PLANNING & CONTROL MANAGEMENT
Global competition that occurs along with advances in technology continue to significantly alter the scope of business and internal reporting requirements. Reduction in national trade barriers on an ongoing basis, a floating currency, sovereign risk, restrictions on sending funds across national borders, differences in national tax systems, the difference in interest rates and commodity prices and the effect of changing equity to assets, earnings , and the cost of capital is a variable that complicates management decisions. At the same time, developments such as the Internet, video conferencing, and electronic transfer change the economics of production, distribution, and financing. Global competition and rapid dissemination of information to support the limited national differences in management accounting practices. Additional pressures include, among others, changes in markets and technologies, the growth of privatization, incentive costs, and performance, and coordination of global operations through joint ventures (joint ventures) and other strategic links. Does it improve the management of multinational companies to not only implement internal accounting techniques that can be compared, but also use these techniques in the same way.
MAKING BUSINESS MODEL
The latest survey found that management accountants spend more time in strategic planning issues than before. Determination of the business model of the big picture, and consists of the formulation, implementation and evaluation of long-term business plan of a company. It includes four main dimensions.
1. Identify the major factors relevant to the company’s progress in the future.
2. Formulate an adequate technique to predict future developments and analyze the company’s ability to adapt or take advantage of these developments
3. Develop data sources for menditkung strategic choices.
4. Certain choices translate into a series of specific actions.
In identifying the relevant factors in the future, scanning the external and internal environment will greatly assist companies in recognizing the challenges and opportunities. A system can be applied to gather information on competitors and market conditions. Both competitors and market conditions are analyzed to see the influence of both the standing of the competition and the level of corporate profits. Inputs obtained from this analysis are used to plan the measures used to maintain or increase market share or to recognize and utilize the new product and market opportunities.
One such tool is the WOTS-UP analysis. This Analicis regarding the strengths and weaknesses of the company relating to the company’s operating environment. This technique helps in generating a series of management strategies that can be run.
Decision tools that are currently used in the strategic planning system relies entirely on the quality of information about internal and external environment of an enterprise. Accountants can help corporate planners to obtain useful data in strategic planning decisions. Most of the required information comes from sources other than the accounting records.
The decision to invest abroad is a very important element in the global strategy of a multinational company. Foreign direct investment generally involves large amounts of capital and the prospects are uncertain. Investment risk, followed by the foreign environment, complex and constantly changing. Formal planning is a must and is generally performed in a capital budgeting framework that compares the benefits and costs of the proposed investment.
Approach to more complex investment decisions are also available. There are several procedures to determine the optimum capital structure of a company, measuring the cost of capital of a company, and evaluate investment alternatives under conditions of uncertainty. Decision rule for investment options generally require a discounted cash flow investment based on risk-adjusted interest rates are adequate: the weighted average cost of capital. Generally, companies can increase the prosperity of the owner to make an investment that promises a positive net present value. When considering the options that are mutually separated or mutually independent (mutually exclusive), a rational firm will choose the option that promises the net present value of the maximum possible.
In the international environment, investment planning is not as simple as that. Huokum differences in tax, accounting system, the rate of inflation, the risk of nationalization, currency framework, market segmentation, restrictions on the transfer of retained earnings, and differences in language and culture adds to the complexity of elements that are rarely found in domestic environments. The difficulty for the quantification of these data make existing problems worse.
Adaptation (adjustment) by multinational companies for investment planning models have traditionally been carried out in three areas of measurement: (1) determine the relevant returns for multinational investments, (2) measure of cash flow expectations, and (3) calculate the cost of multinational capital. This adaptation provides data that support the strategic choices, the third step in the process of enterprise modeling.
VIEWPOINT FINANCIAL RESULTS
A manager must determine the rate of return that are relevant for analyzing foreign investment opportunities. However, the relevant rate of return is a matter of perspective. Should the international financial manager to evaluate expectations of return on investment from the standpoint of foreign project or from the perspective of the parent company? Returns from these two viewpoints may differ significantly due to several reasons such as: (1) restrictions on repatriation of profits by the government and capital, (2) license fees, royalties and other payments which is the profit for the parent company but is a burden for subsidiaries , (3) differences in national inflation rate, (4) changes in exchange rates acing, and (5) differences in taxes.
Opinion that the rate of return and the risk of a foreign investment can be evaluated from the viewpoint of the parent company’s domestic shareholders, are no longer sufficient because:
1. Investors in the parent company of the more that comes from the world community.
2. Investment objectives must reflect the interests of all shareholders, not just from domestic.
3. Observations also show that multinational companies have long-term investment horizon ‘(and not short term). Funds generated abroad tend to be reinvested rather than repatriated to the parent company. Under these conditions, would be more appropriate to evaluate the return from the standpoint of the host country.
The emphasis on local projects of return consistent with the objective to maximize the value of the consolidated group.
Adequate solution is to recognize that financial managers must meet multiple objectives, by providing a response to investor groups and noninvestor in organization and in its environment. Host country governments is one of the group for foreign investment. Match between the goals of multinational investors and host countries should be achieved through two financial return calculations: one from the standpoint of the host country, and the other from the viewpoint of the parent company. The host country’s point of view assumes that a favorable foreign investment (including capital costs of local opportunities) would not be wrong in the somber allocate scarce host country. Evaluation of investment opportunities from the local viewpoint also provides useful information for the parent company.
If a foreign investment does not promise a return on risk adjusted value is higher than the return obtained by a local competitor, then the parent company’s shareholders would be better to invest directly in local companies.
Sumber : teorikuliah.blogspot.com