Alignment of management control system to corporate competitive orientation: some empirical evidence in Malaysia

With the rapidly changing and increasingly more competitive environment, the role of a management control system (MCS) in an organization in providing information feedback to management for monitoring the effectiveness and appropriateness of the organization's competitive strategy to achieve its goals is becoming more important. This study examines the extent of usage of various management control measures and the compatibility of these control measures with the competitive priorities or orientations of firms. A structured questionnaire was prepared and randomly sent to 250 organizations in the Klang Valley. A total of 93 usable responses were analyzed. The results show that organizations, generally, perceived competition based on product price, quality and service/promotion to be more intense than that based on product variety and innovation. Consistent to their perceived intensity of competition, their competitive priorities or orientations also stressed more highly on competition based on low price, high quality and service, with a much lower emphasis on wide product variety and product uniqueness. Except for an apparent pervasive high usage of the "budget vs. actual" financial control measure, there was a fairly balanced usage of accounting-based controls and modern management practices for monitoring, evaluating and controlling the organizational activities. Small enterprises tended to adopt less formal management control systems and had less extensive usage of the various control measures than the large firms. Evidence of a lack of proper alignment or incompatibilities in the usage of certain management control measures was indicated in this study. The implications of the findings are discussed

Activity-based costing for competition against generic products: the case of an herbicide product company

Activity-based costing (ABC) enables management to use activity cost information to formulate more effective strategy against competitors. Based on the case of herbicide product company, this paper examines how DCPM, a subsidiary of a multinational company, uses activity cost information to revise its pricing strategy to compete with the generic herbicide products, as the patent protection of its main herbicide product is coming to an end. The management of DCPM faces serious challenges of not only having to sustain its market share but also to achieve the profit target expected by its parent company. Using the activity cost information, DCPM is able to set competitive prices for different combinations of product and services to cater for customers with differing product/service price-sensitiveness. In the long term, however, the company would have to improve the overall cost efficiency in its product manufacturing and logistics services, as well as to educate users more extensively on the importance of quality and safety standards for herbicide products to sustain its market share

Audit expectation gap and loan decision performance of bank officers in Iran

This study examines the effect of accounting knowledge and experiences of Iranian bank officers on the audit expectation gap, and investigates whether the gap mediates (or explains) the individual factor-loan decision performance relationship. Copies of a structured questionnaire were distributed to 113 loan officers from five large commercial banks in Iran and responses of 111 bank officers were analysed. The results show the existence of a fairly large audit expectation gap among the Iranian bank loan officers, and accounting knowledge was found to significantly mitigate the extent of the gap. More importantly, this study found a highly significant negative relationship between the audit expectation gap and loan decision performance of the Iranian bank officers. Further analyses indicate that the audit expectation gap fully mediates the individual knowledge-performance relationship. The findings of this study have important policy implications for recruitment and training of the bank officers

D crop protection Malaysia: competition from generic herbicides

Case overview: This case illustrates how emergence of generic products had threatened the survival of DCPM and forced its management to urgently review the company's existing approach to pricing of its main herbicide product. The case presents opportunities for readers to discuss the deficiencies of DCPM's existing product costing approach and recommend modifications to meet the price and gross profit margin targets specified. It also highlights issues relating to supply chain management and human resource practices that might have to be improved to enhance DCPM's long‐term competitiveness. Expected learning outcomes: To understand the effects of globalisation and emergence of generic products on intensity of market competition for branded products. To identify deficiencies of the current product costing system of DCPM for pricing decision. To apply alternative contemporary approach to product costing and pricing of Metrix and the other value‐added services. To identify measures to enhance supply chain management and inventory management in DCPM. To assess DCPM's human resources practices. To evaluate the effectiveness of DCPM's existing competitive strategy and formulate new competitive strategy to sustain DCPM's long‐term competitiveness

Contingency factors influencing MAS design of manufacturing firms in Malaysia

From a contingency framework, this paper empirically examines the relationship between decentralization, advanced manufacturing technology (AMT) and market competition on the adoption of sophisticated management accounting system (MAS) design among manufacturing firms in Malaysia. Using a structured questionnaire and regression analysis, data from 137 manufacturing firms from Malaysia show that the sophistication of MAS adopted is significantly and positively related with AMT adoption and market competition. The findings suggests that the adoption of sophisticated MAS design is parallel with the adoption of advanced manufacturing innovations and is able to assist firms to cope with the changes in the business environment. However, a positive but insignificant relationship was observed in the relationship between decentralization and MAS design. These results have contributed to the management accounting change literature by suggesting that attempts by the MAS designers to improve the timeliness and the scope of the information are of particular relevance to the managers of the firm

