Assessing Management Accounting Techniques in Emerging Economies

This essay examines the effectiveness of advanced management accounting techniques, particularly the balanced scorecard, in emerging economies. It reviews the trends in management accounting, discusses current issues in traditional performance evaluation methods, and defines the balanced scorecard technique as a modern solution. The essay summarizes a case study on the balanced scorecard in China, comparing its implementation over time and highlighting both successes and failures. It further discusses the evolution of the balanced scorecard through three generations, detailing their respective characteristics and improvements. The essay also presents a case of failure in SMEs and success in larger organizations when implementing the balanced scorecard, providing a comprehensive overview of the topic and its practical implications. Desklib offers this essay as a valuable resource for students studying advanced management accounting.

Running head: ADVANCED MANAGEMENT ACCOUNTING
Advanced management accounting
University Name
Student Name
Authors’ Note

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Introduction
Survival of a business for a long term period is necessarily reliant upon satisfying
market necessities by means of long term process of creation of value. In itself, traditional
performance enumeration systems such as return on investment (ROI) have been criticized to
be very intently concentrated on pecuniary figures as well as operational level performance
such that they often fail to take into account organizational success. On the other hand, the
balanced scorecard appeals to managers to carry out a commitment to establish a wide array
of dimensions away from narrowly concentrated financial metrics. In essence, the balance
scorecard can in consequence act as dials on specific dashboards and direct businesses into
higher amount of profitability as managers position themselves to serve their employees
better.
Review of the trend
Nowadays, stiff competitiveness in the market and globalization can be considered as
the major challenges in majority of the corporations and management of the firm are seeking
several modern approaches to acquire more competitive benefits. In case of corporations are
to thrive and at the same time prosper in highly globalized competitive arena then they need
to use enumerations and systems of management based on their specific strategies and
capabilities (Hoque, 2014, pp.33-59). Ironically, majority of corporations have the inclination
to ignore issued such as customer satisfaction, competencies of internal processes and
capabilities of organization whilst focussing only on enumerating financial circumstances.
Taking into account these state of affairs, issues namely strategic management, benchmarking
and use of balanced scorecard become significant. During the past 10 years, since the period
of advent of particularly balanced scorecard several alterations have been introduced to

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mainly the physical design, procedures of design as well as utility that are utilized to generate
the specific tool within corporations (Gibbons, Robert and Kaplan, 2015, pp.447-451).
A survey was conducted by taking 174 senior management personnel from mainly
German speaking nations, such as Austria, Germany as well as Switzerland replicated that
around 26% of the corporations utilize the balance scorecard in a restricted manner at the
business unit phase or else utilize the incomplete version of the same (Hansen, Erik and
Stefan Schaltegger, 2016, pp. 193-221). Essentially, the chain of cause and effect is seen to
be present in the 50% of the user corporations. Over and above two thirds of the firms
utilizing the same can be observed to have related their structure of incentive along with
system of compensation. A survey undertaken by Joshi made out that an extensive utilization
of various financial dimensions namely “return on investment”, “analysis of variance” as well
as budgetary control in the process of evaluation of performance (Kerai, Sunita and Ahmed
Saleh, 2017, p. 27). Restricted emphasis was positioned on satisfaction of customers together
with other non-financial dimensions whilst analysing firm’s performance. The results of a
survey conducted with 579 firms in India including 4 transnational firms revealed the issue
associated to designs along with application of performance scorecard. The outcomes of the
study replicate that adoption of BSC in particularly corporate India compared desirably with
United States (Lin et al., 2016, pp. 1-12).
Current issues in the environment
Based on study of the current environment it can be said that traditional method of
performance evaluation and strategic management used in numerous corporations faces
certain limitations (Martello et al, 2016, p. 61). It can be observed that it becomes quite
difficult to provide satisfactory definition of particularly profit as well as investment.
Essentially, profit has several themes namely profit before interest and tax (PBIT), profit after

