Question 1: The Management Accounting Environment Word Count allowed 500 – Actual word count 536 a) How Management Accounting can contribute to competitive advantage and competitive strategy b) How Management Accounting Information can be used for the proposed strategy

GTH Ltd manufactures hearing aids and other innovative products for the deaf community; the business is looking at the differentiation strategy and the possibility of expanding into foreign markets, specifically developing countries.
Management accounting focuses on subunits of the business, which allows the analysis of a variety of aspects of the business, such as processes, departments and specific products to ensure that the actual results are tracking close to the plans. Whereas financial accounting is an overall view of the business which produces reports for the external stakeholders and must adhere to the NZ accounting standards.
Management accounting is not governed by such standards, if something can be measured it can be analysed, controlled and influenced.
The differentiation strategy of innovation means that GTH Ltd needs to continually design and develop innovative products. Management accounting information is important and it must be received by managers in a timely manner so that production processes can be changed rapidly in response to innovations within the R&D team and in response to changes in the competitive environment. Management accounting can track the innovations with regards to the number of products making it to market and the sales/costs of these products. It can also help with comparisons to competitors in the hearing aid market.
With regard to expansion, the potential hearing aid market in developing countries is extensive, but the costs of production need to be economical because developing countries do not have much money available to invest in hearing aids. GTH should use management accounting to complete a cost benefit analysis of the expansion plans and to analyse and minimise the costs of production to ensure the proposed expansion is successful.
When venturing into the foreign market especially in developing countries there are a number of market and cultural considerations. Delivery methods, access to batteries, support for repairs, and maintenance for example. Innovative design and quality manufacturing are important, hearing aids need to be hard wearing and have a low failure rate, perhaps even ideas of solar charged batteries could be an innovation considered by the R&D department. Another innovation possibility is the ear-moulds being important for comfort of the wearer; could a generic pliable ear-mould be developed and mass produced for this developing market? Would it be cost effective? Management accounting can be used to ensure that the costs of producing such an innovative product are within the limits acceptable to management.
Some ideas of what could be monitored within GTH Ltd with regard to the processes used to manufacture the hearing aids, monitoring the failure rate in the factory and in the field. Tracking of costs of components and the costs of delivery to the end user are important to management accounting tasks too.
So in conclusion any innovations that GTH Ltd create with regard to the developing market should also be considered for the domestic market, as hard wearing and long lasting hearing aids will be important for both markets, and any process change could be used in the domestic market products too Management accounting plays an important part in ensuring that GTH Ltd is economical while achieving the differentiation strategy of innovative hearing aid devices for the deaf community both domestically and in foreign countries.

Kim Middleton, 5 year old daughter has hearing loss and wears a hearing aid – Personal observations

WHO (2004) Guidelines for Hearing aids and services for Developing countries (2nd ed.) http://www.who.int/pbd/deafness/en/hearing_aid_guide_en.pdf accessed 28/03/11