Summary of the Research Paper on Competitive Forces and the Importance of Management Control Systems in Emerging-Economy Firms by Neale G.O’connor of School of Business, University of Hong Kong, Hong Kong
Introduction:
The authors of the research paper surveyed exchange listed Chinese firms to investigate the relationship between competitive forces and the importance that the firms place on their management control systems, and whether the firms international market orientation moderates this relationship. Michael Porter's3 famous Five Forces of Competitive Position model provides a simple perspective for assessing and analyzing the competitive strength and position of a corporation or business organization. Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.
The researchers have taken one force from horizontal competition namely ‘Threat of new Entrants’ and one force from vertical competition namely ‘Buyers bargaining power’ to assess the importance the firms give for MCS.
Emerging market and MCS:
The researchers have reasoned that firms in emerging markets need to focus more on MCS for the following reasons:
1. Emerging markets rely heavily on Foreign Direct Investment to accelerate their growth which necessitates the adoption of western accounting practices.
2. Emerging-economy firms are expanding globally through mergers and acquisitions.
3. Social, political and economic factors are likely to impact the importance placed on MCS. The researchers have identified in their research factors that affected their practice of MCS in China such as
(a) Chinese way of doing things(“under the table affairs”)
(b) View they held that MCS is a passive activity
(c) MCS adoption depended on the leaders of the company
(d) MCS adoption depended on the size of the company.
Management Control systems:
Management control system4 (MCS) is the process by which managers influence other members of the organization to implement the
The authors of the research paper surveyed exchange listed Chinese firms to investigate the relationship between competitive forces and the importance that the firms place on their management control systems, and whether the firms international market orientation moderates this relationship. Michael Porter's3 famous Five Forces of Competitive Position model provides a simple perspective for assessing and analyzing the competitive strength and position of a corporation or business organization. Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.
The researchers have taken one force from horizontal competition namely ‘Threat of new Entrants’ and one force from vertical competition namely ‘Buyers bargaining power’ to assess the importance the firms give for MCS.
Emerging market and MCS:
The researchers have reasoned that firms in emerging markets need to focus more on MCS for the following reasons:
1. Emerging markets rely heavily on Foreign Direct Investment to accelerate their growth which necessitates the adoption of western accounting practices.
2. Emerging-economy firms are expanding globally through mergers and acquisitions.
3. Social, political and economic factors are likely to impact the importance placed on MCS. The researchers have identified in their research factors that affected their practice of MCS in China such as
(a) Chinese way of doing things(“under the table affairs”)
(b) View they held that MCS is a passive activity
(c) MCS adoption depended on the leaders of the company
(d) MCS adoption depended on the size of the company.
Management Control systems:
Management control system4 (MCS) is the process by which managers influence other members of the organization to implement the