48 ACCOUNTING FOR MANAGERS
the provision and analysis of management accounting data about a business
and its competitors which is of use in the development and monitoring of
the strategy of that business. (quoted in Drury, 2000, p. 924)Simmonds argued that accounting should be more outward looking and help
the firm evaluate its competitive position relative to its competitors by collecting
and analysing data on costs, prices, sales volumes and market share, cash flows
and resources for its main competitors. Simmonds emphasized the learning curve
through early experience with new products that led to cost reductions and
lower prices.
Bromwich (1990) argued that SMA is the management accountant’s contribution
to corporate strategy, while Bromwich and Bhimani (1994) drew attention to
SMA as an area for future development. There is no comprehensive conceptual
framework of what strategic management accounting is (Tomkins and Carr, 1996)
or of how it relates to corporate strategy. Bromwich (1990) defined SMA as the:
provision and analysis of financial information on the firm’s product mar-
kets 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. (p. 28)Bromwich suggested that SMA should consider product benefits and how the cost
of providing these benefits related to the price the customer was willing to pay.
Wilson (1995) identified SMA 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)Lord (1996) summarized the characteristics of SMA:
žcollection of competitor information: pricing, costs, volume, market share;
žexploitation of cost reduction opportunities: a focus on continuous improve-
ment and on non-financial performance measures;
žmatching the accounting emphasis with the firm’s strategic position.
There are various classifications to identify the strategic positions of firms. The
most recent contributions to SMA from the strategy literature are from Porter
(1980; 1985):
žThe four forces model (the threat of new entrants; the threat of substitutes;
rivalry among firms; bargaining power of suppliers and customers) that assesses
industry attractiveness from the perspective of long-term profitability.
žThe generic strategies (cost leadership; differentiation; focus in market seg-
ments) that lead to sustainable competitive advantage and the firm’s relative
position within its industry.