Cost‐system functionality and the performance of the Malaysian palm oil industry

Purpose: The purpose of this paper is to investigate the relationship between cost‐system functionality and the performance of oil‐palm enterprises in Malaysia, as well as whether manager's perceived usefulness of cost information mediates the cost‐system functionality‐performance relationship. Design/methodology/approach: A structured questionnaire is used to gather data from oil‐palm enterprises located in Sarawak. Findings: The results indicate that the cost relevance/timeliness dimension of cost‐system functionality significantly enhances the performance of oil‐palm enterprises. However, manager's perceived usefulness of cost information only partially mediates the cost‐system functionality‐non‐financial performance relationship, and this is possibly due to the nature of control over the estate operations by the head office. Research limitations/implications: Owing to the small‐sample size and because the oil‐palm enterprises are located only in Sarawak, the generalisability of the results may be limited. Besides, the findings are based on the estate setting whereby decisions made are relatively structured and therefore, they may not apply in less‐structured decision‐making settings. Originality/value: Past findings on the causal link between cost‐system functionality and performance are mixed. However, high‐functional cost systems are expected to be more cost beneficial when environment is highly uncertain. The palm oil industry operates in a highly turbulent economic environment due to serious external challenges and it is expected to benefit from high‐functional cost systems. Unlike previous studies based on firms from diverse industries, the operational homogeneity of the oil‐palm enterprises in this paper enables the effects of cost‐system functionality on performance to be examined in a more controlled setting. By analyzing the attributes of cost‐system functionality into two major dimensions, this paper shows that performance could be enhanced only through provision of relevant and timely cost information

Intellectual capital reporting and corporate characteristics of public-listed companies in Malaysia.

This study examines the extent and nature of voluntary intellectual capital (IC) disclosure by public-listed companies in Malaysia and how the disclosure may be explained by the economics or other rationale of corporate disclosure. Those intangible assets that are required to be disclosed under the extant accounting standards were specifically excluded from this study. The top 30 and the bottom 30 companies were selected from the list of top 100 largest public-listed companies by market capitalization at the end of 2003. Content analysis was used to measure the extent of voluntary IC disclosure in the 2003 annual reports of the selected companies. This study found that the voluntary disclosure of IC information is generally not extensive among the publiclisted companies in Malaysia and narrative description of their IC attributes is the most often adopted format. The findings suggest that the IC disclosure behaviour of the sample companies may be explained based on both economic and non-economic rationale. Implications of the findings are discussed

Relational signalling in governance mechanisms and trust building

‘Thick’ trust is required for the exchange of tacit knowledge in inter-organisational innovation collaborations. Management accounting researchers suggest that when governance mechanisms can provide sufficient mitigations to the relational risks, trusting relationships among the collaborating partners can be developed. However, the question that remains unanswered is why do some collaborative relationships with proper governance structure not lead to the establishment of trust? This study seeks to identify the relational signals in formal governance mechanisms which can foster the development of ‘thick’ trust that is crucial for effective knowledge exchange. Based on the resource-based view (RBV), transaction cost economics theory (TCE), and relational signalling theory, this study proposes a conceptual framework that identifies the relational signalling elements in formal governance mechanisms that can foster ‘thick’ trust among partners. It contributes to the literature by distinguishing specific elements of conventional formal governance mechanisms as relational signalling elements for the effective development of trust among collaborating partners

Influence of institutional pressures on the adoption of green initiatives

Environmental issues which have negative impacts on environment, social, and economy, imply a need for sustainability practices. As the concept of sustainability is broad, this study focuses only on the environmental aspect, particularly green practices. It aims to examine the influence of institutional pressures, namely coercive, mimetic, and normative pressures on the adoption of green initiatives, and the extent of green adoption in Malaysian public listed companies (PLCs). A questionnaire survey was conducted on all 921 PLCs in Bursa Malaysia. The data from 120 usable questionnaires were analysed using partial least square structural equation modelling (PLS-SEM). The findings indicate that the adoption of green initiatives in PLCs is significantly influenced by coercive and normative pressures, while mimetic pressure does not influence the adoption of green initiatives in PLCs. Theoretically, this study contributes to management accounting and environmental management literatures in the context of green practices towards environmental sustainability. It also provides empirical evidence to practitioners on the need to understand the key drivers of green initiatives for them to meet the challenges on green issues and to derive the best results from implementation of the initiatives. Regulatory authorities or policy makers may facilitate more extensive adoption of green initiatives by providing more financial incentives for technical resources and training

Influence Of Institutional Pressures On The Adoption Of Green Initiatives

Environmental issues which have negative impacts on environment, social, and economy, imply a need for sustainability practices. As the concept of sustainability is broad, this study focuses only on the environmental aspect, particularly green practices. It aims to examine the influence of institutional pressures, namely coercive, mimetic, and normative pressures on the adoption of green initiatives, and the extent of green adoption in Malaysian public listed companies (PLCs). A questionnaire survey was conducted on all 921 PLCs in Bursa Malaysia. The data from 120 usable questionnaires were analysed using partial least square structural equation modelling (PLS-SEM). The findings indicate that the adoption of green initiatives in PLCs is significantly influenced by coercive and normative pressures, while mimetic pressure does not influence the adoption of green initiatives in PLCs. Theoretically, this study contributes to management accounting and environmental management literatures in the context of green practices towards environmental sustainability. It also provides empirical evidence to practitioners on the need to understand the key drivers of green initiatives for them to meet the challenges on green issues and to derive the best results from implementation of the initiatives. Regulatory authorities or policy makers may facilitate more extensive adoption of green initiatives by providing more financial incentives for technical resources and training