Generic Strategy and Strategic Management Accounting Practices: Case Study of a Sri Lankan Telecommunication Company

Abstract

Organizations depend on different generic strategies to gain competitive advantage (Porter, 1980). Usage of a particular generic strategy is always associated with a set of rules, practices, and procedures within an organization. Amongst them, Strategic Management Accounting (SMA) practices play a vital role in supporting and monitoring the performance of generic strategies pursued by an organization. However, organizations may change the generic strategies they use over time due to various changes taking place in the environment which include the changes in business environment, technology, competitors, regulation and global economy (Wickramasinghe & Alawattage, 2007). A change in the strategy is expected to lead to changes in existing policies and practices to match the new strategy (Langfield – Smith, 2007). Thus, SMA practices used by the organization should be no exception. Such changes in practices are important for effective implementation of the new strategy. Otherwise, the new strategy is expected to fail. However, studies, which examine the changes in generic strategy and associated changes in SMA practices are scarce in the Sri Lankan context. Hence, the purpose of this paper is to examine whether the change in generic strategy leads to changes in SMA practices used in Alpha Telecom PLC, which is a leading telecommunication company in Sri Lanka. Also, the study expects to find out other factors contributing to the changes in SMA practices in this company. This study adapted qualitative research methodology and used single case study method to conduct an in depth analysis of SMA practices of Alpha Telecom. The data were collected through semi- structured interviews with senior managers and a survey questionnaire distributed among middle level executives. Management Accounting (MA) reports and annual reports of the company were used as secondary sources. The study found that when generic strategy moved from cost leadership to differentiation, the traditional MA practices based on costing shifted to SMA practices such as Balanced scorecard (BSC), Competitor analysis, Quality costing etc. Further it was found that changes in ownership, culture of parent company, and nature of competition also had an impact towards the usage of new SMA practices within the company.