A mind mapping-based literature review on strategic management accounting

A mind mapping-based literature review on strategic management accounting (SMA)

Joseph Kim-keung Ho

Independent Trainer

Hong Kong, China

Abstract: The mind mapping-based literature review (MMBLR) approach, recently proposed by the writer as part of a larger academic research project of managerial intellectual learning (MIL), is employed in this paper to study strategic management accounting (SMA). The two steps involved in the MMBLR approach are: [step 1] to produce a set of thematic analysis findings (i.e., themes and points) and [step 2] to produce a companion mind map on SMA. As such, the paper offers academic and pedagogical values to those who are interested in SMA, literature review, mind mapping and managerial intellectual learning (MIL).

Keywords: management accounting (MA), mind map, mind mapping-based literature review (MMBLR) approach, strategic management accounting (SMA), literature review

Please cite the paper as: Ho, J.K.K. 2016. “A mind mapping-based literature review on strategic management accounting” Joseph KK Ho e-resources blog September 8 (url address: http://josephho33.blogspot.hk/2016/09/a-mind-mapping-based-literature-review_8.html).

Introduction

The subject of strategic management accounting (SMA) is a vital one in the academic management accounting field and for the management accounting profession. Due to the involvement of the writer in teaching SMA and in developing a recently launched research topic on mind mapping-based literature review[1], he produces this paper. There are two study aims:

Aim 1: to portray the overall intellectual landscape of strategic management accounting (SMA) via the mind mapping-based literature review (MMBLR) approach;

Aim 2: to illustrate and enhance the MMBLR approach via its application on SMA.

By achieving these two aims, the paper is expected to offer pedagogical and academic values to the studies of both SMA and MMBLR. The rest of the paper is an account of the MMBLR approach on SMA.

A thematic analysis in the MMBLR approach on SMA

The approach of MMBLR involves two steps. Step 1 is a thematic analysis on the topic under investigation. In this paper, the topic is strategic management accounting (SMA). Step 2 is the construction of a mind map based on the findings from the thematic analysis (step 1).  As more specific elaboration on the MMBLR has been made by the writer in previous works, this paper is not going to explain it here. Interested readers are referred to the Literature on mind mapping and the Literature on literature review Facebook pages for additional information. The Facebook pages on managerial intellectual learning (MIL) is also relevant as the MMBLR approach is a constituent topic in MIL. This section now presents the findings from the thematic analysis on the SMA literature. They are provided below. Specifically, there are seven themes identified out of the thematic analysis. Each theme has a set of points (e.g., SMA viewpoints and findings) identified from the SMA literature.

Theme 1: Definitions and characteristics of SMA

Point 1.1.                “…….Simmonds … was the first to coin the term (Simmonds, 1981). He defined SMA as ‘the provision and analysis of management accounting data about a business and its competitors for use in developing and monitoring the business strategy’ ….” (Guilding, Cravens and Tayles, 2000);

Point 1.2.                  “……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….[SMA definition]…” (Bromwich (1990), cited in Langfield-Smith (2008).);

Point 1.3.                 “…..…the defining characteristics of SMA identified thus far – that it exhibits an environmental, outward-looking and/or a long-term, forward-looking orientation ….. – say little about how strategy is carried out through SMA….” (Cuganesan, Dunford and Palmer, 2012);

Point 1.4.                “….….A range of techniques have been included under the umbrella of SMA, and some commentators define SMA in terms of its techniques…” (Langfield-Smith. 2008);

Point 1.5.                 “….SMA as comprising five categories: (1) costing techniques of attribute, life-cycle, quality, target and value-chain costing; (2) planning, control and performance measurement techniques of benchmarking and integrated performance measurement; (3) strategic decision-making techniques of strategic costing, strategic pricing and brand valuation; (4) competitor accounting techniques of competitor-focused cost, position and performance appraisal; and (5) customer accounting techniques of customer profitability analysis, lifetime customer profitability analysis and valuation of customers as assets…” (Cadez and Guilding (2008), cited in Cuganesan, Dunford and Palmer (2012).);

