Analysis of Management Accounting Problems in Huawei Company Report

This report, prepared for a large consulting firm, addresses management accounting problems within multinational companies, specifically focusing on Huawei. The analysis, based on a recent journal article, identifies issues related to cost structuring, transfer pricing, and taxation frameworks. The report highlights the weaknesses in decision-making processes and the impact of these issues on organizational structure. A SWOT analysis is provided, outlining the strengths, weaknesses, opportunities, and threats of multinational enterprises. Solutions are proposed using management accounting tools, emphasizing the need for effective information management, strategic planning, and risk mitigation. The report concludes by advocating for a team approach and executive leadership to implement efficient strategies that reduce risks and enhance productivity. The references include a list of relevant journal articles.

Running head: MANAGEMENT ACCOUNTING PROBLEM IN MNCs
MANAGEMENT ACCOUNTING PROBLEM IN MNCs
Name of the Student
Name of the University
Author Note
Course ID:

1MANAGEMENT ACCOUNTING PROBLEM IN MNCs
DATE:
TO: The Board of Directors
FROM: Graduate, Large Consulting Firm
SUBJECT: Problems related to management accounting of Huawei Company
The memorandum will aim in identifying the management accounting problems
related to the multinational companies all over the globe with accounting tools and standards.
The memo will further provide solutions to the company in order to improve or eradicate
those accounting issues. The study will be based on the recent journal named Management
Accounting Research published in 2019. The study will additionally state the strength,
opportunities, weakness as well as threats of the multinational enterprise. According to the
problems, the solution will be analyzed.
The method by which a manager of any organization takes a decision in order to
achieve the aim of the organization, then they are done with the help of management
accounting tools. When the market faces poor cost structure, weak strategic policy and
unusual extra expenses, then with the help of management accounting tools, these problems
are solved. The multinational enterprises refer to those corporate institutions who not only
perform in the domestic country but also at least in other countries. One of the first
multinational company established was the East India Company in the year 1601. Recently,
500 multinational enterprises have been found all over the world.
According to the journal, the multinational enterprises have faced problems in the
field of its cost structuring due to lack of a proper strategy behind it. The transfer price that is
set by the multinational companies is creating problem to the taxation framework of the

2MANAGEMENT ACCOUNTING PROBLEM IN MNCs
companies as well as hampering the managerial accounting system. The reason behind it is
that they have a drawback in making decisions. For instance, the MNEs sets a higher transfer
price when the rate of tax is more significant in the downstream country than the rate of tax in
the upstream country. Hence, this mentioned decision leads to an inaccurate decision in
purchasing of a downstream subsidiary. Consequently, the diversified multinational
organizations which engage in international trade are generating a difference in management
accounting and taxation. Hence, the difference in the tax and the management accounting
weakens the organizational structure of multinational enterprises.
In order to manage the risk, the company should implement proper risk management
accounting, which will help the company to earn high profit and to remain their market
stability. As per the journal, the problems can be solved with the help of collaborating, many
transfer prices. Investment return, taxation issues and costs are the risks, which is associated
with the company. Hence, this resulted in the loss of the company’s profit share. This big
enterprise has some strengths, weakness, opportunities and threats other than the issues
mentioned above. Thus, all the four things of the company are discussed below through
SWOT analysis of multinational enterprises.
SWOT ANALYSIS
Strength
The company’s existing under the multinational enterprises works independently from
other companies, which are not under the parent company that is the multinational
organizations. They always try to bring innovation to their market operation and thus, they
invest in those areas. They have cheap labour forces. The multinational companies also have
a known image of their brands. Usually, the customers who are associated with the products
produced by the multinational companies always keep up their loyalty towards the company.

3MANAGEMENT ACCOUNTING PROBLEM IN MNCs
Weakness
The main weakness of the multinational organizations is their weak organizational
framework. The confidentiality of the companies is at risk all the time. Hence, it sometimes
leads to failure in addressing the issues related to the developing economy. The multinational
companies have a lot of rivals present among themselves, which weakens the competitiveness
of the existing company present under MNEs.
Opportunities
There are many opportunities present for multinational companies. The companies,
which are under the multinational organizations, set up their branches in the developing
economies. Thus, more revenues are generated in the market. As a result, the rising demand
leads to innovation of the technology present in the market. Since there are many different
companies present in the market; therefore, the profit share as a whole of the multinational
enterprises rises, which acts as an opportunity. The mentioned industry have a good supply
chain, which helps all the companies present under parent company to grow.
Threats
The threats of any organization are analyzed by their competitiveness in the economy.
Since they are big enterprises therefore, they have many rivals among themselves. The
innovation of other companies appears to be a threat to the companies present in
multinational organizations. The raw materials required to produce the products in the
companies may be a threat to the company because sometimes there is a scarcity of the raw
materials.
Few strength, opportunities, threats and weakness are mentioned. Other than this, the
journal focused on the issues related to the management accounting in the multinational

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companies recently. Thus, with the help of management accounting tools, these problems can
be solved.
Solution through tools related to management accounting
Every company needs a particular type of information to all the level of hierarchy for
working efficiently as well as to increase their productivity with quality. The information
helps the management to build up a strategy so that they can manage to formulate a proper
strategy in order to pursue it. The mentioned company above has suffered from a lot of
drawbacks related to the issue of tax that the management has not appropriately considered as
these are the base for the cost structuring so that they can run in accordance to the law and
therefore, do not break the system within the MNCs are working. Management accounting
provides the company with an effective team and the executive that is able to plan and
execute through their unique skills and knowledge. They are the one who considers all the
relevant information and make a proper plan, strategy and execute them efficiently that
reduces the risks that have occurred in the past and prevent them in the future.

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Reference
Alamri, A.M., 2019. Association between strategic management accounting facets and
organizational performance. Baltic Journal of Management, 14(2), pp.212-234.
Steiss, A.W., 2019. Strategic management for public and nonprofit organizations. Routledge.
Bloom, N., Brynjolfsson, E., Foster, L., Jarmin, R., Patnaik, M., Saporta-Eksten, I. and Van
Buckley, P.J. and Casson, M., 2019. The Internalization Theory of the Multinational
Enterprise: Past, Present and Future. British Journal of Management.
Bustos, S., Pomeranz, D., Vila-Belda, J. and Zucman, G., 2019, May. Challenges of
Monitoring Tax Compliance by Multinational Firms: Evidence from Chile. In AEA Papers
and Proceedings (Vol. 109, pp. 500-505).
Hummel, K., Pfaff, D. and Bisig, B., 2019. Can the integration of a tax-compliant transfer
pricing system into the management control system be successful? Yes, it can!. Journal of
Accounting & Organizational Change, 15(2), pp.198-230.
Kwilinski, A., 2019. Mechanism for assessing the competitiveness of an industrial enterprise
in the information economy. Research Papers in Economics and Finance, 3(1), pp.7-16.
Weetman, P., 2019. Financial and management accounting. Pearson UK.
Löffler, C., 2019. Divisionalization and domestic transfer pricing for tax considerations in the
multinational enterprise. Management Accounting Research, p.100646.
Reenen, J., 2019. What drives differences in management practices?. American Economic
Review, 109(5), pp.1648-83.