ACT302: Strategic Management Accounting - ABM Implementation Analysis

This report provides an overview of Activity Based Management (ABM), a technique focused on cost management in organizations. It explores how ABM can improve efficiency by analyzing events and their costs, emphasizing its role in enhancing quality management and environmental sustainability. The report discusses the nature of ABM, its processes, and the major issues arising from its implementation, such as the challenges of allocating resources and the need for skilled personnel. The study highlights ABM's application in various sectors, including manufacturing and healthcare, and its impact on strategic decision-making and cost reduction. The conclusion emphasizes the importance of adapting ABM to maintain profit levels and optimize resource utility. This analysis is particularly relevant as companies expand into international markets and strive for sustainable practices.

Running Head: STRATEGIC MANAGEMENT 1
Implementation Activity Based Management in Organizations
Name
Institution
Date

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Executive Summary
Actually Activity based management (ABM) is a technique in management which is aimed
directly to the cost managers in event evaluation. Thus a theoretical perception through
focusing precisely in such events, will result in augmentation of the managerial team capacity
of controlling costs which increases efficiency. Moreover, ABM incorporates the use of
ABM data. Consequently, the specific objective of this assignment will be providing a quick
overview of the nature of ABM, ways in which the policy can be employed in order to
improve efficiency, and the core issues resulting due to the implementation of ABM
strategies in business.

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Table of Contents
Executive Summary...................................................................................................................2
Introduction................................................................................................................................3
Nature of Activity Based Management......................................................................................3
How ABM can be used to ensure quality management and environmental sustainability........5
Major issues relating to Implementation of ABM in achieving sustainability..........................7
Conclusion..................................................................................................................................8
Reference....................................................................................................................................9

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Introduction
Due to vast change in business systems, it has increased international competency and
technological advancement. This has entirely resulted to creativity and innovation through
utilizing both financial and non-financial data in firms. Thus the new flanged environmental
demands require accurate data and information related to prices among managerial events,
activities, procedures, services, product, and their clients. Normally, sustainable firms employ
costing frameworks in order to create their products and services which abide by customer’s
tastes and preferences. Aside from their customer’s prospects which could be shaped and
conveyed at a sustainable rate, moreover, direct investment choices and their product mix
aids staff members in education and incessant augmenting of the organizational activities.
Thus the main objective of this paper is analysing issues arousing from implementing activity
based management (ABM) in business organizations. This is a major concern due to the fact
that ABM has currently been considered in the production sector as companies strive to
expand to the international markets (Hoozée & Hansen, 2018). Effective supply chain
management, quality management and environmental sustainability is effective as it enables
boost and introduce the mindfulness of activity based management systems in current
organizations and efficient frameworks used in ascertaining quality and productivity.
Primarily, the paper will talk about a brief overview of the nature of ABM, its processes
involved, and the major issues affecting the implementation of ABM in ensuring sustainable
environment is achieved.
Nature of Activity Based Management
Stating on the nature of activity based management systems, ABM can be stated as a method
enacted in evaluating various execution events and their related costs, assets, and the cost
objects. Definitely, assets are allotted to specific events, on the other hand, some are allocated
to cost objects centred on their utility. Thus ABM finds out the relationship amid the cause to

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the drivers cost of the events (Kang, 2015). The main purpose of creating ABM was to
improve the traditional type of ABM as it was from effective, thus making it be incapacitated
in getting precise production costs or rather providing relevant data used during making
operating decisions. Based on such shortages admins may be posed to implementing choices
centred on imprecise information. This makes increased exposure for firms engage in
multiple services and products.
Therefore, ABM is an equipment used for providing aid based support in organizations
through issues useful data for structuring, planning, managing, taking control, and directing
business activities in improving processes, product and services, eradicating wastes and
perform business activities and strategies. Such data takes into account any type of output of
the ABM data frameworks. Therefore, it attains its strategies via two balancing claims that
are working and strategic based. Figure 1 shows how a working ABM helps in enhancing
effectiveness, reduce costs, and asset exploitation (Huynh, 2013). As a result, this can
augment the capability of resources allotted through minimizing the operational time of the
machines, enhancing or eradicating fully incapacitated events and procedures and
aggregating a firm’s asset. Thus the major advantages acquired from operational ABM can be
assessed by cost reduction, greater revenues by fully using resources and price evading.
Source: adapted by Kaptain & Cooper (1998)

