I. Introduction 1
II. Literature review of Strategic Management Accounting 1
III. The implication of strategic management accounting 5
3.1 The implication of customer profitability analysis techniques 5
3.2 The adoption of activity base costing 8
IV. Conclusion 10
List of Figures
Figure 1 - Strategic Management Accounting - What Is the Current State of the Concept? (Juras, 2014) 5
Many organizations encounter various challenges because the rapid changing in business environment and the inefficiency of traditional management accounting techniques. The traditional management accounting techniques, which focus on the historical data, are questionable in terms of its useful. Managers in series of studies have emphasized their dissatisfaction with the tradition management accounting systems. Juras (2014) stated that there are widely published criticisms of traditional management accounting practice during the 1980s and 1990s. According to Hassan et al (2011) traditional management accounting practice are no longer available for modern day environment and could cause disasters to firm productivity. Changing in business environment, complexity in manufacture processes require higher quality information for planning and controlling process, which traditional management accounting has failed to provide.
Strategic management accounting (SMA) has been identified as a tool that organizations can implement in order to face with today competitive business environment. According to Innes (1988), SMA can improve firms’ making decision process in the long run and has significant effect on the organization performance as it provides both internal and external information. Shank and Govindarajan (1993) believed that changing in management accounting approach need to pay attention more on strategy matters. The weaknesses in the traditional management accounting system are reason for the development and implementation of SMA which is believed can overcome the weaknesses of traditional method.
II. Literature review of Strategic Management Accounting
According to Hassan et al (2011), strategic management accounting (SMA) was first mentioned by Simmonds in 1981. Simmonds defined SMA as a system which focuses on analyzing of management accounting data about a company and its external environment to construct and control the strategy of company. Ward (1993) supposed SMA as accounting aspect for strategic management, while Tayles suggested that SMA provides accounting information to support strategic management. Bromwich (1990) stated that SMA concentrates on contributing financial and non-financial information to evaluate firm’s competitive advantages in an industry and establish object of management accounting.
Hilton (1999) saw that the functions of strategic management accounting are the following:
Providing information for decision-making, planning and effective participation in decision-making and strategic planning process.
Assist managers to direction and control of operational activities.
Motivate managers and other users towards the goals and objectives of the organization.
Measuring the performance of the activities and sub-units and managers and other users within the organization.
Evaluation of competitive situation of the organization and work with other managers to confirm the competitive situation of the organization in the long long-term
Hamza and AbdulHussien (2012) believed that the objectives of strategic management accounting are providing strategic information and a general strategic guideline to senior management to assist them in identifying trends of business environment and making appropriate decisions and organization’s goals in the context of strategic.
Cooper (1989) claimed that the changing economic environment is the main factor influents on the development of SMA. In line with Cooper, Dixon and Smith believed that globalisation make firms pay more attention on