Electronic Board Plc is an organization established by an electrical engineer, John Watsons in the early 1970s as a sole proprietorship venture. The main business of the company is the production of electronic circuit boards. The company later on through dint of hard-work, developed into a public limited liability company. It maintained remarkable business success which climaxed in 1990, when it recorded an appreciable sales margin of £26 million and a profit after tax of £1.9m, using staff strength of 200 employees. The good business records of this company truncated in 1992, when it started experiencing heavy dwindling fortunes by recording abysmal drop in total sales turnover of £21.5m and a colossal total loss of £1.7m. This report assesses the internal and external causative agents of the decline in the success of the electronic board plc, using the SWOT analysis method and critically evaluates the ways through which management accounting and control can contribute to the successful management of the company.
INTERNAL ENVIRONMENTAL FACTORS
The organizational structure of the company is heavily lopsided around Directors who have no management accounting regard and skill required to achieve the profit maximization objectives of the company. In the Board of Directors structure, no management accountant was appointed to advise the company on the cost implications of their expenditures. There was no budget guidelines to expenditures incurred. The up-coming financial advice proffered by the lone qualified accountant appointed only in 1990 was disregarded. A case in point was the statement attributed to one Senior Manager, berating the accounting profession, saying that accountants were not professional electronic engineers: “they know nothing about the industry and the decisions we have to take”. They also have no idea of proper cost of production per unit. In addition to this is an internal bottle-neck, (a major hold-up in the production circle), which they suffered due to the multi-staged and highly automated nature of the process of producing the circuit boards. The company’s heavy inventory system ties down their operating cost. One accounting personnel is grossly insufficient for a company that has 200 personnel and a sales turnover of £26m record. Lack of good budgeting approach to the business activities of the company is unprofessional as it gives room for unguided and unprofitable spending. Another weak operational circumstance of the electronic board plc is that scrap or damage rate of output goods is as high as 25% of production out-put. This represents 1:4 out of every finished good proving faulty. All that are highlighted above constitute the internal weaknesses of the company. It has managerial weakness which contributed heavily to its abysmal performance.
EXTERNAL THREATENING FACTORS
Every business regardless of its internal control system make-up has inalienable relationship with people making up its external environment. An organization’s external environment includes customers, market environment, competitors and others.
In the case of Electronic Board plc, her market environment is highly competitive as the customers had access to alternative goods. There were so many competitors spreading across UK and Far-East who produce and sell other alternative high quality goods which made the demand for the goods of Electronic Board Plc to be highly responsive to change in price. The stiff competitive environment and the recessionary scenario the business was operating in, jointly accounted for the drastic downturn of sales figure of £21.5m and a whooping loss of £1.7m recorded in 1991.
AREAS OF STRENGTH AND OPPORTUNITIES
Notwithstanding the above stated pitfalls, the company’s obvious internal strengths include: (1)The company has a management team that is desirous of improving the fortunes of the...