With the rapid development of the global overall economy, traditional management accounting has been difficult to meet up with the business tactical management and requirements. Strategic Management Accounting(SMA) for the modern enterprise is of great significance. However, it is a fresh techniques and methods. Although proper management accounting has been developed over twenty years, the SMA is still debatable. Furthermore, lots of scholars have experienced to identify what SMA is, however, the views of the scholars continues to be not yet able to be generalized. Yet, proper management accounting is still at the exploratory stage.
Management accounting performs a crucial role available world. It provides important advice to make decision for the businesses in the american society. The expenses of offering excellent products strategically need to be fully integrated into the business cost system and being reported by these systems. Management accounting helps monitoring the performance of the management. Therefore, the customers can then be securely placed in the same market. This may also be helpful on understanding the marketplace in an improved way. Strategic management market aspires to get the information of the competitors in the same market; this gives support with their business when making decision since the owner could change their budget plan regarding the studies of the tactical management market.
Strategic management accounting is recently developed in management accounting. It involved in planning, control and requires financial information. Within the strategic management planning and control systems, R. N. Anthony is convinced that we now have two different focused processes that are externally and internally. Externally oriented process is a financial accounting. Additionally, an internally focused process is including tactical planning, management control and operational control. During the strategic planning process, it is the role of formulating strategy and it emphasis on planning. Planning defines aims, objectives and focuses on of organizations and also does formulation, analysis and selection of policies, strategies, tactics and actions to accomplish them. The orientation is planning outside the organization which is relating to the organization's environment. Second, after proper planning, management control would be implemented. The main function of the process is utilizing strategy which may be a part of the planning. In the final stage, functional control is principally responsible for controlling however also doing the responsibilities as well as planning. In this technique it ensure that resources and obtained and used effectively and efficiently to attain organizational goals and procedures honored or appropriate remedial action taken. It normally occurs within the business.
Strategy orientated accounting complements the original concerns of the Western world accounting. It focuses on the excess costs to be able to maintain competitive advantages of enterprises of actual and potential competitors. It targets the cost impact venture products and marketing strategies and it could be viewed as an substance for success in the current meeting the troubles of an increasingly global market. In most cases, such re-orientation is another certificate management accounting focused on the value of consumer generated in accordance with its competitors. It also helps monitoring the company's performance in the market variables by using a series of strategic decisions in the horizon which would be long enough to achieve the strategic plan. These concepts form the primary of the new concept of SMA. Furthermore, there are 12 proper management accounting tactics. They are really competitive position monitoring, proper pricing, competitor performance appraisal, rival cost assessment, tactical costing, value-chain costing, brand value monitoring brand value budgeting, feature costing, quality costing, life-cycle costing and target costing. However, the primary methods in SMA that happen to be strategic costing, concentrate on costing and product life-cycle. Although there are a lot of practices, there continues to be of a lesser usage and acknowledged by several organizations.
In 1981, Ken Simmonds has first of all suggested the "proper management accounting", he developed the SMA classification. After his conversation, SMA has been worried daily. In the speech, he talked about to acquire management accounting information in regards to a business and the rivals for the uses in producing and monitoring the business strategy. He argues that management accounting should be more outward looking and really should help the emphasis to put upon comparative levels and trends in real costs and prices, cash flow, market show and stewardship of the resources open to the business. It could be developed and controlled the enterprise proper.
Ken Simmonds recommended that profits aren't from interior efficiencies but from the business's competitive position in its market. He lifted several ideas for the application of SMA available. He stressed the value of the learning curve with respect to achieve strategic advantages by forecasting cost reductions and so value reductions of competitors. He also drew focus on the value of early experience to the new product as a meaning to give a unique advantage over competition. Major competitor can reduce the sales price of the products that ought to further increase its creation and boost its market share; which eventually power some opponents to leave the industry. Second of all, Simmonds shows that the cost-volume-profit relationship of rivals could predict the price response and management accounting functions to help examining the cost composition of each major competition and relating this to their prices. In addition to controlling costs and prices, Simmonds focused on amount and market show by monitoring the movements of the marketplace share as the key products, companies can easily see if it is bought or lost position and competitors will show different strength on the market share. Including complete information on the market, management accounting statement will help to enable more tactical management accounting-related. Simmonds suggested that the marketplace talk about of the assertions may be included in maintained accounts. He believes that SMA will develop in general management accounting in the future.
