Management Control Systems and Decision-Making Strategy - Essay Example

Management control systems can inform decision-making and strategy Management control systems can inform decision-making and strategy. Langfield-Smith (1997, pp. 208-209) defines management control systems or MCS as tools that assist management to achieve cooperation amongst groups of organizational units or individuals who may somewhat share harmonious objectives, and direct the joined efforts towards precise organizational goal sets. Consequently, MCS encompasses all elements of the operation of a firm, uses the structure of finance and accounting as the foundation, and uses planned and actual data for managerial control.

Conversely, corporate strategy is concerned with resolutions about the nature of businesses to run, taking account of possibilities of business’ to divest or acquire, and how to outstandingly constitute and fund the company(Langfield-Smith, 1997, p. 209). Kober, Ng and Paul (2007, p. 427) reveal that a corporate strategy is not constant but is subject to conditions like entry into new markets or acquisitions. However, changing strategy is subject to uncertainties and deviations from defined measures that only MCS mechanisms can overcome.

Although addressing deviations from actual metrics involves using diagnostic controls, uncertainties require continued dialogue and debate amongst managers and between managers and subordinates, and facilitate development and consideration of new ideas and information. Such information and ideas generated from MCS are essential for informed decision-making(Kober, et al., 2007, p. 429). Consequently, Langfield-Smith (1997, p. 210) reveals that informed decisions form the basis for strategic management, which ranges from strategic formulation to implementation.

Further, the role of strategy formulation is solely a managerial activity that is concerned with establishment of strategies while strategy implementation is concerned with the translation of the formed strategy into actions(Porter, 1990, p. 44). The management additionally ensures that all defined strategic actions have resources and administrative systems allocated to them. The formation strategy has to respond to expected reforms to seek differentiation from competitors and seek new markets(Kober, et al., 2007, p. 447).

Although the strategy informed by MCS is essential for effective organizational management, the priorities of the strategy may be insufficient to acquire competitive advantage or high organizational performance(Chenhall & Langfield-Smith, 1998, p. 243). Further, Chenhall and Langfield-Smith (1998, pp. 244-245) demystify the notion that the acquisition of competitive advantage is through product differentiation or low cost production using broader philosophies. Conversely, the impact of discrete but contemporary management techniques on organizational performance result to competitive advantage.

For companies emphasizing on differentiation of products as their management techniques, the strategies applied are customer focused since performance measures are less likely to be sufficient. As a result, balanced performance measures associate customer satisfaction with high quality products, speedy and effective delivery, post sales support and dedicated design features and other production activities hence demonstrating the impact of financial outcomes(Chenhall & Langfield-Smith, 1998, pp. 246-247). However, best practice of product differentiation emphasizes management accounting practices implementation.

In addition, product differentiation supports benchmarking, strategic planning techniques, and employee-oriented measures that underline qualitative and non-financial information. Conversely, companies that emphasize more on high levels of cost effectiveness thereby focusing on improving existing processes. Further, the enhancement of performance in low price strategies is through management accounting such as traditional accounting methods and activity-oriented techniques. Activity-oriented techniques are crucial to managers in that they enable them to understand the effect of organizational activities on costs hence offering useful information on how to reconfigure or control the present processes better than those of other competitors (Chenhall & Langfield-Smith, 1998, p. 248). Additionally, activity-oriented techniques offer useful information to make choices on fresh ways of cost advantage attainment through improved existing processes and innovations on manufacturing systems in addition to activity-oriented and traditional accounting techniques.

Modern management accounting together with practices in production, control and planning are crucial in defining new manufacturing philosophies like Just-in-Time or JIT, Advanced Techniques or AT, and flexible manufacturing systems. In manufacturing, control is essential for stabilizing demand, vendor synergies, reduced rescheduling and management of lead times. However, there is need for further research to appreciate the input of management accounting theory and practice through outstanding critical analysis of agency theory.

Works Cited Chenhall, R. H. & Langfield-Smith, K., 1998. The Relationship Between Strategic Priorities, Managemetn Techniques and Management Accounting: An Empirical Investigation Using A Systems Approach. Accounting, Organizations adn Society, 23(3), pp. 243-264. Kober, R., Ng, J. & Paul, B., 2007. The Interralationship between management control Mechanisms, and strategy. Management Accounting Research, pp. 425-452. Langfield-Smith, K., 1997. Management Control Systems And Strategy: A Critical Review.

Accounting, Organizations and Society, 22(2), pp. 207-232. Porter, M. E., 1990. The competitive advantage of nations. London: McMillan Press.