Critical Review: Strategic Management Accounting
Introduction
The article, ‘Strategic management accounting: the emperor 9 s new clothes’ authored by Beverly R. Lord focused on reviewing the contribution that strategic management accounting have on the strategy development and the enhancement of the competitive synergy (Lord, 1996). Lord (1996) noted that although there is little evidence on the strategic management accounting use, it is evident through evaluation of already existing companies. In addition, the techniques and elements within the firm are not formed by the management accountants but rather, it is the role of operation management. The latter will place the accounting management in a strategic position by using strategies such as cost leadership.
Summary
After defining strategic management accounting, the author focused on its components and the scope. It is important to note that the author advocates for extension of the scope of the traditional management accounting to consideration of the external factors of the firm. First, the strategic management account involves the collection of the competitor’s details such a cost, production volume and the pricing models. Second, there is continuous effort to manage costs as well as the adoption of management accounting methods dependent on the strategic position adopted. Further, the author revealed the contemporary application of the strategic management accounting in Cyclemakers. It is revealed that Cyclemakers despite slight changes in the accounting system, Cyclemakers obtained competitors details through salespersons and reduced costs through linkage of cost drivers with the competitive advantage factors (Lord, 1996). Note that the operation management play role in strategy planning and the top management, stake holders as well as interest group creates a network of interaction. Thus, the management accounting alone cannot form a strategic plan but its main role is to provide control system and also acts as a language of discourse.
Methodology
The author argues that the techniques for managing accounting are part of business management strategies and this means that the firm’s operation management is responsible in providing the technique. In other words, the strategic elements in the management accounting system are rooted from the firm (Lord, 1996). In explaining this statement, the author uses Cyclemakers Group Ltd, a business that was competing with dominant manufactures. However, the government regulations restricted the business from importing products. Later, the government removed the restrictions and this changed the competitive nature since many companies could enter in the market with full force. From the case study, the author concludes that since Cyclemakers is a small business, accountants may not implement efficient decision on how to run the business but the operational management that has knowledge and experience is responsible in strategy formation (Lord, 1996).
Critique
Lord (1996) noted the need to consider the competitor's information rather than focusing on the value of the internal information only. This is a great strength of the article considering the fact that competition has intensified due to the globalization, increased liberalization and the presence of the internet (Borcuch, Piłat-Borcuch & Świerczyńska-Kaczor, 2014). With the increased competition, the firm’s strategic point cannot ignore the activities of the competitors that are indirectly part of the company. Lord (1996) noted that it is vital to go ahead and compare the competitor’s details with that of the concerned company. For instance, the budgets of the company can be prepared with more columns to incorporate the activities of the competitors A and B. Further, the sharing of the collected information should not only be restricted to the management only, but others employees also need the information collected to facilitate decisions at their strategic units of operations. That way, the management decisions are complimented by the employees at the lower levels (Foudraine, 2015). Through adoption of such approach, the company is able to succeed irrespective of strategic approach undertaken, differentiation, or cost leadership.
Nevertheless, the information has not been presented without several evident weaknesses. The first weakness regards repetition. While abstract provides a good summary of the paper, the same summary is presented on page 348 to explain the purpose of the paper. After a detailed discussion of the components of the strategic management accounting, the same is repeated in summary on page 354. I feel a well-written abstract should be enough rather than the witnessed repetition that hinders full conceptualization of the ideas learned. Notably, the author assumes that it will be easy to obtain vital details about competitors from published reports and salespersons. However, it is important to note that some crucial internal information about the company may still be unavailable (Berry & Jarvis, 2006). Therefore, information about competitors should only be used to support strategic planning and relied on precaution.
Conclusion
It is vital to consider the information about the competitors especially with the onset of the globalization, liberation and the use of the internet. Nevertheless, it is significant to note that it is difficult to obtain competitors internal information. The operation management should place the management accounting in a strategic position by implementing strategies in the business operations. The information obtained should be supportive to strategic planning and should be diligently relied on with precaution. Regarding formatting, the author should avoid repetition.
References
Berry, A., & Jarvis, R. (2006). Accounting in a business context. London: Thomson Learning.
Borcuch, A., Piłat-Borcuch, M., & Świerczyńska-Kaczor, U. (2014). The Influence of the Internet on globalization process. Journal of Economics and Business Research, 18(1), 118-129.
Foudraine, J. P. (2015). Practices to involve employees in the strategy process (Bachelor's thesis, University of Twente).
Lord, B. R. (1996). Strategic management accounting: the emperor's new clothes?. Management Accounting Research, 7(3), 347-366.
