Problem #1.1 – Write a two-page report explaining the two basic strategies that S&S, Inc. can pursue and the three different strategic positions that it can adopt. Include in your report a discussion and examples of how IT can be used to support the different strategies and strategic positions.
S&S, Inc. Is an appliances and consumer electronics store. It can include both product differentiation and low cost strategies in its business strategies.
S&S can incorporate features and services not offered by competitors in terms of product differentiation or improve specific features and services to make them better than the competitor’s. One solution could be additional assurances after the manufacturer’s warranty has expired. S&S can do this by setting up a small repair & maintenance section that can deliver the extended warranty as well as provide after-sales support where customers can bring in the products for repairs and maintenance after all warranties have lapsed. IT would be very useful in this strategy, as it will be used to monitor purchase dates, manufacturer period and S&S warranties, as well as cause reminders to customers for preventive maintenance.
A low-cost strategy involves the effort to be a good or service’s most effective manufacturer. For S&S to use this strategy means streamlining its retail operations to be able to minimize costs. The inventory management is one very important area where S&S will aim for efficiency. S&S will strive to stock its shop with fast-moving goods to reduce the cost of holding inventories. IT will certainly play an important role in inventory management especially if the inventory volume is high and the goods are diversified. IT will monitor stock movement, determine points of economic order and optimum levels of stocking.
Through focusing on certain product lines instead of offering all sorts of appliances and consumer electronic devices, S&S can use a variety-based strategic position. By tracking sales data, it can first use IT to determine which product lines provide the best returns for the company. Kitchen appliances and electronic devices for example can perform better than those for entertainment or office use. If this is the case, then S&S can stock more of the kitchen-related products and use IT to track sales continuously so that product line emphasis can be achieved be shifted if sales drop.
With a focus on kitchen appliances and electronic devices, S&S can use a strategic position based on needs by trying to satisfy the desires of a particular group of customers, such as homeowners and housewives. IT can be used to maintain a database of homeowners/housewives in the target market and periodically send them information brochures about new products, mailers reminding customers of preventive maintenance schedules or special promotional activities.
With the choice of the “kitchen” product line for appliances and electronic devices and the focus on homeowners and housewives as the specific target market, S&S already employs an access-based strategic position because it does not serve all markets. IT can be used to determine if any of the strategies need to be modified as stated above. With S&S’ plan to also set-up an electronic storefront, IT through the internet can be used to monitor interest of potential customers through website visits and help S&S decide if its product/customer focus should be different for the electronic store and the physical store.
Problem #1.2 – Decision scope categorizes decisions into three broad areas of managerial decision making. These three areas are operational control, management control, and strategic planning. In your own words, define operational control, management control, and strategic planning in relation to managerial decision making. Based on your experience working at a summer job or part-time job during the school year, provide two examples of operational control, management control, and strategic planning decisions that you or your manager would make.
Operational control deals with how efficiently and effectively tasks are done. In the retail operations of S&S, operational control decisions are made by the stockers when they receive products from suppliers which are not consistent with the products ordered. Customer sales representatives decide on whether to extend credit or not, or give discounts based on store policies. Delivery personnel make operational control decisions on how to make deliveries according to set delivery schedules.
Management control deals with how effectively and efficiently resources are used to accomplish organizational objectives. The supervisor for customer sales makes decisions on how to set sales targets for the different sales personnel or how to package different products together to increase salability. The store supervisor makes decisions on what products to re-stock and display at the storefront and at what margins will products be priced for salability and profit.
Strategic planning deals with establishing organizational objectives and policies for achieving objectives. At S&S, Scott and Susan, comprising top management need to make decisions regarding financial and accounting policies, like setting the volume of inventory, Strategic decisions also have to be made regarding introduction of new product lines or setting up additional store locations.
My part-time job is at a janitorial services company where I performed administrative tasks. Since the nature of the business involves deployment of janitors to client sites, an operational control decision that we would make is how to replace an assigned janitor who may have suddenly fallen ill. Another operational decision is the handling of a situation where an assigned janitor broke something in client’s premises.
Management control decisions involve efficient deployment of janitors. This would include requirements for recruitment and training and scheduling available janitors. Another management control decision would be the size of volume discounts for clients requiring large numbers of janitors for a service contract in one location. A big contract is beneficial to the company not only in terms of volume sale but also in reduced cost for supervision as employees are all in one place.
Strategic planning decisions include diversifying into other services like providing drivers and delivery personnel or other skilled workers. Several inquiries have been received for plumbers and carpenters as well as for delivery services for manufacturing and retail accounts. A strategic decision needs to be made if such services will be provided by the company. Another strategic decision may be taken for setting up new billing policies to improve collections. Instead of the current practice of billing for engagement fee and then monthly billings and collections, semi-monthly procedures can be implemented.