One of the key advocates of Strategic Management Accounting is M. E. Porter(1985). His argument on strategic management is recognized as the important information. Porter mentions a two pronged way.
First, he evaluated various areas of the industry's long-term success. He believes the five competitive makes will donate to strategic balance. That is a risk to new entrants, swap products enter the marketplace, competition among existing corporations within the industry, bargaining vitality of suppliers and consumers. These five makes fully represent the competitiveness of many enterprises in an progressively competitive. However, Porter has also increased the question of the comparative position of the business in the industry. This issue is important since it affects the power of enterprises to set-up profits above or below the industry average. Profits may be greater than average to attain a lasting competitive advantage. That is achieved by three basic universal strategies which are cost leadership, differentiation and emphasis.
Cost management means that companies intended to serve as the lowest cost of creation in the sectors. This is achieved by economies of scale; capital of the knowledge curve effect, tight cost control and cost minimization. Also, the business aims to provide a amount of different levels of product and service value to customers. It could generate reduced price. This is actually the differentiation part. Emphasis is another part of the bargaining electric power which concerns about the cost and differentiation concentrate.
Porter pointed out that the value chain is required to determine the future of the practice of tactical management accounting. Value is the client happy to pay which is a function of the image products. In the worthiness string, there are nine elements. Some of these cost individuals may be controllable. The nine components of the value chain can also be segregated as either support activities or main activities. For the support activities, they are firm infrastructure, recruiting, technology development and procurement. And the main activities are inbound logistics, functions, outbound logistics, marketing and sales and services.
For example, Internal value string examination is the goals of promoting businesses to eliminate ineffective businesses and reduce waste material. The factory analyses the operating level detail by detail. The primary reason is to focus on the market and customer. The procedures and the activities of the business-internal price string analysis enable the cost management of corporations to maintain the essential operating level, and explore each level of worth operations, eliminating useless operations.
The value of Challengers chain research can identify the merits and shortcomings in the company. The final outcome of the market and competitors evaluation that set alongside the competitors on the market, creation quality and diversification might not exactly have too much result. When the strategic can increase the quality or diversification in product to improve competitiveness, it would be hard to attain. On the other hand, if organization blindly relying on low prices to gain market share, it will lead to higher losses.
In the research, the impact of the cost drivers on each one of the elements must be evaluated by initiatives. Also, there has to be a satisfactory margin which made by the cost of the nine elements.
Once this is completed, manager must try to make evaluation of their own competitors in the same way. Strategic advantage can build if the elements of the full total cost is less than competitors. It's important to adopt a more good attitude to evaluate if the income greater than those of competition. If not, it is needed to develop ways of achieve the low cost gain by controlling the cost drivers. The cost personal savings would lead to a decrease on costs or improve production. Marketing, sales and service costs may be reduced more efficiently, if the decrease in external fault. An apparent example provides a good customer support services to the general public. If the Volkswagen reduces occurs, as the car is in a guarantee period, the save vehicles comes away and fix it. If it can't be fixed, and then provide replacing. That is would be great way handle but the cost would be costly (C. DRURY, 2008).
Shank based on Porter (1985) suggested three universal strategies to be able to achieve sustainable competitive edge. Shank also mentions the needs for management accounting to aid the enterprise's competitive strategy and clarify two different types of competitive strategy the first one is cost leadership and product differentiation. The second some may be demand different cost analysis perspective. For example, standard product cost is likely to be a very important tool for management control in the company that pursuing an expense command strategy in an adult item business.