Point 1.6.                 “…A unifying link between these various views and definitions of SMA (and SCM [strategic cost management]) is that SMA entails taking a  strategic orientation to the generation, interpretation and analysis of management accounting information, and competitors’ activities provides the key dimension for comparison….” (Langfield-Smith, 2008);

Point 1.7.                 “….Four features of the pattern of Strategic Management Accounting practice emerge clearly from the factor analysis: competitor, long run, process and customer orientation…” (Cinquini and Tenucci, 2007);

Theme 2: Underlying management thinking of SMA and theoretical SMA issues

Point 2.1.                “…..SMA as lying at the interface of management accounting and strategy. However, some other authors see marketing as the more relevant orientation for SMA…” (Dixon and Smith (1993), cited in Langfield-Smith (2008).);

Point 2.2.                “…..there is an inherent contradiction between the apparent decline of SMA and the sustained growth in the number of concepts, models, tools, theoretical perspectives, disciplines, academic and professional journals and consultancy practices that populate the SM [strategic management] domain….” (Nixon and Burns, 2012a);

Point 2.3.                 “…….. the SMA literature is based in large part on a narrow, first-era, view of the SM [strategic management] literature that reached maturity with Michael Porter’s industry analysis model and generic competitive strategies….” (Nixon and Burns, 2012a);

Point 2.4.                “…there is still no agreed conceptual framework outlining what constitutes SMA….” (Guilding, Cravens and Tayles, 2000);

Point 2.5.                 “…..the “empowerment option” that is captured by many of the SMA techniques, which, while being perhaps based on “questionable underpinning”, were worthy of exploration…..” (Roslender (1995; 1996), cited in Langfield-Smith (2008).);

Point 2.6.                  “…….Establishing a clear identity and boundaries for SMA is complicated further by the loosely-linked nature of the management accounting techniques associated with SM [strategic management]….” (Nixon and Burns, 2012a);

Point 2.7.                “….One view seems to be that SMA links strategy and management accounting.  Another view is that SMA links SM [strategic management], which encompasses both strategy formulation and implementation, with accounting, broadly defined to include management accounting as well as elements of financial accounting and financial management….” (Nixon and Burns, 2012b);

Point 2.8.                 “….that a unified body of knowledge for SMA would have four ‘building blocks’: the SM [strategic management] literature, practice, related strategy-oriented literatures and an integrated set of management accounting techniques…” (Nixon and Burns, 2012a);

Point 2.9.                “…..….The formal, structured, linear approach that pervades the SMA literature is based on two classical perspective assumptions, namely that the environment is relatively stable and predictable and that the overarching objective of the organisation is maximising shareholder wealth…..” (Nixon and Burns, 2012a);

Point 2.10.            “….…..The few SMA studies that have examined how strategy occurs (see, Bhimani and Langfield-Smith, 2007; Cadez and Guilding, 2008) generally assume that strategic processes are uni-dimensional, being either formal and structured or informal and unstructured….” (Cuganesan, Dunford and Palmer, 2012);

Point 2.11.            “…..…two distinct, yet complementary, perspectives of SMA. The first perspective involves viewing SMA as comprising a set of strategically oriented …. management accounting techniques. …The second perspective considers the potential for greater management accounting engagement in the strategic management process….” (Cadez and Guilding, 2008);

Point 2.12.            “….….Consistent with the breadth of interpretations placed on the word ‘strategy’ and the problems associated with conceiving of a strategic management process, management accounting commentators attach a range of inferences to ‘SMA’…. “(Guilding, Cravens and Tayles, 2000);

Point 2.13.            “…..The second era of SM that began in 1977 with a move to a more internal, resource-based view of the firm and competitive advantage has been mostly neglected by the extant SMA literature….” (Nixon and Burns, 2012a);

Theme 3: SMA techniques and approaches

Point 3.1.                 “….…. 12 strategic management accounting practices have been identified. These are: attribute costing; brand value budgeting and monitoring; competitor cost assessment; competitive position monitoring; competitor appraisal based on published financial statements; life cycle costing; quality costing; strategic costing; strategic pricing; target costing; and value chain costing….” (Guilding, Cravens and Tayles, 2000);

