The case for strategic management accounting: The role of accounting information for strategy in competitive markets

A review of two economic theories is utilized to provide theoretical support for the greater possible involvement by accountants in what has been called strategic management accounting. One of these theories is concerned with the underlying characteristics of enterprise products. It suggests that there is a need for accountants to consider the cost structure of not only their own firm but of all enterprises in the relevant market and of potential entrants. It also suggests that costs can not be considered in isolation from demand factors. The second theory to be reviewed is concerned with whether a firm's cost structure permits its market strategy to be sustainable in the face of potential entry. This theory again emphasizes the intertwining of demand and cost factors and the need to consider these factors simultaneously. The use of this theory allows a new perspective to be taken to cost behaviour which is especially suited to high technology manufacturing.