On the in contrast, standard product cost is probably not important after the differentiation strategy of businesses. Using the market-driven, there exists rapidly changing and fast-growing business. A company's quest for product differentiation strategy may require more information than on the expense of the best about new product development, design cycles, research and development expenditures and marketing cost examination. The difference between your cost control and product differentiation which rely upon the primary strategic thrust of the company.
Recently, Professor Bromwich(1994) further discusses strategic management accounting and definition of tactical management accounting such as the provision analysis of financial home elevators the firm's product market segments, rivals' costs, cost set ups, the monitoring of the enterprise's strategies and those of its opponents in these marketplaces over lots of periods. Bromwich discovered that SMA is a development of management accounting. This new techniques would have to be further mentioned by the accountants in the foreseeable future. Moreover, Bromwich described that the role of accounting is going to extend in two guidelines when adding the strategic point of view to traditional management accounting. First, in proper cost examination, costs need to built-into it and so align costs with strategy. Second, in a fairly general way, the cost structure in rivals businesses also to track record the changes over time. To do this, Bromwich also features this distinction discovering two dominant methods to SMA. One looks for to cost the product attributes proposed by a company's goods. It really is to catch the attention of customers. The other methodology is to cost the functions in the worthiness chain which provide value to the client. (Bromwich and Bhimani, 1994)
In the cost leadership strategy development fads, as well as obsolete the traditional cost accounting. SMA concentration is dependant on the benefits which is doubtful for the typical costing performance measurement; suspected the use of flexible developing costs, budget control, a worship of the budget; rigid adherence to the traditional product cost costs decisions; someone to consider the price tag on competitors; the absence of formal awareness of the marketing costs.
Roslender (1995) determine the target cost as a domain within strategic management accounting. This is why why concentrate on the exterior part which is a market-oriented methodology for product costs and cost management. Furthermore, it includes the proliferation of management accounting throughout the business and active involvement of personnel in a wide range of management functions. Their goal is to achieve the target cost, including the identification, evaluation and use of cost functional analysis of the product features and research opportunities to lessen costs throughout the value chain. Moreover, a recently available contribution to the role of SMA, emphasizing the management accounting in the development and support the overall competitive strategy of an organization is the Balanced Scorecard. The goal of the Balanced Scorecard is to encourage behavior constant with organizational strategy. It offers a comprehensive platform for performance way of measuring to clarify, communication and management strategy. (Kaplan and Norton, 1992). He recognizes SMA as a strategy that to take into account strategic placement by the trials to combine the views from the prior marketing text messages into management accounting.
Robin Roslender and Susan J. Hart mentions that SMA is intimately associated with both management accounting and marketing management because SMA is on the tactical level who attends to change in the environment outside the enterprise but not limited to this one area of the business, SMA explore the whole industry value chain available information and enhance the enterprise's monetary environment. It emphasis that business development and environmental change are regular, in order to attain the optimal effectiveness of industry, SMA requires marketing management to collect the info of rivals. The management accountants collect, compare, and assess the information. The evaluation of SMA is depending on the information from marketing management. It is controversial that if it is essential for the management accountants to handle to the marketing information or the marketing management can obtain the information using their own tool.
Innes (1998) believes that strategic management accounting for the provision of information to support proper decision-making in venture. Strategic decision-making usually consists of in a long-term period, there's a significant impact on the business, even though they could have an interior element, plus they also have external factors. This definition was introduced offering information to be able to support an organization's main long-term decisions, such as the use of activity-based costing information, provide the relevant information product framework, the release and abandonment decisions are the domain of SMA. This view is support by Cooper and Kaplan (1988) who declare that proper accounting techniques are designed to support the whole organization's competitive strategy. In most cases, the power of using information technology is to develop more complex product and service costs.
Despite tactical management accounting has received, there is still no detailed conceptual platform of what proper management accounting (Tomkins and Carr, 1996). For instance, Coad(1996) claims that SMA is an rising field whose limitations are loose and there continues to be no unified view of what it is or how it could develop. The prevailing books in the field is both disparate and disjointed (Coad, 1996:332).