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interest and tax (PAT), profit after deduction of various costs and controllable profit and
many others. Again, companies utilizing ROI in diverse corporations, it is imperative that
firms employ identical accounting policies and mechanisms (Kang et al., 2015, pp. 124-134).
In addition to this, utilization of ROI might influence management to choose investment with
superior rate of return. However, the investments that would lessen the overall ROI could on
the other hand enhance the value of the overall business.
Current Tools
The current tool under consideration is the balanced scorecard. In essence, the
balanced scorecard can help in providing broad consideration of diverse business aspects,
counting financial as well as human aspects. On the other hand, this can be utilized as a tool
for employee tracking tool rather that in turn can help in analysis of company performance.
This tool takes into account the way each section/division affects another division, in place of
concentrating on a specific aspect of performance (Shen et al., 2016, pp. 127-139).
Definition of the technique
The current study identifies the innovative modern system of balanced scorecard that
can help in overcoming the issues encountered by the traditional systems. Balance scorecard
can be considered as a performance dimension that can be utilized in the area of strategic
management to recognize and enhance diverse internal functions of a business and their
ensuing external results (Perkins et al., 2014, pp.148-169). This study also elucidates
illustratively the modern technique that can be used for reinforcing good behaviour in a
specific corporation by isolating four different areas that have the need to be evaluated. The
four different areas include learning and growth, processes of business, finance as well as
customers. The current segment therefore aids in attainment of objectives, enumerations,
goals as well as initiatives that stem from four chief functions of a business. In this way,

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business concerns are seamlessly recognizing facets that hinder the overall performance of
the firm (including financial as well as non-financial dimensions). Basically, with the use of
balanced scorecard, the management of the firm can analyse the entire company at the time
when considering the objective of the firm. A specific corporation might utilize the balanced
scorecard to execute stratagem mapping to understand where value is added within a specific
corporation. In this case, the requisite information is acquired and analysed from four
different business aspects (Baxter et al., 2014, pp. 347- 363). Thus, it can be said that the
primary characteristics of the balanced scorecard entail focus on strategic agenda of the
concerned firm, selection of comparatively small amount of data for monitoring and
presentation of a combination of both financial as well as non-financial items.
Succinct summary of the case
The article “The balanced scorecard in China: Does it work?” penned by Kaisheng
Zeng and Xiaohui Luo intends to understand restrictions of balanced scorecard mainly from
the Western literature in a bid to ascertain the hurdles related to employment of BSC in
particularly China. In addition to this, this study intends to deliver suggestions for various
Western firms in terms of ways to successfully execute balanced scorecard in China. The
case under consideration takes into account trends of implementation of balanced scorecard
in China, research regarding the limitations of the same, substantiation as regards the
cause and effect association, strategic control barrier and other obstacles associated to
implementation of BSC in China and the way Western firms need to prepare for
implementation of BSC in China (Frost et al., 2014, pp. 696-749). In the end, the study
presents the suggestions for preparation of the balanced scorecard together with the
insinuations for both management practices along with research. Thus, this study aids in
gaining deep insight regarding the low rate of adoption of BSC in the initial period and the

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way things changed after the year 2008 when nearly 53% respondents declared about
adoption of the same (Gibbons, Robert and Kaplan, 2015, pp. 447-451).
Comparison with previous period
The modern method of performance measurement and firm’s strategic management
was necessarily introduced in the period 1990s by Robert Kaplan and David Norton.
However, since that period, the notion has become quite popular and its diverse forms
extensively adopted across the entire globe (Cooper et al., 2017, pp. 991-1025). By
combining various financial measures as well as non-financial dimensions in a single
declaration, the balanced scorecard delivers managers with richer and more pertinent
information regarding activities they are handling than is provided by financial measures.
Essentially, the changes can be described as an evolution by means of three distinct
generations of balanced scorecard design (Martello et al., 2016, p.61).
Balanced scorecard of 1st Generation
Balanced scorecard was initially described as an approach to measurement of
performance. In addition to financial dimensions, managers were inspired to look at
dimensions derived from three different perspectives (Lawrie et al., 2015). Learning as well
as growth, procedures of internal business, along with customers, selected to replicate the
major stakeholders in a specific business. Balanced scorecard was spare and concentrated on
high level framework of the instrument. This required association to the company’s goals
along with vision to aid in the process of selection of dimensions to be utilized, and also
inspired the consideration of certain typical interest areas (Perkins et al., 2014, pp. 148-169).
These theories suggested the introduction of various attitudinal questions associating to
specific visions as well as goals of the corporation to help in the process of selection of
dimensions to be utilized.

