Japanese Management Accounting System

Question a)

Explain what you consider to be the significance of the above statement

The main point addressed by the statement is that Japanese organization is focusing on the customer value in their strategic management accounting practices. High competition and rapid changes in business environment requires firm to be innovative and produce a product that would sustain in the market and meet customer demand at lowest cost possible. It is particularly crucial to be innovative for a company involve in assembly-oriented industries such as automobiles, electronic and electrical products which experience rapid growth, high competition and everchanging technology. These industries are the major contributors in Japan economy with large numbers of players in the market. Therefore, in order to dominate the market or even to just stay competitive and survive; effective market-oriented cost management strategies are being implemented by Japanese firms in their production process.

The decision on product cost is determined by marketing objectives that have been set by an organization to promote a product to potential customers which might include enlighten customers about specific product features so that they are more willing to buy the product in future. The key element of Japanese management system that make it a market-oriented system is the extensive approach of “Feedforward” control system, where decision on production output is depending on external factor such as customer demands. The system work in the opposite way from traditional method and “feedback” system in a sense that the first stage of production process (product design, product cost) is influenced by the customer end of the value chain; instead of depending on manufacturing factors such as availability of resources that responding to the customer and environmental feedback for any future changes in production. The objective of the Japanese management accounting system is to create a product that have...