Point 3.2.                 “….the following “strategic functions” that information provided by a strategic accounting system should support: . environmental analysis; . strategic alternative generation; . strategic alternative selection; . planning the strategic implementation; . implementing the strategic plan; and . controlling the strategic management process….” (Cinquini and Tenucci, 2010);

Point 3.3.                “…..…The many techniques of SMA, including the executional and structural cost management tools of strategic cost management, can provide depth to, and help to integrate, the perspectives of performance measurement and the controls of management control….” (Nixon and Burns, 2012a);

Point 3.4.                 “….….Some of the techniques that we often consider are a part of the management accounting toolbox are considered by other disciplines as their own…” (Langfield-Smith, 2008);

Point 3.5.                “….….The external and long-term orientation criteria for SMA techniques …. are certainly necessary but they risk eclipsing the need for internal organisational capabilities to support external competitive bases….” (Nixon and Burns, 2012a);

Point 3.6.                 “….Several studies on ABC have examined, to some extent, the issue of the link between ABC and business strategy…” (Cinquini and Tenucci, 2010);

Point 3.7.                 “…….The techniques of SMA can also be developed by, and, in turn, enhance, concepts of knowledge management relating to, for instance, uncertainty and risk management, innovation, knowledge transfer, communication and coordination….” (Nixon and Burns, 2012a);

Point 3.8.                “….the important role of SMA in providing a common language to facilitate communication and collaboration across functions and with a community of external suppliers, alliance partners, customers, stakeholders and special interest groups….” (Nixon and Burns, 2012b);

Theme 4: Research methods and themes of SMA

Point 4.1.                “….….The published works that address SMA fall into several camps. These include normative papers that focus on case studies of the implementation of specific SMA techniques emanating mostly from the professional literature; descriptive case studies used largely for teaching purposes and to demonstrate the benefits of SMA (or SCM); case studies or fieldwork that are grounded in theory that focus on a variety of topics, and; surveys of practice that gauge the adoption and/or benefits of SMA and of SMA techniques…..” (Langfield-Smith, 2008);

Point 4.2.                “….…categorize SMA research into three groups. First is the area of quantitative research which links strategy and management control systems ……..The second group, which they assess more positively, is the balanced scorecard (BSC) literature..… The third group relates to SCM research….” (Roslender and Hart (2002), cited in Langfield-Smith (2008).);

Point 4.3.                “….The stream of research that Simmonds’ definition catalysed focused more on the cost management needed to support low price competitive strategies …. than on the research,  development, design and innovation required to earn a price premium through product differentiation…..” (Nixon and Burns, 2012a);

Point 4.4.                “…..…An extensive management accounting research literature exists concerning the interface with strategy. Within this literature there are two main research traditions: research that uses the label ‘strategic management accounting’ (SMA) to investigate management accounting that is strategically oriented; and research that examines the inter-relationships between strategy and management control systems (MCS)…” (Cuganesan, Dunford and Palmer, 2012);

Point 4.5.                “…..linked SMA adoption in their case study organisation to market pressures, actions to mimic rivals and the interests of internal organisational participants…” (Ma and Tayles (2009), cited in Cuganesan, Dunford and Palmer, 2012);

Point 4.6.                 “….SMA research has also overlooked the importance of strategy in the public sector and the specificities of this context that problematise existing knowledge of techniques that might make up SMA…” (Cuganesan, Dunford and Palmer, 2012);

Point 4.7.                “….The growth of research in SMA is rooted in the basic consideration of the increasing relevance of information outside the boundaries of the firm…” (Cinquini and Tenucci, 2007);

Point 4.8.                “…..…Most of the published empirical research over the past 30 years has consisted of questionnaire surveys that sought to establish the extent to which specific SMA techniques were adopted ….. However, the limitations of surveys and the relative dearth of case studies mean that very little is known about how the SMA techniques are used, by whom and for whom ….” (Nixon and Burns, 2012a);

Point 4.9.                “….….Studies seeking to draw conclusions on the use and value of management accounting in aiding strategic decisions need to see how accounting works within a much more complete understanding of the context of the decision situation as it develops .…” (Tomkins and Carr, 1996);

