerial decisions through data quantification and evaluation of the dollar costs and implications (Brickley et al., 2014; Demski, 2008). The accounting systems provide objective measurement platform for both domestic and international performance and their underlying direct and indirect transaction costs associated with those activities and its overall impact on the bottom line (Demski, 2008). The data quantification and objectivity from managerial accounting system (MAS) support the TCE and principal-agent of pursuing cost efficient model within the global economic business systems (Cronqvist & Fahlenbrach, 2013; Marinescu, 2012).
In creating global organizational value, accountability and quality judgment are paramount (Libby, Salterio, & Webb, 2004). Accounting information tool (e.g., BSC) present managers financial and nonfinancial data to objective evaluate performance and to establish control measures to trigger strategic decisions (Libby et al., 2004). Although BSC is an effective performance control measurement tool, it is reasonable to suggest that personal bias and data quality are some of the limitations to BSC and other management control systems (Libby et al., 2004). According to Libby et al. (2004) managers’ effort to explain and justify decision-making reduces bias and increase data quality and confidence to ensure greater accountability and strong control practices. By requiring global managers to substantiate their decisions through quality data matrix, it can create effective control mechanism to curtail risky ventures and at the same time advancing strategies that align with stakeholder’s interest to mitigate principal-agent conflicts (Cronqvist & Fahlenbrach, 2013; Libby et al., 2004).
Another managerial accounting system for value creation and cost control, particularly in a global manufacturing firm is standard costing (Badem et al., 2013). The standard costing technique provides relevant product cost information irrespective of business location (i.e., labor, direct material, overhead, etc.) to determine effective product pricing with emphasize on true cost and margin (Marie & Rao, 2010). Standard costing aim to measure performance and control cost to ensure effective product pricing and competitiveness (Badem et al., 2013). Managerial accounting techniques including budget, standard costing, BSC, etc. present managers relevant and reliable information to aid their decision-making on planning, cost controlling and evaluating performance (Badem et al., 2013; Juras, 2014; Ito &Souissi, 2012).
Financial and Managerial Accounting Systems Conclusion
The managerial accounting couples with economic theories (TCE and principal-agent) systems presents an arsenal of costs analysis techniques to promote business efficiency module in a context of global firm and optimal cost solution strategy. In practice, accounting information provides a global manager a decision platform to negotiate and renegotiate market exchange and contracts to influence productivity performance at different cross-border cultures (Jensen, 1993; Thomas & Peterson, 2015). For example, if the accounting data reveal higher transactional costs on a business unit, management may either negotiate to pass on the increase to consumers through price hike especially in a low competition market or renegotiate labor or raw material costs contracts. Either way, global management should find a way to resolve such costly contracts. By minimizing the economic costs impact internally or externally via contract negotiations that will influence the behavior of employees or customers depending on management decision to costs (Jensen, 1993). Finding the perfect balance to control costs so as to influence performance behavior towards desirable direction is always struggle for global managers. There must be different analysis and scenarios on costs and its effects outputs and cross-border challenges. Managers can rely on accounting data to forecast product costs and prices and to and predict future returns (Demeski, 2008). However, the key to success for a global manager in the global marketplace is the continuous desire to learn and adapt to its cross-cultural dimensions of decision-making, strategic planning, and controlling (Thomas & Peterson, 2015).
Financial and Managerial Accounting Systems References
Andreea-Oana, I. (2009). A new approach in economics: Transaction costs theory. Annals of the University of Oradea, Economic Science Series, 18, 370-375. Retrieved from http://steconomice.uoradea.ro/anale/en/
Badem, A. C., Ergin, E., & Drury, C. (2013). Is standard costing still used? Evidence from Turkish automotive industry. International Business Research, 6(7), 79–90. doi:10.5539/ibr.v6n7p79
Brickley, J. A., Smith, C. W., Zimmerman, J. L., & Willett, J (2014). Designing organizations to create value: From strategy to structure. (Custom Edition) New York, NY: McGraw-Hill
Brickley, J. A., Smith, C. W., Zimmerman, J. L., & Willett, J (2014). Designing organizations to create value: From strategy to structure. (Custom Edition) New York, NY: McGraw-Hill
Chapman, J. C., Ji, L., & Li, L. (2011). Mergers and acquisitions in China. Part two: Anatomy of a deal in the middle kingdom. Corporate Finance Review, 16(3), 12–20. Retrieved from http://ria.thomson.com
Cronqvist, H., & Fahlenbrach, R. (2013). CEO contract design: How do strong principals do it? Journal of Financial Economics, 108, 659–674. doi:10.1016/j.jfineco.2013.01.013
Demski, J. (2008). Managerial uses of accounting information. (2nd ed.).New York, NY: Springer Science+Business Media.