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Balanced scorecard of 2nd Generation
The practical difficulties related to design of 1st generation scorecards are
considerable, as the definition of the balanced scorecard was at the outset vague, permitting
for considerable analysis. Essentially, two important areas of concern include filtering and
clustering. Discussions associating to clustering keep on to be rehearsed in the present
literature, however, discussions associating to filtering can be considered to be less common
and normally appear as part of the description of mechanisms of balanced scorecard
(Hladchenko, Myroslava, 2015, pp. 167-176). Perhaps the most significant alteration
transformed the attitudinal approach to enumerate selection proposed originally by Kaplan
and Norton into a specific procedure that yielded certain important dimensions of
performance in each and every perspective. The proposed solution was necessarily the
introduction of the theme of “Strategic Objectives” (Rampersad, Hubert and Hussain, 2014,
pp. 29-38).
Balanced scorecard of 3rd Generation
The 3rd generation balanced scorecard format is founded particularly on refinement
and modification of the 2nd generation design features as well as mechanisms to deliver
superior functionality and strategic evidence (Basuony, Mohamed, 2014, p. 14). Essentially,
the origin of specific developments arises from specific issues associated to target setting and
substantiation of various strategic intent selections. Particularly, these directed various
developments in the period of late 1990s of a further design component presented initially at
the closing of design procedure to confirm objectives, dimensions along with targets selected.
The important elements of the 3rd generation of balanced scorecard are necessarily the
destination statement, strategic objectives, strategic linkage and association model and
perspectives as well as measures (Lueg, Rainer, 2015, pp. 34-40).

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Statement of a case of failure and success
The article “Why the balanced scorecard fails in SMEs: A Case Study” written by Dr,
Nopadol Romphom reflects about failures of SMEs in implementation of balanced scorecard.
Despite several accounts of successful execution of balanced scorecard in large business
concern, Kaplan and Norton deciphered two different sources of failures based on their
experience. The two identified sources include failure of design and process failure. The said
study elucidates in detail about the SAQ Company Limited instituted during 2002. The
company was a retail corporation operating in the sector of electrical appliance that registered
yearly sales of approximately 10 million. The manager and owners were in favour of
implementation of balanced scorecard for execution of a performance measurement
framework that could assist in translating mission as well as strategy into action
(Hannabarger et al., 2013). However, this BSC practice was observed to fail and the major
cause behind this failure was found out to be frequent alterations in strategy of the company.
It was witnessed that since the implementation of BSC in the firm, several dimensions were
added and constantly modified. The firm observed decline in the sales within three months of
the implementation of the tool. Hence, it can be inferred that findings of the current case
study helps in expanding the overall knowledge as regards BSC implementation, reflecting
factors leading to successful utilization of the balanced scorecard in both large as well as
small enterprises.
The case of Mecklenburg County, NC presents accounts of success stories of the
implementation of balanced scorecard. It can be seen that the company Mecklenburg County
essentially lacked both consistent as well as sustainable approach for attainment of vision. In
addition to this, the company possessed no consistent model for arriving at financing
decisions founded on set priorities and analysing the larger impact of these decisions.
However, with the establishment of the balanced scorecard approach, the county instituted an

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Office of Management and Budget for taking up the responsibility for the firm’s strategic
management procedures and communicating the performance at different levels namely
community, corporate as well as departmental levels (Kuhn, Kephas, 2013). Thus,
Mecklenburg County engaged different departments in the process of development of
scorecard. In essence, Mecklenburg County advanced knowledge and understanding
regarding BSC among employees and instituted a proper structure, even though informal.
This in turn aided Mecklenburg County to maintain engagement, garner support, constant
refinement and ultimately effective usage of the balanced scorecard within each and every
department of the company.
Overall performance in different nations
The first and foremost article on the subject matter of balanced scorecard was
presented by Kaplan and Norton during the year 1992 (Freeman, Brandon, 2014). However,
since that period, the usage of the balanced scorecard has developed radically as an important
strategic management tool and is now observed as a globally recognized system. Reports
suggest that this tool is used extensively in private as well as not for profit as well as public
sector firms, of different sizes and categories. Let us say, the results of international survey
conducted by Bain and Company 2008 with 1430 global executives from corporations in a
wide range of industries reflect that the balanced scorecard is the sixth most utilized
management tools among 25 (Hoque, Zahirul, 2014, pp. 33-59). Furthermore, the survey also
replicated that the balanced scorecard received the eight highest rating of satisfaction (rating
was 3.83/5.00) and it was utilized by nearly 50% of the firms surveyed in various major
regions of the world. Strikingly, the highest satisfaction level could be observed in the
healthcare segment. Furthermore, it can also be hereby stated that one of the most vital