Theme 5: Criticisms on traditional MA [management accounting] and SMA

Theme 5.1: Related to traditional MA

Point 5.1.                “….Traditionally, management accounting (MA) has been conceived of as supporting the financial decision-making process in organisations..” (Nixon and Burns, 2012a);

Point 5.2.                “…..…The conventional management accounting system does not tend to adopt a long-term, future-orientated stance, nor is it characterized by a marketing or competitive focus. With respect to management accounting’s time frame, the financial year predominates….” (Guilding, Cravens and Tayles, 2000);

Point 5.3.                 “….…‘[t]here is a danger that the investment and cost aspects of strategy may be considered secondary in the absence of accountants being involved in strategy and able to apply SMA techniques’…” (Nixon and Burns, 2012a);

Point 5.4.                “….…The literature on capital budgeting acknowledges that finance theory offers only limited guidance on strategic investment decisions and its application on  ore advanced manufacturing projects is also known to be problematic…” (Carr and Tomlins, 1996);

Point 5.5.                 “….…..we need to release “management accounting from the factory floor” to assist it to meet the global challenges in product markets, and to allow management accountants to focus on the firm’s value-added relative to competitors……” (Langfield-Smith, 2008);

Point 5.6.                 “…..….On both sides of the Atlantic, case studies were published that demonstrated the superiority of SMA or SCM over traditional forms of management accounting, and the need to take a strategic perspective to management accounting became the accepted wisdom….” (Langfield-Smith, 2008);

Theme 5.2: Related to SMA

Point 5.7.                “…..the links between the SMA literature and related literatures, such as performance measurement, management control and knowledge management, in particular, are weak….” (Nixon and Burns, 2012a);

Point 5.8.                “….…A surge of interest in strategic management accounting (SMA) appears to have been provoked by widely published criticisms of conventional management accounting practice….” (Cadez and Guilding, 2008);

Point 5.9.                 “…‘there remains a worrying lack of knowledge of what it actually means to practice accounting in new product development’…” (Nixon and Burns, 2012a);

Theme 6: SMA diffusion and adoption issues

Point 6.1.                “…..…The research on SMA has only in recent years been dedicated to exploration of the contingent factors underpinning the implementation and use of a number of SMA techniques….” (Cinquini and Tenucci, 2010);

Point 6.2.                 “…..….research in other disciplines, such as marketing, operations management, business strategy, finance and economics, that had ‘already laid the groundwork for understanding strategic cost management’…..” (Nixon and Burns, 2012a);

Point 6.3.                “…..SMA has had a major impact on the thinking of practising management accountants and managers. This may be due to the influence of the books and papers written by key SMA advocates ….but also due to the influence of activities of professional accounting bodies…” (Langfield-Smith, 2008);

Point 6.4.                “….…..One reason for the demise of strategic cost management in the 1990s …. may be that, increasingly, firms need to compete on several bases simultaneously, for example, on product features, price, quality, functionality, service and image…” (Nixon and Burns, 2012a);

Point 6.5.                “….….limited adoption of strategic management accounting appears to be a further example of the profession in a state of ‘evolution not revolution’….” (Guilding, Cravens and Tayles, 2000);

Point 6.6.                “….surveys found that SMA techniques were generally regarded by adopters as useful, and there were clear indications among survey respondents of their intent to adopt ABC in the future…” (Langfield-Smith, 2008);

Point 6.7.                 “….SMA techniques appear to be extensively used….” (Cinquini and Tenucci, 2007);

Point 6.8.                “…..….there is negligible use of the term ‘strategic management accounting’ in organizations and that appreciation of the term amongst practising accountants is somewhat limited……” (Guilding, Cravens and Tayles, 2000);

Point 6.9.                “….The evident decline of interest in SMA since the ‘glory decade’ of the 1990s …. seems at odds with the long, steady development and expanding interest in cognate accounting areas intended to support SM, such as management control systems, performance measurement and knowledge management.…..” (Nixon and Burns, 2012a);

Theme 7: Impacts on management accountants’ roles and the accounting function

Point 7.1.                 “…..there is a lot of “strategic” management accounting happening in organizations, but not always with the leadership or the involvement of the accounting function….” (Langfield-Smith, 2008);

