|Type of paper:||Essay|
|Categories:||Automotive industry Leadership style Leadership management Historical events & places|
Impact of Technological Change, Globalization and Customer Expectations on Management Accounting at Tesla Motors
Changes in technology have had a direct influence on management accounting at Tesla Motors. The past two decades have witnessed an exponential rise in the rate of development of technology that is evident in the changes experienced in management accounting. The rise of cloud-based systems permits the full utilization of the internet in accounting management for globalized businesses such as Tesla motors. Cloud-based computing enables Tesla to streamline all its accounting information so that it is accessible to its accounting managers at their convenience, and allows the organization to function optimally. The improvements allow Tesla the convenience of real-time analysis of data and access to the most recent data. The benefit of cloud computing is also evident in the fast distribution and accessibility of accounting information relating to the company. The unlimited storage space that comes with these environments allows Tesla to store large volumes of accounting files. Another essential aspect of this technology is the synchronization of data across multiple files, which enables departments and stakeholders access to accounting information.
Globalization and its attendant increased customer expectations have led to a more diverse role for the accountant. At Tesla, the expanded role is ever more evident. The advancements in technology have ensured that the tedious work of compiling and computing accounting data is automated. Available accounting software and cloud-computing allow the easy gathering, computation, and retrieval of accounting information. Therefore, in addition to the compilation and computation of accounting data, the accountant is also capable of performing detailed analysis and presentation of accounting information so that it is meaningful to the stakeholders. The accountants are also able to take up an additional role of forecasting and consulting for Tesla regarding how best they can improve their financial situation.
Changes in technology are also permitting businesses such as Tesla to be more efficient in their financial transactions. Digital financial and accounting structures allow smooth interaction and cooperation between the various departments of the company. A key trait of globalization is that it creates the need for fast analysis and reporting of customer profitability. The increased competitiveness across market segments also results in an increased need to perform group and divisional reporting as well as market and competitor analysis. Fortunately, newer accounting management technologies allow for remote access to accounting data. Departments can view, edit, and comment on statements from their different locations, permitting improved collaborations.
In addition to improved handling of accounting data and efficient presentation of accounting information, newer technologies allow a more practical application of accounting information in product development. Specialized accounting software permits product lifecycle costing. Accounting management efficiency is enhanced through the improved efficiency derived in the way that these technologies complement the accounting staff. Globalization and customer expectations require more responsiveness and accuracy in accounting information and predictions. Luckily, new technologies allow creative financial staffing (CFS) to be achieved. Tesla can develop balanced scorecard basics (BSCs) and key performance indicators (KPIs), which would enable a better understanding of accounting information, and align it with the product management and profitability needs.
The company has worked its best to develop excellent electric vehicles that are environmentally friendly as they capture the concept of green energy and attract a vast number of customers around the world (Karamitsios 2013). In terms of technological development within Tesla motors, the advancement of the BEV market is more contingent on the perpetual improvement in the core technologies such as vehicle performance and vehicle batteries. Such enhancements include batteries, production costs as well as safety and reliability, and improved vehicle performance, including torque, efficacy, and security (Stringham et al. 2015). The electric vehicles are six times effective with highly reduced pollution compared to gasoline-powered cars.
Memo to Management
TO: Tesla Motors
FROM: Hawk-Eye Consultants
DATE: June 10, 2020
SUBJECT: Improved Accounting Practices
Accounting management is one of the pillars of Tesla's profitability, resource management, and sustainability. Tesla's accounting management practices must be in sync with the changing operational environment, customer needs, and the internal demands for efficiency. A review of the inefficiencies of traditional accounting practices reveals gaps that are bridgeable using modern activity-based management (ABM) and activity-based costing (ABC).
Limitations in the Use of a Traditional Budgetary Control System
An outmoded budgetary control system exhibits many inefficiencies and slows down Tesla's capacity to achieve its full profitability potential. The current management accounting techniques include product profitability, product costing, Tableau de bord, return on investment, strategic planning, deviation analysis, budgeting, and break-even analysis of sales. Whereas these techniques serve their various roles, they are not useful in decision making within modern globalized dynamics, where fast, accurate information is required. The slowness of these techniques in enabling retrieval and analysis of data slows down the decision-making process. The current costing, budgeting, decision-making, and performance evaluation strategies are not tailored for the present market dynamics.
