Introduction
As the economics of the world become
more developed, the competition of business gets more intense. To survive in
such battle, the corporation must evolve and apply at least some certain degree
of survival strategy. Management accounting first appeared to serve users’ need
of such information. Sooner or later, those who run the business started to
feel that something seemed to be missing. The academics kicked in searching for
answer and numerous discussions began to prosper. In between these discussions,
strategic management accounting (SMA) came forth as the solution of the problem
with many scholars guaranteed. Nevertheless, the terminology is not clearly
defined in the academic world let along the business world. It didn't stop the trend
of developing and applying of SMA techniques within firms. Although several
limitations occurred due to the nature of case research, the researchers
confirmed that trend through many case studies. As the world gets to understand
SMA better, there is a greater possibility to elaborate advanced SMA techniques
that adapt the situations more properly.
The rest of article is arranged as
follow: in section 2, the definition of strategic management accounting (SMA)
is discussed; in section 3, the development of SMA is briefly mentioned; in
section 4, the results, criteria and tendency of case studies papers are
summarized and analysed; the last section is conclusion.
What is strategic management accounting
Breaking down piece-by-piece, the term
‘accounting’ has many and various descriptions; however, in general it means
conveying information for those who need it. If the title in front of
accounting changed, the essential of information also shifted its focus. For
example, financial accounting provides information of the firm's economic
activities, for a certain period of time or at the exact point of time. With ‘management’
in front of accounting, information especially concentrates on managing
purposes, more specifically, decision-making. Management accounting (MA) focuses
on delivering internal information of the entity to users, in this situation, mostly
managers. This internal information sometimes can be confidential and case
sensitive against competitors. By using such type of information to carry out
the organization goals, managers of the entity draw the route map or correct
the direction accordingly. This process of making decision and responding to
competition is thought to be strategic management accounting (SMA).
However, there is no concrete definition
about what constitutes SMA (Tomkins and Carr, 1996; Roslender and Hart, 2003).
Several researchers have tried to conclude a proper expression with different
yet similar terms, such as accounting for strategic position (Simmonds, 1986)
and strategic cost management (SCM) (Shank, 1989, 1996). Some researchers would
tend to be more specific about the idea they carry on later in the research.
Bromwich and Bhimani (1994) describe that SMA concentrates more on the customer
value and also help to monitor the company's market performance. Haider et al.
(2011) explain that SMA improves the traditional management accounting by
expanding the scope and combining with other fields such as strategy and
marketing. The summary review of SMA development states 'SMA entails taking a
strategic orientation to the generation, interpretation and analysis of
management accounting information, and competitors’ activities'
(Langfield-Smith, 2008, pp. 206).
Furthermore, Langfield-Smith (2008)
notes that there are many techniques included 'under the umbrella of SMA' and
some commentators define SMA in terms of its techniques, such as target
costing, life-cycle costing, strategic cost analysis, competitor cost analysis,
activity-based costing, activity-based management, attribute costing, strategic
performance measurement systems. All these mentioned techniques are perceived
to be more strategy-oriented or strategy-concentrated. In a simple way of
telling, it is basically management accounting applied with strategic
dimension.
The development of SMA
As previously
mentioned above, the MA practice mainly emphasizes internal information
delivery; therefore, some criticisms arise. Chapman (2005) points out that
putting special attention to the internal affairs of the business might lose
sight of external opportunities and possible threats. To answer such critics
and also improve the methodology, various attempts have been made, including
SMA. The SMA terminology started to pop out in recent decades as a new and
effective cure for organization coping with all the difficult situations. This
concept inspires plenty responses and further discussion are made by numerous
researchers (Simmonds, 1986; Shank, 1989, 1996; Bromwich and Bhimani, 1994;
Chapman, 2005; Langfield-Smith, 2008; Carmen and Corina, 2009; Haider et al., 2011; Nixon and Burns, 2012). Through these efforts put into
shaping and structuring the context of SMA, the researchers try to uncover more
extended linkages with other disciplines. If the accountants wish to develop a more
advanced accounting system, it is best to know the logic and rationale behind
every strategy applied by sense-making and how it is used during the process
(Tillmann and Goddard, 2008). Nixon and Burns (2012) suggest that SMA should be
integrated with strategic management (SM) because SM gives broader boundary and
also stimulates more ideas.
Case study for SMA
Despite the
theoretical supports and prospering researches related to SMA, the empirical
evidences somehow are scarce. One of the critics for SMA is about the
lack of real practices and actual usage applied in business. The research
finding implies that the use of the term SMA is not very general among
management accountants. Many who actually use the techniques don't recognise
them as SMA implying the uncertainty about the phrase. However, the observation
from the UK sample in this research provides a cue that SMA had more
appreciation because the term was first cited and originated in UK, implying
cultural and historical factors involved in the choice of words, not entirely
related to lack of practices in other countries. Some studies put more weigh on
building profound knowledge by inspecting the vertical relation within one organisation
rather than horizontal. Either ways of pursuing and exploring helps construct a
thorough comprehension.
Practices in different countries
Guilding et al.
