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IBM started in New York City at first. The company outspread the office to other places of New York State, Washington, DC, Ohio, Michigan and Toronto, Canada soon. Thomas J. Watson turned into the president of the company after he entered the company in year 1914. The company developed its product and services in his leadership. Watson had broadened the company's business to Australia, Asia, South America and Europe in ten years. The company's name was changed to IBM to show the firm's international expansion. (ibm,2013)
International Business Machines Corporation (LSE-IBM), or IBM, is multinational technology and consulting corporation. IBM provides hosting, infrastructure and consulting services in sectors covering from mainframe computers to nanotechnology. Moreover, it also runs computer hardware and software businesses by manufacturing and marketing. IBM which runs its businesses in more than 170 countries has many talented employees around the world to settle difficulties for businesses, governments and non-profits.(ibm,2013)
The core of IBM's strategy is innovation. Today, IBM concentrates on business analytics, cloud computing, growth markets and Smarter Planet, the four growth initiatives. IBM sets up business value for clients and settles business difficulties by applying the solutions of leverage information technology and expertise of business processes. IBM produces value by cutting down a customer's running costs and enables new ability to increase revenue.(Reference,2013)
IBM has an organizational structure which is highly complex and that is always controlling its managements to the highest efficiency. The structure is a complex matrix structure. The structure of organization is divided into small units by this matrix. Open communication is used between the management and employees and make a sense of flat structure in the small units. The culture of IBM is always called social business culture.(InfoBarrel,2011) It always sees their clients in the first position and the employees have their own authority. IBM makes several management accounting decisions in its organization. This has been highlighted accordingly.
3.0 Modern Management Accounting in International Business Machines Corporation
IBM always makes decision regarding how to survive and expand its business in a competitive market. IBM applies modern management accounting in its company. Modern management accounting system gives related information to each management department of IBM for decision making which can increase the effectiveness and efficiency of the company. In a modern management accounting system, IBM can enhance the innovation and flexibility of the organization. There is some modern management accounting practices which are applied by IBM. This has been highlighted accordingly.
JIT which is an inventory system applied to guarantee that the arrival and leave time of inventory. IBM uses this inventory system to make sure the raw materials are delivered at the time when they are required on the assembly line while manufactured goods are produced at the time before they are sent to its clients. The purpose of JIT is grounded on quantity and quality required and finishing the work at the accurate time. Traditionally, raw materials are ordered in a large quantity and stored in warehouse until they are required for manufacturing or supplying a service. Under the JIT system, IBM orders raw materials in small quantity frequently. By this the company can save money by reducing the storage expenses. One of aims of the JIT system is to eliminate waste. In JIT system, IBM manufactures and orders the raw materials only when they are required by using a demand pull system. IBM has applied JIT successfully as part of a modern management with a highly disciplined workforce.
3.2 Total quality management (TQM)
TQM is a management approach where a successive effort by the management of an organization to make sure the loyalty and satisfaction of clients in long term. IBM is one of the companies which implemented TQM. By applying the purpose of TQM, IBM works hard to decrease the mistakes arose during the production and service processes, improve clients' satisfaction, modernize of equipment and make sure the highest level of training of its employees. In enhancing quality by TQM, IBM is assisted by all department its company, from the top executive position to the lowest-level part time employee.IBM has trained many experts in information technology sector all around the world to give the best services to its clients in achieving the TQM system. The company realizes the importance of communication in its quality attempts. TQM cannot work without an effective communication.
3.3 Activity-based costing(ABC)
IBM has applied ABC system which is a costing method of allocating the costs to services and products based on the quantity of transactions associated to the process of supplying the services and products. Generally, it is applied as a method to plan and control. ABC enables managers of IBM to assign costs to events involved and products more accurately when it is compared with traditional cost accounting method. Furthermore, non-value adding events and costly activities are clear in ABC, therefore managers of IBM enable to concentrate on these parts to decrease or eliminate them. Detailed cost information is provided by ABC system to assist annual budgets and evaluate its client profitability. ABC system also allows IBM's management to find out the ways to maximize the performance and realize the growth strategies.
3.4 Planning skill
Planning is the method of deciding a proposal carefully before a company wants to carry out it. IBM's managers always emphasize the importance of planning skill. Planning skill enables IBM to achieve a goal by avoiding financial problems. This skill allows the company makes prudent decisions. Planning is a major basic of business. IBM applies planning skill to do a budget, construct various projects and ensure the direction taken by the company. Planning skill enables IBM to structure and arrange its operation and the workforce. Moreover, IBM controls its expenses and improves revenue by planning skill. Therefore, planning skill plays a vital role in modern management accounting part as planning skill is essential for IBM to be successful in business.
3.5 Analytical skill
In management accounting part of IBM, analytical skill is known as the analyzing ability of the company's financial performance to do forecasts in long term. This skill also applies a logical thinking to collect and identify information then the company can decide a wise solution to solve the problem and create the suitable plan. Analytical skill is important in the IBM to make sure the difficulties can be solved to maintain productivity and the workforce errorless functioning. (job-interview-site.com,2013)
3.6 Communication skill
Business communication enables IBM to enhance the performance of its workforce and the performance of the entire company. This communication skill is essential to ensure IBM to execute its company's strategy, achieve the vision and accomplish the mission. For internally, IBM creates an effective and open communication space for employees to enable the opportunity of commitment, breakthrough ideas, trust among the workforce. Moreover, this effective communication skill enables IBM to align its company. For externally, this skill enables the company to communicate with its clients and expand its business smoothly. (skills2lead.com)
The management accounting part of IBM makes budgets for incoming production and manufacturing operation. In IBM, the budgeting skill is based on the past production quantities, raw materials and labor costs and the average labor hours consumed to accomplish particular tasks. By applying a budgeting skill, IBM can measure and guide a particular project to be carried out by following the budget. Adjustments will be made to budgets grounded on the targets of the budgeting of IBM. IBM can allocate and apply its resources wisely by budgeting skill. Besides, budgeting can show the direction of IBM and motivate its employees to achieve their goals. This skill plays an important role in IBM as budgets can be an early warning system. The managers of IBM will be aware of the exact sum of money. Budgeting gives awareness to managers of IBM about the actual sum of money in the company and always reminds them of their targets. Moreover, based on the financial statements of IBM, budgeting makes management accounting department to plan systematically.
3.8 Strategic skill
Strategic skill is the ability of a company's process of determining its strategy, or direction, and making decisions of how to apply its resources to achieve the strategy.. The strategic skill of IBM can be shown in its vision statement and mission statement. IBM uses strategic skill to give a clearer direction of organization, maximize its efficiency and effectiveness and a road map which shows what the company's business is. Lastly, the management accounting department of IBM gives a framework and makes decision easier with a clearer direction by strategic skill.