Point 7.2.                 “….the future role of management accountant as remaining the acknowledged expert in costing and accounting, but also becoming including a coaching or advisory role, as SMA activities move beyond the accounting function…..” (Langfield-Smith, 2008);

Point 7.3.                “……Strategic management accountants are no longer seen as just information providers, they are seen more as active players in the strategic management process, with power to achieve their own ends…” (Chenhall (2003), cited in Cadez and Guilding (2008).);

Point 7.4.                “……that to undertake SMA projects, accountants need to work smart and hard. …. SMA requires a learning orientation..” (Coad (1996), cited in Langfield-Smith (2008).);

Point 7.5.                “….…..Despite proposing that management accountants were suited to promoting and implementing SMA, ….. some of the SMA processes might already be undertaken by other functions within a firm, such as the marketing function, so in these cases, the role of management accountant would be to audit such data……” (Dixon and Smith (1993), cited in Langfield-Smith (2008).);

Point 7.6.                “……SMA practices have moved management accounting from an emphasis on operational issues to a more strategic orientation through an integration of customers, processes, HR and financials. Some see the significance of this to be such that a new concept, ‘‘the strategic accountant”, has emerged…..” (Chenhall (2008), cited in Cadez and Guilding (2008).);

Point 7.7.                “…..the SMA belongs to the team, although accountants are likely to have a competitive advantage in compiling and using financial numbers, balancing and negotiating financial targets among other disciplines, analysing variances and ensuring consistent application of financial criteria in decisions…..” (Nixon and Burns, 2012a);

Point 7.8.                “…….To survive, management accountants must develop skills in systems design and implementation, change management, and strategy as well as cost management and management accounting….” (Langfield-Smith, 2008);

On the seven themes, theme 5 “Criticisms on traditional MA [management accounting] and SMA” has two sub-themes, namely, sub-theme 5.1 “Related to traditional MA” and sub-theme 5.2 “Related to SMA”. The points associated to the seven themes are viewpoints, observations and findings from the academic literature on SMA. The referencing on these points enables readers to trace them to the academic sources. As the academic references employed also make use of other references in their discussion, readers are required to study the references used here and trace the root sources of the ideas, if necessary. This writer has tried to clearly provide references on the citations made in the references used. This thematic analysis solely studies SMA literature that focuses on the SMA topic as a whole and not those references on individual SMA techniques, such as target costing and balanced scorecard. Readers interested in SMA are also referred to the Facebook page on Literature on Management Accounting for further information. With the findings from the thematic analysis, the paper is in a position to construct and present a mind map on SMA in the next section.

A mind map on strategic management accounting (SMA)

Mind mapping-based literature review (MMBLR) constitutes step 2 of the MMBLR approach. This step makes use of the findings from the thematic analysis (step 1). It complements step 1 to foster a more engaging, stimulating and exploratory literature review endeavour. The resultant mind map produced renders a lively image on the overall intellectual landscape of a topic under review. In our case, it is strategic management accounting (SMA). The map is shown in Figure 1.

Referring to Figure 1, the topic under examination is positioned at the centre of the mind map as a blob with the label of “Strategic Management Accounting”. The seven main branches attached to the blob correspond to the seven themes identified by the thematic analysis. In the same vein, the two branches split from the red-coloured main branch of “Criticisms on traditional MA and SMA” represent subthemes 5.1 (Related to traditional MA) and 5.2 (Related to SMA). The various links and ending labels, e.g., “interface with strategy”, “need to understand context” and “contingency factors”, are based on the points noted in the thematic analysis findings. Therefore, clarification on the meanings of these labels needs to be sought from there. Drawing the mind map is an engaging and concept-exploratory exercise on literature review; the resultant map helps in presenting and memorizing the literature review findings. Due to the limited size of an A4 paper, the mind map so constructed inevitably has physical constraint on the number of branches and points capable to be captured in it. Partly for this reason, the knowledge content of the mind map should be considered as illustrative, not exhaustive, on the SMA literature.

Concluding remarks

The application of the MMBLR approach on SMA adds to the existing literature on the MMBLR approach. As such, it has both pedagogical and academic value on the MMBLR subject and the broader subject of managerial intellectual learning (MIL).  The findings from the thematic analysis and the companion mind map on SMA are also valuable for capturing the diverse SMA views, observations and research findings as well as revealing the knowledge structure on SMA in a condensed way. For this reason, researchers and students on SMA should also find this paper a useful reading.

