Management Accounting And Management Of The Organization

The current report presents the recommendations for the management of Lycamobile Group, UK, based on management accounting system of the organization. Management accounting is known to help the managers make informed decisions based on financial stature of a company. This report is meant to understand Lycamobile’s current standing in the UK telecom sector. It will also highlight company’s managerial problems and take help of management accounting to make useful recommendations.

1.Background to the company

2.1. Overview of the Company and its Products

Lycamobile is a telecom mobile network operator (MNVO) that is operating in many countries including United Kingdom, US, Austria, Australia, Sweden, Switzerland, etc. There is a different brand named Lycatel brand, which operates with different corporate companies. Nevertheless, operation of Lycamobile and Lycatel do overlap in some countries but they do not work in parallel.

Major portion of the company’s revenues come from Lycamobile’s SIMs produced for the consumers. The company produces SIM cards for people who wants to make international phone calls. The cards are designed as pay-as-you-go. The company takes radio frequencies on lease from local mobile network operators and form partnerships with local operators in the counties it does business in. Lycamobile has also developed other business arrangements like MNVA structures in several countries.

The purpose of the company is to provide services of international calling within affordable range for the customers. Lycamobile is known to implement aggressive pricing structures when it is entering new markets. This is done in order to attain greater market shares early on. In some cases, the mobile network operators hit by a surprise by the actual company growth instead of the projected estimates of the company’s products. The company was launched in 2006 in Netherlands, and since then it has attained nearly 15 million pay-as-you-go customers in all the countries it is currently serving in.

Lycamobile group also has the following products, alongside the pay-as-you-go SIMS:

  1. GT mobile
  2. Lycatel calling cards
  3. Lycachat
  4. Lycatalk

2.2. Lycamobile, UK Competitors

Lycamobile group has been reported to be among the top ten mobile telecom networks in the UK. The names and details of these groups has been tabulated below:

S. No

Name of the Telecom Company

Revenues generated

Total Number of Subscribers

1.

BT Group

$ 15 billion

 

 

~30 million

2.

Sky UK Limited

$ 13 billion

 

 

16 million

3.

Vodafone

$ 10 billion

 

 

20 million

4.

EE or Everything Everywhere

$ 10 billion

 

 

31 million

5.

O2

$ 10 billion

 

 

25 million

6.

Virgin Mobile UK

$ 7 billion

 

 

~8.5 million

7.

3 (Hutchinson Whampoa)

$ 3 billion

 

 

10 million

8.

TalkTalk Group

$ 3 billion

 

 

6 million

9.

Lycamobile

$ 2 billion

 

 

~13 million

10.

Giffgaff

$ 150 million

 

 

  1. million

2.3. Problems being faced by Lycamobile

Lycamobile, UK operates in a very competitive environment. Nevertheless, the company has been able to increase its market share with implementation of different strategies. In a relatively very short time period, it has been able to include itself in the top ten telecom companies of the country. However, like any other multinational company, it has suffered with some managerial problems that are rooted in managerial decisions that have been made in the past decade. The result of these decisions made by the company is reflected in some loopholes in the services being provided. These problems are being shown in the poor network quality being reported by customers. Some of the problems are:

  1. Problems with roaming service
  2. Lycamobile hotspot problem
  3. Network problems

A customer review states the following:

“Lycamobile has some problems regarding the pricing. The company’s offers are misleading in that it has many hidden charges that are not properly conveyed to the customers. The company also claims to provide free calls within the network. However, this is also not entirely true. Tariff structure are also very difficult to take a grasp of.”

This and many other reviews point out that it is time for the company to make prompt decisions regarding pricing structure and network quality if the company aims at improving its standing among the UK based competitors.

 

2.Review of Management Accounting

The management accounting is related to the accounting managers to provide insight on the management decisions of the company. This is also true for the accounting mangers to make decisions make decisions based on their information related to the company’s accounting matters. This process helps improve the management functions of the company and align company’s decisions according to the company’s financial statistics (Burns and Scapens, 2000).

The practice of management accounting incorporates three areas:

  1. Strategic management—that enables the managerial accountant to make strategic decisions about the company.
  2. Performance management—the practices of efficient decision-making and effective management of the company.
  3. Risk management—to formulate the framework and strategies for identification, measurement and management of risks and align them towards achieving company’s objectives (Hunt et al, 2013).

In order to achieve company’s objectives managers have to make many decisions. These decisions become more effective if they are informed decisions. This information gathering requires the managers to reach out to different company areas like marketing, manufacturing, legal and accounts area. Bigger organizations have complicated operations and their managers are in bigger need to gather information (Horngren et al. 2002).

Effective decision making also requires effective resources management. It involves effective (achieving better results) and efficient (use of less resources for achieving better results) use of the resources. Management accounting helps managers gain the required information to formulate effective resource management strategies and working towards achieving organizational goals (Horngren et al. 2002).  

In order to contribute to the above-mentioned strategy making process, a management accountant has the following responsibilities:

  1. Contribution towards the improvement of the organization’s competitive strategy. This can be done by enhancing the quality of service, cost innovation using modern process improvement and cost management procedures.
  2. Changing and implementing strategies based on changing market trends requires information. Such information can lead to changes in budget and control systems (Costa-Prrez, et al. 2013).
  3. Estimating the cost of the company’s output (services and products) that can support and enhance the company’s strategic and operational decisions.