(2000) survey 12 SMA practices usages in hundreds of the largest public and
private companies, in terms of turnover, among United Kingdom (UK), United
States (US) and New Zealand (NZ). It appears that NZ companies have special
preferences for three out of the 12 SMA practices questionnaire ('value chain
costing', 'competitive position monitoring' and 'competitor performance
appraisal based on published financial statements') while US companies have
totally different point of view. The researchers also point out that the
observation conclusion may be due to a) a fast-developing and highly-competitive
business environment in NZ, or b) those NZ companies selected from samples are
part of multinational operations. To conclude, there are four major findings according
to this paper: firstly, competitor accounting and strategic pricing seem to be widely
applied; secondly, despite most of the low usage rate of SMA practices, the
underlying potential shouldn't be overlooked because the expected advantages
are higher than the usage rate; thirdly, the company size affects the adoption
of SMA when restricting matched sub-sample level; lastly, the phrase SMA seems
not broadly appreciated in corporations.
Following up, Tillmann
and Goddard (2008) examine the context of SMA based on a case study of one
large multinational company in Germany. The authors define the core phenomenon
of SMA process as sense-making which employed as a vehicle to better understand
situations encountered and make sure no spots missed, in other words,
understandability and transparency. This paper tends to provide insights into
SMA and serve as cornerstone for other possible future SMA systems design
because one SMA technique could not fit with all situations well. The finding
also highlights the ability of management accountant has to cover more
knowledge, not just accounting related, but other know-how. As a main
information translator in organizations, management accountants nowadays are
required to be full-aspect prepared.
Furthermore, Ma
and Tayles (2009) inspect the adoption of SMA practices from one department
within a global medical technology company in England. In the case company, the
researchers discover that some SMA techniques are adopted because those methods
fit with the company’s strategic goals, suggesting that usage of certain SMA
techniques due to the level of relevance. In addition, the trigger behind the
adoption of SMA techniques was changed market situation and thus increased
competition pressure. In such manner, the case company strived to survive, and
hence the accounting information remodeling procedures were made.
Moreover, Cadez
and Guilding (2012) investigate how prototypes of new SMA techniques facilitate
performances in Slovenian manufacturing companies. The result indicates that
approximate level of performance can be reached by different strategies
portfolios.
Tagging along,
the process of exploring and broadening SMA gradually goes from surface to
core. The above case studies provide a stand ground for coming up researches. The
research started with a simple question: is there any similarity among
practices preferences among different continents? Although the researchers
chose English-speaking countries to begin with, the result indicates the
existence of preferences and implied cultural geographical characteristics. Among
these case firms in different countries, there might be certain cultural
differences but the ultimate goal is the same: pursue the best performance.
Criteria
There are several criteria for selecting the
sample for analyzing and interpreting strategies behind applications. In the
survey research, the scope of practices must be considered, for such work could
be very experimental and exploratory. The research carried out at
organizational level varies from the one at sub-department level, for higher
management with more strategy concerned and direction guidance, and middle
management with more field practice and real perception of strategy execution.
One problem is that the unclear definition of
SMA, more specifically, what constitutes SMA. Considering future possible
innovating techniques, the boundary of SMA would be presumably vague and
conceptual. The need of SMA conceptual framework is foreseeable increasing.
Standardizing terminology is also considered
to be one of the coming problems. Since SMA has a wide range of definition and
applied techniques, researchers desperately attempt to establish a boundary for
what components constitute SMA. To a basic standing point, the literature must
have some level of mutual agreement to what constitutes SMA otherwise further
studies would be invalid because it is different subject at the beginning.
The level of economic development would also
affect the choosing of case company. In a developing economics, small capital
corporations are more common than large capital corporations, and thus jobs and
responsibilities are not as diversified as the larger ones. For concept of SMA,
it specifically targets at combining two or more different functions of the
entity together and thus creates a sharp forward-looking strategy which helps
the entity to compete against other market participants. Given the prosperity
of economics, there are more objects to choose from, even just doing a thorough
investigation of one firm. The complexity and depth of real business practices
would not be revealed unless digging deeper underneath, which large capital
corporations are more capable to offer. However, there is also a possible
explanation that small capital corporations have more flexibility and in-time reaction
to sudden change in situations when adopting SMA as a tool to survive.
Conclusion
This article tends to outline the development
of strategic management accounting, an improved management accounting, and analyses
the empirical evidence carried out by different researchers. As mentioned
above, SMA has quite vague and broad definition, no conceptual framework
existing yet. It is also considered to adopt an even broader coverage as
strategy management, lightening the image of accounting. However, SMA
techniques are useful in the real business world practices, even with mere
perception of the term. Through those case studies, the researchers confirm
that the adoption of certain type of SMA technique is based on the relevance of
performance. There are many possible SMA techniques combinations, validated by
case studies, no matter which one combination the firm choose can reach similar
level of performance. This result implies that there is no perfect solution but
the most suitable one. By acknowledging the criteria those researches
encountered, the future researchers can try to improve the research method, and
even better, come up with more advantageous SMA techniques.
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