Study Example: The Interaction Amidst MACSs and Strategy in the LDSs Public Sector

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Middlebury College
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There are many setbacks in managing accounting and financial aspects in the organizations within the less developing countries (LDCs). Many strategists, business, and accounting scholars are of the view that the design of an organizations control systems should mirror the business strategy of that particular organization. This study aims to explore the relationship type that exist between strategy and MACSs in LDCs public sector. An empirical study is undertaken using the case of Saudi Arabia to test the association between strategy and MACSs in LDCs public sector. The design of this study is such that it unveils the impact of strategy on MACSs, the impact of MACSs on strategy and hence establish the relationship between the two parameters in LDCs public sector. Data obtained from structured interview is analyzed and used to the manner of alignment between MACSs and strategy. Furthermore, there is a discussion of preliminary evidence that allude the relationship between not only MACSs and business strategy, but also the performance of an organization.

Keywords: Management accounting, control systems, strategy, public sector, LDCs


An organization has to ensure that there is a fit in the relationship between MACSs and strategy in an organization within the public sector. Dent and Simons (1990; 1990), indicate that achieving a fit between its MACSs and strategy reinforces the efforts to improve performance. They further argue that different MACSs are better aligned to different strategies. However, less developing countries have a number of deficiencies in aligning MACSs and strategy in the public sector due to deficiencies in the accounting systems as well as the socio-economic underdevelopment (Craner and Jones (1990). Unlike the argument of (Dean, 1989), that both developed and developing countries LDCs experience setbacks in monitoring how the public sector performs, there is a view that inadequacy in the MACSs the LDCs results to decisions that are not only inconsistent but also unrealistic (Blondal, 1988). In turn, resulting to imbalances in accounting issues within the public sector. This paper explores the existing argument in literature that MACSs is marred with deficiency. As such, there is a research gap that demands for deeper analysis of the interaction between MACSs and strategy in an organization.

In this regard, this chapter is devoted to discuss the background of the study, the research objectives, research questions, and the significance of the study as well as its scope.

1.1. Background of the study

The term strategy may be given various definitions. According to Mintizberg (1978), all decisions in regard to the future of an organization are collectively termed as the organizations strategy. To add weight on this definition, other authors state that strategy is feasible when implementation of its provisions is achieved through the existing processes as well as structure of the organization (Johnson, 1987, pp. 4-5), (Miles & Snow, 1978). It is imperative to note that strategic decisions are not made at only one stage but at different stages of the management process (Johnson, 1987, pp. 4-5). The organizations strategy encompasses the organizations future on a long-term basis, the scope within which the organizations activities are done, the manner in which various activities of the organization relate with the environment, the stakeholders expectations, resource allocations, and effectiveness of those resources (Johnson, 1987, pp. 4-5). According to Johnson (1987), organization strategy is the sum total of the actions that an organization undertakes in a bid to attain its long term objectives. The collaborative actions are usually fashioned to ensure that the organizations strategic plan catapults the organization mission and vision (Johnson, 2017). He furthers that the strategic plans normally take at least one year for their completion and normally it is an all-inclusive activity that calls for the involvement of the company employees. Sophie Johnson puts it that the top management are vested with a responsibility of creation of a comparatively larger organization strategy. On the other hand, the middle as well as the lower management are obliged to adopt the organizational goals and the established plans so as to fulfill the organization strategy in a procedural manner (Johnson 2017). This kind of a unified effort can be figured out as a journey. For instance some of the daily challenges during the operation ought to be subdued in a bid for the company to reach its ultimate goals. Johnson (2017) recommends that for a strategy to be feasible, it ought to be converted into relatively smaller and achievable goals. It is the sole responsibility of the middle management to embrace the objectives and the goals that ought to bring a competitive advantage to the company (Johnson 2017). Usually, the tactical objectives take a period of less than a year to establish. On the other hand, the lower management level in a company, particularly the functional managers ought to concern themselves with the daily operations of the organizations and establish if its operations are in the right trajectory, otherwise, they have a noble responsibility of devising control measures to ensure that the company grand strategies are achieved within the time frame allocated.

According to Anthony (1965), MACS refers to the process used by managers to obtain resources and ensure their effective and efficient use for the purposes of achieving the objectives of an organization. A deeper analysis of this definition indicates that a MACSs are greatly used in the planning stage, monitoring and evaluation, performance measuring, and integrative frameworks (Langfield-Smith, 1997). Other researchers explain MACSs as a process that has the ability to influence the way things are done. As such, MACSs works to align individuals with various sections of an organization. These individuals will tailor their efforts towards achieving the goals set by an organization under objectives that are congruently stated (Flamholtz, Das, & Tsui, 1985).

There is a great interest in strategy of an organization and how it impacts the performance of an organization (Kobayashi, Kato, Maezawa, & Sano 2011). Also, the OECP (2010), in their policy-making, appreciate the existence of a link between the performance of an organization and strategy (OECD 2010). As such, establishing a working strategy is of great importance to an organization as far as access to global marketplaces in concerned (OECD 2010). To develop an understanding of what organizations strategy alludes, it is important to view organizations strategy as the one that enhances sustainable performance; a performance that constitutes not only ecological and economic criteria but also social criteria (Boons, Montalvo, Quist, & Wagner 2013). Many researchers are of the view that an organizations strategy is fundamentally necessary in the business activities on the international scale. However, there is need for deep and extensive research on the mechanisms that promote and improve the organizations strategy. On this basis, Boons et al. (2013) say that despite the appreciable knowhow on the drivers of strategy in an organizational setup, there is little knowledge on the ways of realizing working strategy and how to ensure effectiveness of strategy not only at production levels but also in consumption systems to as to create win-win scenarios in business activities (Boons, Montalvo, Quist, & Wagner, 2013). In this regard, this study focuses on the latter issue and undertakes a deeper analysis on how MACSs and strategy of an organization interact.

According to Danneels (2002), an organization need to continually re-energize in order to remain relevant and successful in the contemporary business world. For instance, technology, competition, and customer dynamics continuously change and organizations need to be updated on those fronts. To realize a competitive advantage, effective strategy is a key element that an organization must be keen on. For more than a decade, there has been a great emphasis on resource-based-view in all frameworks and aspects to do with strategy creation in organizations. Dent, Langfield-Smith, and Shields (1997; 1990) in their different articles, argue that much has been done in showing how MACSs has been impacted by strategy and less attention given to the impact of MACSs on strategy. In addition, some level of contradictions and ambiguity flaw some of the findings on the MACSs-strategy relationship.

According to Otley (1980) a firms design should be in such a way that MACSs are in line with an organizations business strategy (Otley 1980). Despite the high acceptance of the argument that a connection between the strategy and structure of an organization exist, there lacks sufficient empirical proof to substantiate this assertion. In the existing studies, researchers are of the view that a clear conception of the connection between MACSs and strategy is fundamentally necessary in the business activities.

1.2. Objectives of the Study

The general objective of this study is to investigate the interaction amidst MACSs and strategy in the LDSs public sector. To realize clarity in this general objective, the manner in which MACSs and strategy impact each other will be examined. In order to effectively achieve the primary goals, the following specific objectives are in place:

To investigate the strategy and MACSs formulated in terms of type in the examined organization.

To examine how strategy and MACSs impact each other.

To establish how MACSs that are already implemented are impacted by change in strategy.

1.3. Research questionsThe following research questions are pertinent in undertaking this research study and in the effort to obtain data in regard to strategy and MACSs in the public sector within LDCs:

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