Student ID: 0818548; Paper: 367902/63

Ken Simmonds (1981), the pioneer writer on the subject of Strategic

Management Accounting, defined it 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." Ward (1992) defines it as, “strategic
management is an integrated management approach that draws together
all the individual elements involved in planning, implementing and
controlling business strategy”

For management accounting must help accomplish the three strategic

objectives of quality, cost, and time to have strategic significance by
providing information that, first, links the strategic objectives of an
organization to the daily actions of managers; second, enables managers
to in actual fact involve the entire extended endeavour of customers,
suppliers, dealers, and recyclers in achieving the strategic objectives;
third, look at the long-term view of the organisation. (Ansari, Bell,
Klammer, Lawerence, 1997)

Thus, serves strategic decision makers by providing information on the

financial implications of alternative business strategies. The concept was
defined more narrowly by Bromwich (1990) as “the provision and analysis
of financial information on the firm’s product markets and competitors’
costs and cost structures and the monitoring of the enterprise’s strategies
and those of its competitors in these markets over a number of periods”.
However, this definition focuses purely on financial information and
ignores the use of non-financial data, for example, occupancy rates, which
are crucial focuses of interest in the hotel sector.

Strategic management accounting focuses on a larger picture and a longer term

than traditional budgeting. The rapidly changing economic world means that
planning horizons have shortened, and even then, projections beyond perhaps
twelve months cannot be relied upon very much. Strategy may need to look at a
wider series of objectives that "meet the needs of the present without
compromising the ability of future generations." Such a view must go beyond
any limit of traditional economics and accounting measures. Strategic
Management Accounting especially is used to check up on competition and one

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requires to be vigilant and up-to-date when it comes to leadership in brand

market. (Inman, 1999)

Traditional management accounting fell short in the subject of the fact

that it fails to assess the relative cost positions of competitors;
concentrates on the manufacturing and neglects the high cost post-
conversion activities, it ignores the impact of other activities; over-
reliance on existing accounting systems. (Hoque, 2003)

Professor Bromwich (1994) pointed out that adding the strategic

viewpoint to traditional management accounting required the role of
accounting to extend in two directions. First, using strategic cost analysis,
cost be incorporated and aligned into strategy. Second, to make certain
the cost structure of competitors and keep an eye on changes that occur
over a period of time. Thus one could arrive at the cost of value-added
functions given to customers as well as the cost of a certain product
feature provided by a company’s product.

By contrast, strategic management accounting purports to place

emphasis on the ways in which a company may secure a sustainable cost
advantage, the relative cost position, costs of differentiation i.e., what
makes their product different and hence more attractive.

Reference List:

Ansari S., Bell J., Klammer T., Lawrence C. (1997). A Modular Series:
Management Accounting: A Strategic Focus: Strategy and
Management Accounting. Houghton Mifflin Company, Boston.

Bromwich, M. (1990). “The case for strategic management accounting:

the role of accounting information for strategy in competitive
markets”, Accounting Organisations and Society, Vol. 15 No. 1/2,
pp. 27-46

Bromwich M., Bhimani A. I., (1994), Management Accounting — Pathways to

Progress, London.

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Hoque, Z (2003). Strategic Management Accounting. (2nd Ed). Spiro Press

USA

Inman, M. (1999). Strategic Management Accounting. Retrieved from

http://www.accaglobal.com/archive/sa_oldarticles/43981 on 28th of
July, 2010

Simmonds K., (1981) The Fundamentals of Strategic Management

Accounting, London.

Ward, K. (1992). Strategic Management Accounting. Butterworth-

Heinemann, Oxford.

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