Ito, K., & Souissi, M. (2012). Managerial accounting as a tool for corporate strategy: Synergy creation and anergy inhibition. Journal of International Business Research, 11(1), 63-72. Retrieved from http://www.globethics.net
Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48, 831–880. doi:10.1111/j.1540-6261.1993.tb04022.x
Juras, A. (2014). Strategic management accounting – What is the current state of the concept? Economy Transdisciplinarity Cognition, 17(2), 76-83. Retrieved from www.ugb.ro/etc
Libby, T., Salterio, S. E., & Webb, A. (2004). The balanced scorecard: The effects of assurance and process accountability on the managerial judgment. Accounting Review, 79, 1075–1094. doi:10.2139/ssrn.317486
Marinescu, C. (2012). Transaction costs and institutions’ efficiency: A critical approach. American Journal of Economics & Sociology, 71, 254-276. doi:10.1111/j.1536-7150.2012.00829.x
Neto, S. B., Barroso, M. F. G., & Rezende, A. J. (2012). Co-operative governance and management control systems: An agency costs theoretical approach. Brazilian Business Review, 9, 68-87. Retrieved from www.bbronline.com.br
Rindfleisch, A., Antia, K., Bercovitz, J., Brown, J., Cannon, J., Carson, S., & … Wathne, K. (2010). Transaction costs, opportunism, and governance: Contextual considerations and future research opportunities. Marketing Letters, 21, 211-222. doi:10.1007/s11002-010-9104-3
Thomas, D. C., & Peterson, M. F. (2015). Cross-cultural management: Essential Concepts. (3rd ed.). Thousand Oaks, CA: Sage.
Verbeke, A., & Kano, L. (2012). The transaction cost economics (TCE) theory of trading favors. Asia Pacific Journal of Management, 30, 409–431. doi:10.1007/s10490-012-9324-6
Williamson, O., & Ghani, T. (2012). Transaction cost economics and its uses in marketing. Journal of the Academy of Marketing Science, 40(1), 74-85. doi:10.1007/s11747-011-0268-z
Assignment requirement:
By Day 5 of Week 3, respond with your own thoughts to at least one Presenter’s posting(please see above) in an edited three-paragraph, formal academic peer review. At a minimum, be sure to include the following elements:
•Assess the conceptualization, analysis, and synthesis of key research concepts presented.
•Evaluate the extent to which the Presenter has addressed the elements from the Learning Objectives from this two-week pair.
•Does the presentation provide a cohesive summary of the assigned concepts with an effective evaluation of their implications for international managerial accounting?
•Did the Presenter provide a meaningful academic argument or interpretation that demonstrated fluency with the material?
•Incorporate relevant scholarly resources in your posting.
!!!!! Please complete an assignment based on the presenter posting above in an edited three paragraph, formal academic peer review.
Financial and Managerial Accounting Systems Sample Answer
Comment
The seminar presentation paper contained vital information that are critical drivers for the global marketplace. The conceptualization of the key points has been successful, and the presentation of these points has been done with much efficiency. The key ideas including planning, control, and systems of accounting have been much signified to be primary drivers of the global economy or the marketplace (Choi & Meek, 2011). The managerial aspect has incorporated these basic factors of the global business world. The critical management practices hence have been shown to include control and planning practices that involve the significant data acquired from the accounting systems that are so crucial to the operations of global corporations.
The aspects talked about in the seminar presentation paper have mostly touched on international managerial accounting. Essentially, it has become like a prerequisite for the global manager to be in contact with the accounting data. The significance of this interaction brings about the understanding of the global business environment (Kaplan & Atkinson, 2015). As such, the paper has shown that it is most vital for a manager, in essence, a global manager is content with an understanding of the global business environment. This fact has helped a lot of multinational business to get more returns on the products and operational basis.
The Precise driver of the global marketplace has been well defined in the text. The concepts mentioned in the paper have been quite well conveyed. The efficiency of the document in the issue it addresses cannot be doubted. The writer has provided much evidence and support to the fundamental ideas and concepts that support the paper beyond doubt. The text also touches strongly on global management practices with managerial accounting as a critical factor for global business growth. Essentially, a manager ought to be familiar with cross-cultural environments to conquer the international and otherwise global business world (Choi & Meek, 2011).
Financial and Managerial Accounting Systems References
Choi, F. D., & Meek, G. K. (2011). International accounting. Pearson Higher Ed.
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & Managerial Accounting. John Wiley & Sons.