Problem #1.3 – Information technology is continually changing the nature of accounting and the role of accountants. Write a two-page report describing what you think the nature of the accounting function in a large company would be like in the year 2020.
With the rapid advances in information technology, the nature of the accounting function especially for large companies would definitely undergo many changes by the year 2020. The accounting function requires the collection, recording, storing and processing of data to produce useful information for decision-making.
Today, data collection is already done using computers and other devices for most companies. Some companies do not even need human intervention for data collection. Sales through the internet are automatically recorded. Credit card companies already have automatic billing processes. By 2020, large companies would most probably not need human accountants at all for data collection. Instead, data shall be collected automatically and electronically as soon as it is available.
Data recording, storing and processing, today, are also in a similar state as data collection. So, by 2020, it would be most likely that large companies will also not need accountants for these functions.
Therefore, all the traditional facets of the accounting function would probably not require accountants at all. However, accountants who understand the need for accounting and the purposes that the accounting function serves certainly cannot be replaced by technology. They would however have a totally different focus on their job. Instead of actually collecting, recording, storing and processing data, by 2020, the accountant’s job would most probably be that of managing a technology-driven accounting information system.
The accounting function by 2020 would consist of ensuring that the accounting information system is working as intended – collecting, recording, storing and processing data as designed; ensuring that the AIS does not break down or finding ways to prevent such; researching and developing ways in how accounting can benefit from new technologies; and assisting technology developers in defining requirement specifications for the development of newer technologies.
Moreover, by 2020, the accounting function would also have expanded into an accounting and information analysis function. Instead of just handling data, accounting would be merged with or integrated with financial analysis and become more of a business information management function.
Problem #1.5 – Research the programming language XBRL and write a two-page report about its effect on financial reporting via the internet.
XBRL is a language for the electronic communication of business and financial data within the family of XML languages which is a means of communication information between businesses and on the internet (XBRL International, 2007). XBRL is projected to revolutionize business reporting around the world providing “major benefits in the preparation, analysis and communication of business information. It offers cost savings, greater efficiency and increased accuracy and reliability to all those involved in the provision or use of financial data (XBRL International, 2007).
XBRL promises to provide significant benefits to the producer-consumer supply chain of business information. With increased collaboration of the participants of this supply chain – companies, government monitoring and regulating agencies, investors and public sector accountants, the greater would be the benefits that will be derived (Price Waterhouse Coopers, 2002).
According to white paper by Price Waterhouse Coopers (2002), systems have already been or are being developed for business-to-business communication through the internet, such as purchase orders and invoices. But problems still exist in the accuracy of information due to incompatible systems and software, and data sharing issues which limit the usefulness and transparency of information reported. This will all change with XBRL because it is platform-neutral. Information provided in the XBRL format is the same whatever computer or software is used. There will be no need to convert or migrate to another format. Moreover, according to XBRL International (2007), “XBRL can handle data in different languages and accounting standards. It can be modified flexibly to suit the different needs and uses. Data can be transformed by appropriate mapping tools into XBRL, or it can be created by appropriate software in XBRL.
Price Waterhouse Coopers (2002) avers that its significant benefits are in lowering preparation costs, reducing preparation time, simplifying international access, broadening information availability, enhancing analytical capabilities, providing more informed investment decisions, and providing more trustworthy information when associated with a digital signature.
Indeed, XBRL will transform the corporate and financial reporting supply chain if it becomes the data standard for corporate reporting. According to Price Waterhouse Coopers (2002), XBRL will not change accounting standards, rather it is a common language across all boundaries and stakeholders wherein the accounting standards can be incorporated and expressed.
When XBRL would have been sufficiently developed and stabilized for adoption by both producers and users of financial reports via the internet, all stakeholders would have to agree to adopt it as a standard. Those involved in producing the financial reports would have to learn how to use it and develop processes using XBRL to produce requisite financial reports. These would include system developers and system users in business organizations. Both producers and users would then need internet access to be able to deliver and access these XBRL financial reports. When this happens, financial reporting via the internet will use XBRL as the standard and hopefully all the benefits promised by the developers redound to all stakeholders.
- XBRL International. 2007. XBRL Extensible Business Reporting Language. 24 July 2008 <http://www.xbrl.org/Home/>.
- Price Waterhouse Coopers. 2002. Corporate Communications for the 21st Century. 24 July 2008 <http://www.pwcglobal.com/xbrl/>.