Bibliography

1.      Bromwich, M. 1990. “The case for strategic management accounting: the role of accounting information for strategy in competitive markets” Accounting, Organizations and Society, 15(1/2): 27]46.

2.      Cadez, S. and C. Guilding. 2008. “An exploratory investigation of an integrated contingency model of strategic management accounting” Accounting, Organizations and Society 33, Elsevier: 836-863.

3.      Carr, C. and C. Tomlins. 1996. “Strategic investment decisions: the importance of SCM. A comparative analysis of 51 case studies in U.K., U.S. and German companies” Management Accounting Research 7: 199-217.

4.      Chenhall, R.H. 2003. “Management control systems design within its organizational context: Findings from contingency-based research and directions for the future” Accounting, Organizations and Society 28: 127–168.

5.      Chenhall, R.H. 2008. “Accounting for the horizontal organization: A review essay” Accounting, Organizations and Society 33: 517-550.

6.      Cinquini, L. and A. Tenucci. 2007. “Is the adoption of Strategic Management Accounting techniques really “strategy-driven”? Evidence from a survey” Munuch Personal RePEc Archive Paper No. 11819 June (url address: http://mpra.ub.uni-muenchen.de/11819/)

7.      Cinquini, L. and A. Tenucci. 2010. “Strategic management accounting and business strategy: a loose coupling?’ Journal of Accounting & Organizational Change 6(2), Emerald: 228-259.

8.      Coad, A. 1996. “Smart work and hard work: explicating a learning orientation in strategic management accounting” Management Accounting Research 7(4): 387-408.

9.      Cuganesan, S., R. Dunford and I. Palmer. 2012. “Strategic management accounting and strategy practices within a public sector agency” Management Accounting Research 23, Elsevier: 245-260.

10.  Dixon, R. and D. Smith. 1993. “Strategic management accounting” Omega 21(6): 605-18.

11.  Guilding, C., K.S. Cravens and M. Tayles. 2000. “An international comparison of strategic management accounting practices” Management Accounting Research 11: 113-135.

12.  Langfield-Smith, K. 2008. “Strategic management accounting: how far have we come in 25 years” Accounting, Auditing & Accountability Journal 21(2), Emerald: 204-228.

13.  Literature on literature review Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.literaturereview/).

14.  Literature on management accounting Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.management.accounting/).

15.  Literature on mind mapping Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/literature.mind.mapping/).

16.  Ma, Y. and M. Tayles. 2009. “On the emergence of strategic management accounting: an institutional perspective” Accounting and Business Research 39: 473–495.

17.  Managerial intellectual learning Facebook page, maintained by Joseph, K.K. Ho (url address: https://www.facebook.com/managerial.intellectual.learning/).

18.  Nixon, B. and J. Burns. 2012a. “The paradox of strategic management accounting” Management Accounting Research 23, Elsevier: 229-244.

19.  Nixon, B. and J. Burns. 2012b. “Editorial: Strategic management accounting” Management Accounting Research 23, Elsevier: 225-228.

20.  Roslender, R. 1995. “Accounting for strategic positioning: responding to the crisis in management accounting” British Journal of Management 6(1): 45-57.

21.  Roslender, R. 1996. “Relevance lost and found: critical perspectives on the promise of management accounting” Critical Perspectives on Accounting 7: 533-61.

22.  Roslender, R. and S.J. Hart. 2002. “Integrating management accounting and marketing in the pursuit of competitive advantage: the case for strategic management accounting” Critical Perspectives on Accounting 13(2): 255-77.

23.  Simmonds, K. 1981. “Strategic management accounting” Management Accounting 59 (4): 26 – 29.

24.  Tomkins, C. and C. Carr. 1996. “Reflections on the papers in this issue and a commentary on the state of Strategic Management Accounting” Management Accounting Research 7: 271-280.

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[1] The mind mapping-based literature review (MMBLR) topic is a part of a more encompassing subject called managerial intellectual learning (MIL) (see the Managerial intellectual learning Facebook page).