Management Accounting Research , 1996, 7, 247 – 269
Global competition: challenges for management accounting and control Jeremy F. Dent*
The success of Japanese and south-east Asian ﬁrms in world markets over recent decades is well known. Playing by ‘new’ rules, these ﬁrms have pursued global strategies which many Western ﬁrms have found difﬁcult to confront. Moreover, the rules are continually evolving. This paper analyses some issues arising for management accounting. By way of introduction, the paper ﬁrstly reviews the analytics of global competition and discusses emerging issues for the 1990s and beyond. Thereafter, ﬁve challenges are identiﬁed for management accounting, and in particular for planning and control. The ﬁrst is to foster multiple perspectives, the second is the coordination of complexity, the third concerns competitor analysis and a fourth concerns resource allocation. The ﬁfth is to overcome centrifugal tendencies, developing a clarity of strategic intent, binding managers together worldwide and rewarding behaviour in the corporate, as opposed to local, interest. ÷ 1996 Academic Press Limited
Key words: global competition; transnational organizations; planning and control in complex organizations.
1. Introduction The considerable success of many Japanese ﬁrms in world markets over recent decades, and of those from the newly industralised countries of south-east Asia, is quite apparent. In industries ranging from shipbuilding to electronics, and from automobiles to banking and ﬁnancial services, they have achieved the most remarkable and rapid international expansion. Often proceeding from a pitifully small resource base just a few years ago, some have emerged to rival or dominate their leading Western counterparts (Figure 1). To some extent this reversal in Western fortunes is ironic, for Western ﬁrms have a much longer tradition in managing international businesses1. The overseas * London School of Economics and Political Science. Earlier versions of this paper were presented at the European Institute for Advanced Studies in Management, Second Workshop on ‘Strategy, Accounting and Control’, Brussels, September 1994, and the DEC / Deloittes Financial Executives Roundtable, Gleneagles, February 1992. 1 In 1914, for example, the U.K. was responsible for half the stock of foreign investment held abroad, France, Germany and Holland accounted for a further 43%, and the U.S. 6%. Following the post-war expansion of American ﬁrms, by 1960 the U.S. accounted for 59%, and the above four European countries 33% (Bartlett and Ghoshal, 1989, pp. 46 – 47). 1044 – 5005 / 96 / 020247 23 $18.00 / 0 ÷ 1996 Academic Press Limited
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J. F. Dent
1990 Canon Xerox
1990 NEC GTE
1990 Matsushita Philips
Figure 1. Japanese versus Western sales growth 1975– 1990. (Source: company accounts converted at – Y 100 $1).
operations of European ﬁrms such as Shell , Unilever , Courtaulds , Philips and ICI (or their predecessors) were well established in the early decades of this century, and those of many U.S. ﬁrms shortly thereafter. But the pattern of international competition in recent decades has been rather different to that experienced by these pioneering ﬁrms. Playing by ‘new’ rules, Japanese and south-east Asian ﬁrms have pursued global strategies which many Western ﬁrms have found difﬁcult to confront. Moreover, the rules are continually evolving. Western ﬁrms have faced, and continue to face, huge challenges in responding to global competition. The purpose of this paper is to explore some implications of global competition for management accounting and control. The structure as follows. First, in order to ground the argument, the paper outlines the new rules of the game and associated organizational issues. Thus, the next section reviews the analytics of global competition, contrasting the strategies of...
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