Strategic Managment Accounting Essay

4358 words - 18 pages

Strategic management accounting
|by Mark Lee Inman |  |
|01 Nov 1999 | |
|Strategic Management Accounting has been defined as "a form of management accounting in which emphasis is placed on information which|
|relates to factors external to the firm, as well as non-financial information and internally generated information." |
|Back in 1981, Ken Simmonds, probably the pioneer writer on the subject, developed the above definition. He saw it as ...view middle of the document...

|
|Traditional management accounting is perceived as inadequate since it: |
|concentrates on the manufacturing and neglects the high cost post-conversion activities; |
|ignores the impact of other activities; |
|fails to assess the relative cost positions of competitors; |
|over-reliance on existing accounting systems; |
|By contrast, strategic management accounting purports to place emphasis on: |
|the relative cost position; |
|the ways in which a company may secure a sustainable cost advantage; |
|costs of differentiation i.e., what makes their product different and hence more attractive. |
|This article will take two approaches. First we will look at how Strategic Management Accounting adopts a different emphasis. |
|Secondly, we will look at areas that need to be the focus of a management accounting view. |
|1 Strategic management accounting |
|One of the main exponents of Strategic Management Accounting is the American M.E. Porter. As you progress in your studies at final |
|level, you will become very familiar with that name. His 1985 text on strategic management is regarded as a corner-stone. Porter |
|takes a two pronged approach. |
|First he assesses different industries in terms of their long-term profitability. He sees five competitive forces that will |
|contribute to a strategic equation. |
|(a) The threat of new entrants into the market |
|While it is influenced by the cost of entry into a market and perhaps the opportunity to make a profit, this threat remains. In |
|principle, the larger the organisation and the more investment required, the less likelihood of any competition. However, students |
|have only to look at the recent history of commercial aviation, where deregulation has allowed small airlines to enter the market and|
|compete successfully, while the UK telecommunications industry has seen a...

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