The natural course of the organization involves birth, growth, and maturity. When in the first two stages, traditional accounting management practices may be efficient as the company is majorly inward-oriented. However, as Tesla expands to meet the needs of a more heterogeneous, diverse, and complex market, it needs accounting approaches that help to forecast easily, and manage risks promptly. However, the present costing practices do not allow for a holistic analysis of the costs required. The outdated strategies, which are currently in use, do not permit the communication of fixed and variable costs in a manner that allows for efficiencies. The approaches used do not enable proper visualization of overhead costs nor the cost trends.
Increasingly, the company is unable to assess the actual cost of quality. This limitation is particularly critical as it hinders the company from achieving its core objective of guaranteeing quality. Furthermore, the strategies do not allow effective target costing, which would allow the company to achieve efficiency by focusing on the most urgent projects that offer the most impact and profitability. As regards the budget, the current strategies do not outline the planning purposes that should ensure effective budgeting. They are also ineffective in as far as budget control is concerned, because of the slowness, and bureaucratic bottlenecks involved. These impediments hinder strategic planning as the desired flexibility in the budget is lacking.
The current accounting management approaches are also ineffective with regard to decision-making processes. Accounting management information should allow managers to make effective decisions. However, the company cannot ensure this with the existing structures that do not provide timely profitability analysis regarding the product. The company is unable to communicate in detail its cash flows, and the stakeholders cannot understand the time value of the money invested or the payback period. Also, considering the risks and uncertainties that emerge each day, the old accounting management approaches are unable to undertake a realistic probability analysis or enable sound decision-making that considers attendant challenges.
Tesla's growth can only be guaranteed when stakeholders have a good sense of the company's performance evaluation outline. However, the present accounting management approaches are deficient in as far as financial and non-financial measures are concerned. Increasingly, there is a need for approaches that help visualize the operations and innovation potential and return that is inherent in the organization, and how the company leverages this potential to achieve profitability. Tesla needs a new accounting management approach that bridges these gaps.
How 'Activity-Based Management (ABM)' and 'Activity-Based Costing (ABC)' May Help Tesla Motors Achieve Their Strategic Objectives
Activity-based management is a corporate concept that will involve internal analysis of Tesla motors to identify the operational activities and then evaluating such operations depending on the cost incurred and the value that such services have added to the company. The focus will remain on the analysis of activities conducted by Tesla in its move to produce better electric cars in the industry. Activity-based management will require the administration to identify the opportunities with the motive of enhancing efficiency as well as profitability for the company.
The implementation of activity-based management through the analysis of different operations should include the development of technology. Technological development will be classified into value-added activity. For instance, the use of advanced technology in the production of vehicle batteries and improving vehicle performance is a sign of adding customer value to the company because customers would prefer using the BEV, which is sturdy and environmentally friendly. Other activities include a focus on the battery innovation, which is also adding value to the company because the change will involve technology advancement to improve on the performance range and to lower the cost.
On the activity-based costing concept, I would like to inform the management at Tesla motors that it is the technique that involves measuring the cost and the performance of activities, the resources, and cost objectives of the company. The management will be allocating the company's resources to the activities as they assign such activities to the cost objective depending on how they are used. Thus, the concept of activity-based costing is driven by the activities, cost, and resources involved in the activity. In the case of Tesla motor, I am glad to inform the management that activity-based costing captures on areas such as product positioning that requires the management to identify a specific sales position of the electric cars. The resources required to position the product to attract more customers compared to the competitors and the cost involved in such activities for the betterment of Tesla (Hoffman 2015). Therefore, the electric car as a product should get positioned to meet a variety of customer needs.
The new accounting approaches should help realize proper market segmentation, which requires the company's management to divide potential customers into different market segments with different behaviors and needs. The activity will be aiming at prospective clustering customers who share a high level of homogeneity and differentiated from other groups of customers. For instance, it is also worth informing the management that the company has targeted different consumer segments such as the luxury vehicle Sedan market, the high-end sports car market, and the mainstream vehicle consumer segment (Chen and Perez 2018).
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