impact of the changing business environment on management accounting.

Global Competition

• Firms now operate in global markets due to reduced trade barriers and improved communications.

• Increased competition means firms cannot pass cost increases to customers.

• Management accounting must provide detailed cost and profitability information by product and location to support cost management and competitive pricing.

Deregulation & Privatization

• Removal of government protection and price controls has intensified competition.

• Firms must now understand their full cost structures.

• Management accounting systems are required to identify profitable and unprofitable products, services, and markets.

Growth of the Service Sector

• Service industries now account for a major share of GDP.

• Historically, service firms faced little pressure to control costs or improve efficiency.

• Increased competition has created a need for accurate service costing and profitability analysis through management accounting.

Shorter Product Life Cycles

• Global competition and technological change have shortened product life cycles.

• Being late to market significantly reduces profitability.

• Many costs are committed at the design stage, requiring management accounting to focus on early cost management and faster time-to-market.

Advances in Manufacturing Technology

• Firms have adopted lean manufacturing, JIT systems, and advanced manufacturing technologies.

• Focus has shifted to waste reduction, quality improvement, and flexibility.

• Management accounting systems must adapt to support these modern production methods.

Advances in Information Technology

• IT and e-commerce enable real-time global transactions and cost savings.

• ERPS integrate all organizational data and allow real-time access to information.

• Management accountants spend less time on routine data processing and more time on analysis, interpretation, and decision support.

Customer Orientation

• The competitive environment requires firms to be more customer driven.

• Customers are more informed, demanding higher quality and better value.

• Management accounting supports customer-focused decisions by providing profitability information by product, customer, and market.

Environmental Issues

• Customers expect firms to act responsibly beyond legal compliance.

• Firms face pressure to consider social and environmental impacts.

• Management accounting provides information to support environmentally responsible decision-making.