Porters analize
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According to Shank & Govindarajan ("Tailloring Controls.."), strategic cost management can be defined as the use of cost information to help formulate and communicate strategies, and carry out actions to implement those strategies, and then to develop and implement controls that monitor the success at achieving strategic objectives. Suffice it to say, management accounting information is important in facilitating the development and implementation of business strategies.
Generally, strategic decisions mainly concerns decisions on what business to operate in, how we could compete in that particular business and what capabilities should we have to support a particular chosen strategy.
The decisions on what business to operate in mainly concerns decisions on what business the company should acquire in, or how it can allocate and utilise resources in a way that takes advantage of environmental opportunities. Porter suggested that here, companies can exploit into four possible areas to develop a competitive advantage namely: (1) Portfolio management; (2) Restructuring; (3) Transferring of Skill; and (4) Sharing of Activities. In this context, the role of accounting expertise in evaluating acquisitions, diversification and divestment decisions is important. Which business should we invest in? Management accountant's expertise on the techniques of capital investment appraisals provide theoretically sound ways of assessing the value and deriving the value of forecasted net cash flows associated with investments, while improving allocation of resources between divisions. Further, their expertise in producing short-term financial targets for evaluation of performances of businesses acquired can also be seen..