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Explain the Role of Strategic Management Accounting

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 bjectives 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 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 ost post-conversion activities, it ignores the impact of other activities; over-reliance 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

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