There is an exception such the study which conducted by Guilding et al. (2000). The review test included 312 large companies. Guilding et al. found that recognition of what's difficult to look for the structure of the proper management of generally accepted accounting practice. Based on the overview of the literature, they identified 12 tactical management accounting techniques including value-chain costing, tactical costing, target cost, life-cycle costing, feature costing etc. They are being used to look for the practice, it is a must demonstrate one or more of the following characteristics: the environment and market position focus on opponents; and long-term, forward-looking course. At the end of the test, Guilding et al figured 12 tactical management accounting practices are of relatively low utilization, there are two factors that should not dismiss their potential. First of all, all the analysis of SMA methods may be significantly higher than expected utilization of the advantages of scoring points. Second of all, there are still many companies have discontinued the usages of the SMA. These results showed that there surely is a difference between the neediness and the genuine reviews conducted. It sees that there the practicing accountants do unfamiliar with the usage of the SMA. This gives helps to the findings of Tomkins and Carr's (1996) while they thought that the SMA is ill-defined.
In addition, it continues to be lacking of the strategic management accounting consensus. (Lord, 1996) explained that a variety of strands have been used to spell it out the proper management accounting. It magnifies the inner emphasis of traditional management accounting and the exterior information to opponents. The linkage between your tactical position which determined by the companies and the anticipated emphasis on management accounting and finally obtaining competitive advantages by interpreting methods to reduce costs or even to boost the types of the companies' goods by exploiting the partnership between your value chains and generalizing the cost drivers.
Strategic management accounting is recently developed in management accounting. It involved with planning, control and requires financial information. Nevertheless, SMA havent produced a unified knowledge. While some organizations may have noticed SMA. They may lack for a understanding in SMA.
Although SMA has lots of different views from various authors. For example, Simmonds is the earliest to create the strategic management accounting. He mentions to gather information on business competitors. Than Bormwich has more info SMA is not only to accumulate information. It still need to analyze and competitors on their own competitive edge and value creation process and research a long-term decision-making pattern in the organization point of view, for the marketing of the products and services give enterprises the full total revenue. Furthermore, Porter identified 3 universal strategies in SMA to attain sustainable competitive edge. . However, Innes (1998) assume that tactical management accounting for the provision of information to support tactical decision-making and Cooper and Kaplan (1988) views that Strategic Accounting technology is designed to support the complete organization's competitive technique to develop more advanced products and services costs. On the other hand, lord (1996) determined SMA not only analysis external competitor information but also expand the key point of traditional management accounting. All of them are authors who hold different evidence to aid their own mind in SMA, so SMA is very confide, it is remains a unknown. , In my opinion, the primary reason of SMA occurs because Economic is expanding extremely fast and SMA is reclamation and atone for traditional management accounting in a fresh environment. However, SMA has a lot of obstacles in producing process such as organization keep continue steadily to apply the SMA in the request and do modification and innovation, in so doing it can promote the introduction of SMA application to make it update. So I believe that Although SMA lack of consistent theory at this moment, it will be a huge management accounting develop in the future.
Bromwich, M. "Accounting information for proper excellence"
Bromwich, M. , 1990 "The case for strategic management accounting : the role of accounting information for strategy in competitive markets". Accounting Organization and Population, Vol 15, No, pp. 27-46
Cadez, S. , 2008 "An exploratory research of a contingency style of strategic management accounting", Accounting, Organizations and Society, 33, pp. 836-863
Drury, C. 2008, Management & Costing Accounting, 7th ed. , London: South-Western.
Horngren, C. T. , 1999, Management and cost accounting London: Prentice Hall, 1999
Lucey, T. , 1988 Management accounting 2nd ed. London: DP Publications
Roslender, R. and Hart, S. , 2003 "In search of strategic management accounting : theoretical and field review perspectives". Management Accounting Research 14, pp. 255-279
Ryan, B. , 1998, Strategic Accounting for Management 5th ed, Australia: Thomson Learning
Tillmann, K. , 2008 "Strategic management accounting and sense-making in a multinational company", Management Accounting Research, 19, pp. 80-102
Wright, D. , 1996 Management accounting London: Longman