Strategic Management Accounting a Better Contribution to the Firm’s Strategy
FPC_Z0930086
Strategic Management Accounting: A Better Contribution to the Firm’s Strategy
Anthony and Govindarajan (2007) define strategy as “...the general direction in which an organisation plans to move to attain its goals” (p.56), the goals of strategy include: profitability, maximizing shareholder value, balancing risk and preserving company assets as well as pleasing customers and the market.(Anthony and Govindarajan, 2007). Lord (2007) adds that strategy’s main focus is to give the firm a competitive advantage and to do this it must take the actions of its competitors into consideration. He also states that business strategy produces “... long-term plans for the business, takes into consideration plans and possible actions of competitors, the main objective being to position the firm so it has a competitive advantage … .” Therefore, Lord (2007) believes that for management accounting to assist in the development of strategy it “... must provide managers not only with internal, financial information, but also with information, both financial and non-financial, about the environment in which the firm is operating...” (p. 135). Through the examination of the contributions of traditional management accounting and strategic management accounting to the firm’s efforts in defining strategy, as well as the exploration of management accounting in other cultures and globalisation, this paper will discuss Lord’s statement.
Firstly, the various schools of Management Accounting must be defined. Shah (2011) notes that that the general discipline of Accounting is based on two elements, “process”, where accounting is said to identify, measure, analyse and report economic information. Second, “purpose” which is stated to be helping the users of that information make better decisions (American Accounting Association, 1966, p1)” (p.1-2) Cost Accounting, being the “... calculation and measurement of resources utilized for different business activities usually production
Strategic Management Accounting: A Better Contribution to the Firm’s Strategy
Anthony and Govindarajan (2007) define strategy as “...the general direction in which an organisation plans to move to attain its goals” (p.56), the goals of strategy include: profitability, maximizing shareholder value, balancing risk and preserving company assets as well as pleasing customers and the market.(Anthony and Govindarajan, 2007). Lord (2007) adds that strategy’s main focus is to give the firm a competitive advantage and to do this it must take the actions of its competitors into consideration. He also states that business strategy produces “... long-term plans for the business, takes into consideration plans and possible actions of competitors, the main objective being to position the firm so it has a competitive advantage … .” Therefore, Lord (2007) believes that for management accounting to assist in the development of strategy it “... must provide managers not only with internal, financial information, but also with information, both financial and non-financial, about the environment in which the firm is operating...” (p. 135). Through the examination of the contributions of traditional management accounting and strategic management accounting to the firm’s efforts in defining strategy, as well as the exploration of management accounting in other cultures and globalisation, this paper will discuss Lord’s statement.
Firstly, the various schools of Management Accounting must be defined. Shah (2011) notes that that the general discipline of Accounting is based on two elements, “process”, where accounting is said to identify, measure, analyse and report economic information. Second, “purpose” which is stated to be helping the users of that information make better decisions (American Accounting Association, 1966, p1)” (p.1-2) Cost Accounting, being the “... calculation and measurement of resources utilized for different business activities usually production