Introduction
The purpose of the corporate and business strategies is to bring about the conditions under which the firm can create this vital additional value and pass it on to the customer both now and in the future. The strategic task is to create a distinctive way ahead, using whatever core competencies and resources at its disposal, against the background and influence of the environment. Through these distinctive capabilities the organization seeks sustainable competitive advantage. A resource, or set of resources, can be used to create competitive advantage. The sustainability of this advantage depends upon the ease with which the resources can be imitated or substituted. When resources are combined they can lead to the formation of competencies and capabilities. Competencies refer to the fundamental knowledge owned by the firm. To be distinctive they are not confined to functional domains but cut across the firm and its organizational boundaries. Competitive advantage can come from a focus upon key competencies. Capabilities, meanwhile, reflect an organization’s ability to use its competencies ( 2002).
Capabilities refer to the dynamic routines acquired by the organization concerning the managerial capacity to improve continuously the effectiveness of the organization. Capabilities represent the firm’s ‘collective tacit knowledge of how to initiate or respond to change that is built into an organization’s processes, procedures and systems, and that is embedded in models of behavior, informal networks and personal relationships. Sustainable competitive advantage can be built up over time based upon the unique competencies. They can be based upon knowledge, know-how, experience, innovation, and unique information use. The activities and processes utilizing the competencies are hard to replicate by competitors. Products and technologies provide only a short-term strategic advantage as they have a relatively limited life span and are easy to copy or improve upon. The core competencies or capabilities and processes cut across organizational boundaries. At a strategic level, the importance of these processes and core competencies must be recognized ( 2002).
It has become clear that an operations strategy, like any strategy, revolves around a pattern of choices. The choices or decisions involved are concerned less with individual day-to-day, tactical activities and more with the whole transformation system that is part of the organization. The pattern of decisions tends to be of a medium to long-term nature and supports both the core capabilities and competencies of the company, and how it uses resources and technologies to provide sustainable competitive advantage in the future ( 2002). Competitive advantage by a company can be acquired by a company through many things one way to acquire such is to for the company to have a management accounting control system. The paper will evaluate the assumptions that Management Accounting Control Systems have been conceptualized by some management theorists in terms of implementing a firm's strategy. Other authors argue that the power of a Management Accounting Control System lies in its ability to influence the strategy formulation process.
Strategy formulation
The notion of comprehensive planning implies that a commercial enterprise must be treated as a whole entity and as part of a larger economic system. Thus, comprehensive business planning is not limited to the analysis of a firm's individual operating strengths and weaknesses, financial analysis, market or industry analysis, forecasting, goal setting, resource allocation, budgeting, or project management ( 2004). It is a system of interrelated methods and procedures that deal with the whole enterprise all of its resources and all of their functions to predefine the firm's highest performance potential in its economic, industry, and marketing environment. Comprehensive planning is not long-range planning. Indeed, a plan for the future is not feasible if it cannot be implemented in the present.. Conversely, operating plans for the near term must be consistent with longer term strategy and objectives ( 2004).
A sound plan consists of both short-term and extended elements: both must exist in the same strategy without contradiction. One does not leave off where the other begins: rather, each provides a different perspective on the timing of strategy and the relative immediacy of consistent objectives. It also has been argued that long-range planning entails a relatively simple extension of current strategy into the future. In that argument, strategy formulation is distinguished from planning as a much more creative pursuit ( 2004). Planning, then, essentially amounts to work programming, or scheduling. Only when a strategy already exists, it is argued, can planners prepare programs for long- or short-range implementation. This concept of strategy places it primarily in a realm of abstract rationale, without the necessity or benefit of justification by intended outcomes or goals, let alone operational validation an impractical proposition that most experienced senior managers surely would reject. Such a dichotomous view of strategy and planning is not generally accepted. The term strategic planning is not a very helpful one, either. Although it is used widely, the term is redundant. Strategy formulation is one very important element of the comprehensive planning discipline, but certainly no more important than the others ( 2004).
Comprehensive planning requires management to evaluate internal and environmental business conditions, to select from alternative goals and strategies, to decide how strategy best can be implemented, and to perform these functions continuously. Strategy must be appropriate for prevailing and potential business conditions, as well as for an enterprise's goals and capabilities ( 2004). Reliable implementation of strategy also must be feasible. When business conditions change, strategy must change.. Indeed, any single plan of business that is not modified from time to time and implemented long enough probably will lead to a firm's eventual failure, simply because internal and external business conditions change continually ( 2004). In planning for the future of a company comprehensive strategy is used by a company and when there are changes in the environment there is a need for the company to change its strategy.