3.Management Accountant System’s Recommendations for the Company

The below mentioned account represents the recommendations for the areas that require strategy change:

4.1.Management Accounting Responses to the Changing Business Environment

The telecom business is built on the changing trends, emerging business strategies, and continuously evolving competitive environment. It is important that managers take not of the changes in the industry. There are several companies, which are undergoing vertical and horizontal diversification. By looking at the data for the top ten service providers in the UK, it is observed that the leading companies have different services like broadband, television, etc. and they are operating in many countries for example, the GT group operates in nearly 160 countries (Hall, 2016).

The information about the changing trends of the business will allow the company to operate more effectively in catering to the competitors. Increasing competitiveness will also increase stakeholder trust and the company share value as well (Ward, 2012).

4.2.Costing goods and services

The company is known to make aggressive costing decisions to enhance market share. This has led the company to achieve market growth, however, with the growing telecom industry the today’s consumer has greater options than there were a decade ago. It is important to review the cost strategy to provide competitive process (Friedrich, 2015; Kaplan and Atkinson, 2015).

4.3.Other recommended management decisions

  1. Identification of changing social trends that can enhance company’s value in near future.
  2. Identification of sustainable business challenges and correlated them with the company’s strategy, business model and performance (Bebbington and Thomson, 2013).
  3. Identification of sustainability risks that can harm the company’s operations as to how and when can the company be affected by them.
  4. Laying out the key performance indicators (KPIs) and how can they affect the company’s strategy and objectives.
  5. Regular reporting on the sustainability of the company to make informed decisions about budgeting, cost effectiveness, investment appraisals and company’s strategy.
  6. Application of the following management accounting techniques for better performance:
    1. Scenario planning
    2. Identification of resource availability
    3. Lifecycle cost estimates
    4. Formulation of integrative strategy
    5. Correlate suitability issues with company’s decisions

5.The Strengths and Weaknesses of Analysis

The following account gives a SWOT analysis of the analysis in the report.

5.1.Strengths

  1. Understanding of the effectiveness of management accounting in company’s decision-making process.
  2. Knowledge about the current standing of the company among the leading service providers of the country.
  3. Identification of the management accounting techniques to enhance management’s performance.

5.2.Weaknesses

  1. Lack of the knowledge of complete company’s policy.
  2. Inability to make a holistic plan for implementation.

5.3.Opportunities

  1. Information resources like these can help the company improve its competitiveness.
  2. Such reports will allow the future endeavours that will incorporate management accounting to make informed decisions.

5.4.Threats

  1. Being a newly formed strategy for information gathering, it might not be able to fully change the company’s position.
  2. It will require continuous report generations and information gathering for better decisions in the future.

6.Conclusion

This report was aimed at figuring out the problems related with the current operations of the company. This was correlated with the management accounting at Lycamobile to make informed decision about the company’s managerial structure and to revaluate the decision making process. The company needs to regularly correlate management accounting with the operations of the company. This will enhance the efficiency of management accounting system and enhance its abilities to improve company’s management.

 

 

 

 

 

References

Bebbington, J. and Thomson, I., 2013. Sustainable development, management and accounting: boundary crossing. Management Accounting Research, 4(24), pp.277-283.

Burns, J. and Scapens, R.W., 2000. Conceptualizing management accounting change: an institutional framework. Management Accounting Research, 11(1), pp. 3-25.

Costa-Prrez, X., Festag, A., Kolbe, H.J., Quittek, J., Schmid, S., Stiemerling, M., Swetina, J. and Van Der Veen, H., 2013. Latest trends in telecommunication standards. ACM SIGCOMM Computer Communication Review, 43(2), pp.64-71.

Friedrich, R. 2015. 2015 Telecommunications Trends. [Online]. Available at: http://www.strategyand.pwc.com/perspectives/2015-telecommunications-trends, [Accessed on: 7th March, 2016]

Hall, S. 2016. 7 Strategic Priority Areas for new Telecoms Business Models. [Online]. Available at: http://www.telco2research.com/articles/eb_7-strategic-priority-areas-telecoms_summary  [Accessed on: 7th March, 2016]

Hunt, C., Fowler, C. and Drennan, L., 2013. Management Accounting: Strategic Decision Making, Performance and Risk. Pearson.

Horngren, C.T., Sundem, G.L., Stratton, W.O., Burgstahler, D. and Schatzberg, J., 2002. Introduction to Management Accounting: Chapters 1-17. Prentice Hall.

Kaplan, R. S. and D. P. Norton, 2001. The Strategy Focused Organization, Harvard Business School Publishing Corporation

Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.

Otley, D. and Emmanuel, K.M.C., 2013. Readings in Accounting For Management Control. Springer.

Ward, K., 2012. Strategic Management Accounting. Routledge.

 

 


Get in Touch With us

Get in touch with our dedicated team to discuss about your requirements in detail. We are here to help you our best in any way. If you are unsure about what you exactly need, please complete the short enquiry form below and we will get back to you with quote as soon as possible.