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How ABM can be used to ensure quality management and environmental sustainability
Actually, activity based management can be used to ensure quality management, making it
become adopted in many states in vast number of sectors internationally. Dissimilar sectors
around the world have been adjusted and thus its managerial tactics improved utilizing the
ABM model. Instantly, ministries of the economy including the banking, manufacturing,
retail and the government itself have accurately applied the ABM model inside their
management costing systems. Actually, Japan gives a considerably more exploratory
contextual investigation for our discourse. An incredible effect of the advancements of cost
bookkeeping procedure, fundamentally on the ABM model, on the innovation was triggered
between the years. It was especially connected on both the electronic and the automotive
department. Previously, reasons for low pay work and underestimated monetary standards
were the imaginative managerial rehearses, without a moment to spare material progression
of frameworks, factual procedure control and consistent were augmented. Additionally, the
issue of uncalled for rivalry and appropriation of improper administration rehearses from
different organizations.
There was development of new costing methodologies in a few assembling ventures
including the car business. It was after the acknowledgment that the cost bookkeeping
frameworks utilized around then were related with negative operational and key results.
Instantly, the Tektronix Company began apportioning made overheads to the particular items
dependent on the immediate work. Hence it urged the specialists to structure items that
required less work to fabricate when contrasted with the previous years. The disposal of the
social contortion that was inborn in the utilized cost bookkeeping framework helped the
Tektronix Company to contend. An alternative division where the ABM strategy was
executed and utilized is the business segment in offering money related management
decisions (Huynh, 2013). In most innovations, advancement of the original strategies

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empowered the improvement of the ABM model. Substantial number of counselling firms
began developing the ABM rehearses due time with a presentation of the main industrially
accessible ABM programming. Through the creation of this strategy, there was an expansion
in the dimension of benefit proportion by these consultancy firms. This was on the grounds
that ABM went about as an impetus for basic leadership that is influencing the benefit level
and had the capacity to uncover wellsprings of the misfortune that were in charge of the
decay of the gainfulness level.
Moreover the technique aided the consultancy firms to grow new spotlight on the beneficial
markets and clients, structure items to evacuate cost, and dispose of the non-esteem included
exercises. Thus, activity based management is being utilized by various organizations in
various parts of the economy. For example, in the human services industry activity based
management has given a simpler method for managing issues with respect to the arrangement
of wellbeing administrations and items to its residents (A., 2012). The greater part of the
medical clinics like Mowasat Hospital, King Faisal Hospital and Armed Force Hospital have
profited such a great amount from the procedure of action based cost the executives
frameworks. It has empowered the medical clinics to improve their quality and proficiency in
medicinal services administration arrangement with thought of the cost controls and asset the
executives.
Major issues relating to Implementation of ABM in achieving sustainability
Vast number of issues executives in trending economies encounter in the process of
implementing the ABM techniques within their own firms. A significant issue within the
ABM method is the exertion of enacting the process. The main problematic issue is the
unease in allotting of assets. The main reason behind this is due to the fact that it requires
much effort and energy in effecting the ABM model which proves to be hard. Moreover,
emerging economies have inadequate methods and techniques of implementing the idea.

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Vindicating assets, recognizing the chances and then intellectualizing effective choices is
daunting to such economies because of inadequate skilled personnel within the managerial
levels.
Actually, activity based management bodes well to organizations that produce a changed
scope of items or administrations and those that are experiencing incorrect data costing. This
organization’s execution processes isn't such a major problem, this is on the grounds that the
exertion required to effectively actualize ABM merits their assets. With the rising economies
there is need for substantial organizations that provide numerous items, in this way the
expense of actualizing the ABM model will be extremely a test to a supervisor of that
organization. Organizations are contending in a regularly changing aggressive globe. Thusly
organizations should completely execute and apply the ABM framework so as to turn out to
be increasingly beneficial, effective and productive and in this way procure an upper hand
over different organizations.
The use of the ABM strategy into an organization framework necessitates that the
organization to which this framework is to be executed should have the required assets and
ability to have the capacity to oblige the framework. For the accomplishment of an
organization in actualizing the ABM model, there must be top administration perfect
association. An organization that has top administration support, should give a chance for the
achievement of the execution of the ABC model (Orams, 2013).
Conclusion
Conclusively, activity based costing technique is advantageous to organizations that aspire to
maintain profit levels and thus that focus on maintaining the normal rate in managing the
product linked prices in an efficient manner. Based on the above results it is evident that
ABM has been vastly employed and organizations are currently acknowledging it to be an

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effective system. Although, in order for any organization to be successful, improvising such
model will be helpful as it guarantees absolute utility of the company’s resources in a perfect
manner.

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Reference
A., H. (2012). Activity-based learning: A business management case study. AFRICAN
JOURNAL OF BUSINESS MANAGEMENT, 6(33). doi: 10.5897/ajbm11.2810
Hoozée, S., & Hansen, S. (2018). A Comparison of Activity-Based Costing and Time-Driven
Activity-Based Costing. Journal Of Management Accounting Research, 30(1), 143-167.
doi: 10.2308/jmar-51686
Huynh, T. (2013). Integration of Activity-Based Budgeting and Activity-Based Management.
International Journal Of Economics, Finance And Management Sciences, 1(4), 181.
doi: 10.11648/j.ijefm.20130104.11
Kang, M. (2015). Activity-based Costing Research on Enterprise Logistics Cost
Management. Business And Management Research, 4(2). doi: 10.5430/bmr.v4n2p18
Orams, M. (2013). Economic Activity Derived from Whale-Based Tourism in Vava'u,
Tonga. Coastal Management, 41(6), 481-500. doi: 10.1080/08920753.2013.841346