Management Accounting
The job of managers and accountants is to finish the return of relevance to management accounting. With that return, they not only lay the groundwork for the accountable organization, but they will enable companies to re link management and financial reporting. The numbers provided by management accounting can once again come first. These numbers and other important managerial information can feed financial reporting, in particular the broader set of information that accountable companies will want to disclose ( & 2000). Accountants and senior managers can then mount a corporate communications strategy to ensure that all stakeholders receive the information they need. This information includes a broadened universe of both facts and data to help outsiders, first, to evaluate past corporate performance and, second, to make projections about future performance. Top financial officers play a special role. They must set aside the money and dedicate the people to complete this revolution in accounting, returning relevance to financial reporting. As they do, they will have to expand their role beyond stewards of the financial figures ( & 2000).
They must insist that the organization draw on the richness of a newfound universe of measures to voluntarily report performance to stakeholders. Any company that has not radically changed its management accounting risks finding it produces problems similar to those created by financial accounting. The two most critical problems are prodding managers into, first, an incessant financial focus and, second, a near total reliance on historical, or lagging, indicators for decision making ( & 2000). The product and service costs that managers receive, the meat and potatoes of managerial accounting, often reveal little about the non financial factors of performance that create costs, like complex product designs or defective customer service. The cost data help managers keep the financial score but not necessarily how to improve their long-term batting average. Management accounting forced managers to build world-class organizations with a truncated set of chromosomes. With the help of revitalized cost accounting and non financial measurement, managers can develop a full set of instructions financial, operational, and social for the enterprise. Those instructions give them the capability to create accountability they never had before ( & 2000).
A balanced family of measures can evolve into a powerful system for executing strategy. The measures help to define the strategy, communicate it to the organization, and direct its implementation at every rung of the hierarchy, from the corporate level to the individual. They also keep everyone's efforts aligned, because they link strategy to budgets, to resource-allocation systems, and to pay programs. In the best of cases, they route such high-quality feedback through the organization that executives can make critical, midcourse adjustments in strategy ( & 2000). Management accounting provides various opportunities for improvements in a company. It creates a better way for the company to measure its performance and change its strategies.
Management accounting and control systems
The basic organizational form divides the organization into groups, hierarchical levels, and various management tasks. Planning and control systems and process regulations are developed to solve the residual interdependencies. In essence, planning and control systems regulate various aspects of structure, such as the allocating of resources, the training and development of personnel, and the gathering of information ( 1999). In this connection, planning systems identify the issues that become candidates for managerial scrutiny, while control systems specify the times for review and discussion of progress against objectives. Planning and control systems are often added to the basic organizational form to provide a stimulus for action and to ensure the appropriateness of these actions ( 1999). Elaborate planning and control systems focus efforts in prescribed areas and limit the self-control of organizational units and participants. Usually, such systems are oriented to specifying activities that will take place in the form of programs, schedules, and operating plans. However, by implementing comprehensive planning and control systems, the actual structure may lose its potential for flexibility ( 1999).
Should an unforeseen change require a redirection of the firm's strategy, it may be very difficult in terms of costs and required time to change the firm's course since the planning and control systems have been set firmly in support of the current strategy ( 1999).From a managerial accounting perspective, the changes in the economy, in industries and individual firms alike, must be supported by the firm's accounting and control infrastructure. In order for knowledge employment to be effective and efficient, coordination within and between firms is essential, focusing on people's collaboration with each other and learning from each other. However, there is no reason to suspect that the more traditional roles of accounting and control will disappear, thus posing a tension between demands for flexibility and control ( 2003).
Management control practices have evolved over time. During the nineteenth century, management control systems focused primarily on cost control particularly in terms of direct labor and material costs. The emergence of large and vertically-integrated firms called for the development of more sophisticated management accounting and control systems. The growth in the size of firms, the creation of functional organizations, and the need to decentralize decision-making required the use of control devices that focused not only on costs but on controlling the performance of responsibility centers and the implementation of business strategy. At the turn of the twentieth century, the most important dimension of management control was cost control. The emergence of scientific management had emphasized the need for managers to dictate to workers how to perform tasks.. Management control systems were essentially used to compare actual results with expectations. Thus, the basic model for control consisted of three phases ( 2003). Control systems assist in regulating the procedure of management accounting.
Evaluation of the principles
It is said that Accounting Control Systems have been conceptualized by some management theorists in terms of implementing a firm's strategy. Other authors argue that the power of a Management Accounting Control System lies in its ability to influence the strategy formulation process. Management accounting control system provides assistance in determining what strategy should be used by a company so that it can acquire competitive advantage. Management accounting control system provides evaluation of the whole management related policies and practices used in the company. It thoroughly analyzes if the management policies used by a company is still appropriate for the achievement of the goals of the company. The management accounting control system provides information to managers and other decision making members of a firm, this information can be used to know whether the managers are still effective and the strategy they use is still acceptable. The success of management accounting control system will depend on how it contributes to change in the strategy for a company.
Conclusion
Management accounting control systems are seen by theorist as something that provides assistance to companies for them to make the right decisions and for that company to have sustainable competitive advantage over the competitors. The effectivity of management accounting control system depends on its ability to discover the faults of a company’s strategy.
References
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