Accounting Information System

The term 'strategic management accounting' has now been in use for more than ten years, with the result that its underlying concepts should now be fairly well understood. Unfortunately the evidence strongly suggests that many businesses are experiencing severe difficulties in practically applying these concepts. This is particularly worrying when it occurs during a period of increasing competition, as the need for very clearly focused competitive strategies is obviously increased. Management accounting should be fulfilling a vitally important role in analysing and evaluating the financial impact of these alternative competitive strategies.

The clear economic objective of any specific competitive strategy is to enable the business to develop and sustain a competitive advantage in its chosen marketplace so that it can earn a super profit (i.e. above normal rate of return) on this area of its operations. Therefore a potential practical subtitle for strategic management accounting is 'accounting for competitive advantage'. This somewhat more focused title may assist businesses in identifying the key elements required in order to realise the substantial benefits which are achievable from a well designed strategic management accounting system.

COMPETITOR ACCOUNTING

The first obvious but vitally important issue relating to accounting for competitive advantage is that, by definition, any competitive advantage is a relative concept which can only be assessed by comparison with the external environment. Thus the management accounting system must add in an external focus (including competitors', suppliers' and customers' perceptions of value) in addition to the traditional inward emphasis of the accounting analysis, planning and control cycle.

However, the inclusion of competitors within the management accounting framework does not automatically mean that it is necessary to attempt

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