Strategy and control form an important relationship in management accounting as they inform the nature and use of control systems to guide decision makers. Strategy is concerned with strategic issues and the aim of having sustainable competitive advantage. Strategies need to be well thought out as well as specific, measureable, attainable, realistic and timely. Control is the task of setting standards, measuring performance and taking corrective action to ensure objectives are achieved. Strategy and control frameworks provide a means of determining the link between strategy and control. One framework is Ferreira and Otley’s performance management system which provides a more holistic view of the organisation to ensure valuable information is available to decision makers. A second framework is Kaplan and Norton’s strategies map which shows the steps and links between the development of strategies and the operations of the organisation to provide decision makers with information regarding difficult areas of operations.
Strategy can be defined as complementary actions working towards maintaining competitive advantage; however, it might be more important to understand the definition of strategic management accounting. Hopper, Ashton and Scapens (1995) define this as “an approach to management accounting that explicitly highlights strategic issues and concerns. It sets management accounting in a broader context in which financial information is used to develop superior strategies as a means of achieving sustainable competitive advantage (p. 162). The importance of an organisation’s strategy can be noted when implementing control system tools as guidance is required. This often comes in the form of the strategies. Strategy can provid...
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...n makers would not otherwise have and will impact the outcome of decisions made for the better.
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Even though a myriad of tools and techniques learnt in the Strategic Cost Management and Strategic Business Analysis courses are not fully exploited in this essay, it is generally recognised that those techniques are useful for a corporate to formulate strategy, do strategic planning, control costing and quality, as well as eventually elevate its values, regardless the nature and size of organizations.
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Throughout the global economic environment the desire to out-perform the competition is always present. In every situation, the companies who do better are the ones with superior strategy (Rothaermel, 2013). Strategic management is therefore important in every company, no matter what industry or market they operate in; and as stated by M. Carpenter and G. Sanders, 2013, is described as "The process by which a firm manages the formulation and implementation of its strategy". Strategic management is a constant topic under discussion with different schools of theorists with different beliefs and attitudes which is described as "A tense array of disagreement" (Rees, 2012).
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Strategic management is a disciplined effort or control to make necessary decisions that have an effect on a business or an organization; the aim of strategic management is mainly to develop new, innovative or diverse ideas and opportunities for potential or development, and facilitates or assists an organization to achieve its goals (SM, 2010). In reality, strategic management not only can be used or applied to determine mission, vision and values or objectives, but it also establishes roles and responsibilities or timelines in a business (David, 2009). In the following sections, this study will focus on and examine the nature of strategy formulation, implementation, and evaluation activities, and analyze the potential pitfalls or risks in using a strategic-management approach to decision making.
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This indicates the importance of strategic management for organisations in making appropriate decisions and selecting strategies which will assist them to gain strategic competitiveness and as a result earn above-average returns.
Strategy implementation is an important feature at CPK and the type of strategies implemented depend on organizational design, structure, human resources (people), organizational culture, and the use of control systems (Bradford and Duncan, 2000). Even though the mission statements are not openly stated anywhere, they are very essential in influencing the types of strategies implemented by the company and must be executed in such a way that influences the performance of the company. Human resources and organizational culture must support the strategy implemented. Lastly, CPK depends on control systems to undertake majority of the company’s operational activities.
When implementing a new performance management system in an organization there are both advantages and disadvantages that need to be taken into consideration by the design team. However, one of the best ways to know if a performance management system is effective is by implementing the system within the organization and then continuously monitor and reevaluate if the system is still relevant to the organizational