Management control - a pre-requisite for survival
3eatures within the e'ternal en#ironment of an organisation that affect the design of an accounting- based control system include its degree of predictability% the degree of competition faced in the mar(etplace% the number of different product-mar(ets faced% and the degree of hostility e'hibited.
*he nature of a manufacturing process determines the type of costing system that is required and the e'tent to which costs can be traced to products. *he growth in the number of ser#ice organisations is also significant since a large proportion of the total cost of the ser#ices pro#ided is in the nature of o#erheads. *his% together with the fact that ser#ices are often consumed at the time of purchase% will influence the type of costing system used and the e'tent to which costs can be traced to ser#ices.
Size and complexity
Organisational sie is an important #ariable which affects both structure and control. $t can be frequently obser#ed that as an organisation starts to grow it will initially be organised on a functional basis. s further growth is achie#ed #ia di#ersification% and the organisation becomes e'posed to a greater number of product mar(ets% many organisations then choose to re-organise acti#ities into semi-autonomous units. *op management is then able to utilise the accounting control system to measure and compare the performance of its di#isions using similar performance measures as those employed to assess the o#erall performance of the firm. $ncreasing structural comple'ity will also lead to an increase in the number of accounting tools used by an organisation% while en#ironmental discontinuity may require new tools to replace those which ha#e become obsolete.
,ore recently% attention has been focused on the inter#ention of corporate strategy as a contingent #ariable. ,uch research relating to corporate strategy has centred on classifications proposed by 4orter. *he majority of contingency theory research focused on the strategy #ariables cited by 4orter has concentrated on the differences between business units pursuing differentiation and low-cost