SMA

Role of Strategic Management Accounting in Hermione Plc

Role of Strategic Management Accounting in Hermione Plc

1) Critically evaluate the role that can be played by the practices of strategic management accounting in helping Hermione plc! decide upon their competitive strategy.

Hermione plc is an advertising agency which operates three units based on the services it offers to its clients. These units are strategic, buying and creative units. Currently Hermione operates in an environment which is both rapidly changing and competitive. Hermione has been profitable since its establishment but presently its margins have taken a downturn and growth have gotten slow. Hermione has 3 branches south, west and north. Hermione is at present run by three people. Amy is chief executive officer, Ellis is Chief financial officer and Anna Davies is the director in charge of business development. Furthermore, the staff is divided in to four categories which include creative, buying, Administration and Accounts Management. Mostly, The staff is paid a fixed salary.

In recent years, strategic management accounting has gained importance and has been developed as an essential tool for devising the competitive strategy that a company chooses to follow. Strategic management accounting focuses on information related externally to the firm and also makes use of non-financial and internal information of the firm. It generates the information for allocation of costs for profit reporting, measurement of performance, planning, control and effective managerial decision making. The external information may refer to competitors as well as suppliers and customers. Strategic management accounting techniques are adopted to identify an approach for strategic positioning of products. There are various techniques that may be used. These include attribute costing, brand value budgeting, competitor cost assessment, competitive position monitoring and competitor performance appraisal.

Attribute costing method involves evaluating the product based on different characteristics and then price it respectively according to these attributes. The market share is determined by different attributes that the product holds and the consumer preferences (Vein, Bromwich (1990) pp. 27-46). Hermione's competitors have specialized in some services which are worth noticing. Sledge has specialized in providing services to retail businesses and furthermore extended to provide services to drinks and advertising promotion businesses. Eight lines have adopted new technology in areas of graphics, animations and phonics, attracting companies which are themselves interested in developing their own technology. Hence both competitors attract consumers with preferences in retail and technology. These specialized services may be considered as attributes that the services hold. So both sledge and eight lines are benefiting from these services. Hermione should also develop attributes in services so that it can attract more customers. Hence, attribute costing can play an essential part in developing Hermione's services and growth.

Brand value budgeting is used to enhance the brand's position by considering the brand value as a foundation for resource allocation to support managers in decision making (Colin, 2005, pp. 467). Brand value budgeting can be included as the report stated that the there were some issues regarding the control systems used. The brand value budgeting system can be used ...