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management ideas was the balanced scorecard in the last seventy five years by particularly
the Harvard Business Review.
Analysis
There are several scholars who expressed concerns regarding traditional measures of
performance that solely concentrated on various financial dimensions. Essentially, scholars
before Kaplan and Norton criticised the traditional metrics that laid emphasis on the financial
dimensions and concentrated on short term financial outcomes whilst sacrificing various
prospects of the long term period (Gibbons, Robert and Kaplan, 2015, pp. 447-451). Analysis
of cases reflect that the return on investment (ROI) has several limitations taking into account
intricacies involved in the process of presenting satisfactory definition of both profit as well
as investment. At the time of comparing and assessing the ROI of various firms, it is
obligatory that the corporations utilize identical policies of accounting as well as methods in
respect of st7ock valuation, ascertainment of value of various fixed assets, allotment of firm’s
overheads, ways of treating expenditure associated to research and development. In addition
to this, ROI can also exert influence on managers to choose investments with superior rates of
return (Martello et al., 2016, p. 61).
However, there were other scholars who endorsed the idea that together with the
financial dimensions, it is important to take into consideration different non-financial metrics,
for instance, reduction of cost of process, quality, and times of cycle and on-time deliveries
among many others. The concept of associating measures to stratagem is also not a unique
concept of the balanced scorecard approach. Thereafter, the notion of balance pyramid was
introduced in which vision regarding the balance was integrated into financial as well as non-
financial dimensions of firm’s performance. Balanced scorecard is one of the tool that is used
for analysing performance can help in identification of the mission, vision as well as

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perspectives of the firm, recognition of various stratagems to attain mission and assessment
of the performance of the corporation from specific perspectives to acquire an idea regarding
the way the corporation can get successful (Shen et al., 2016, pp. 127-139). Evaluation of
performance of corporation replicate that the tactic to deliver a balanced as well as
comprehensive structure for the purpose of reviewing a corporation’s performance from
various perspectives such as financial perspective, customer perspective, growth perspective
as well as business along with production procedure perspective. Four different perspectives
entailed in the balanced scorecard can be considered to be interrelated as well as inter-
associated. For instance, the primary objective within financial perspective is profitability
(Martello et al., 2016, p.61). Essentially, profitability can be regarded to be plausible at the
time when the perspective of the customers can meet the objective of satisfaction of
customers.
Detailed analytical review helps in understanding the way balanced scorecard can he
linked to diverse performance dimensions. This helps in understanding the way consumers
perceive the company and its performance, internal perspective of comprehending factors at
which company need to excel at (Martello et al., 2016, p. 61). Besides this, innovation as well
as learning perspective can aid in comprehending whether the company can continue to
enhance and create value. Additionally, this helps in understanding the way it is important to
look at shareholders based on analysis of financial perspective.
Objective
The current study can help in outlining the issues faced by usage of traditional method
of return on investment (ROI) for enumeration of performance of the company. Moving
further, the study replicates the way the modern method of balanced scorecard can help in
overcoming the issues encountered owing to implementation of the traditional method of

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return on investment (ROI). This study intends to present the ways in which the modern
method can help in addressing the issues identified in the process of enumeration of
performance (Perkins et al., 2014, pp. 148-169). Thereafter, this study helps in understanding
various benefits of BSC along with illustration of case studies reflecting successes of
implementation of BSC. In addition to this, this study also intends to throw light on the
limitation of implementation of BSC together with illustration of cases of failure in the
process of execution of BSC (Kerai, Sunita, and Ahmed Saleh, 2017, p. 27).
Conclusion
The above mentioned helps in gaining comprehensive understanding as regards
adoption of modern method of balanced scorecard for the purpose of addressing the issues
identified in case of traditional method that is return on investment (ROI). This study helps in
understanding key features of the traditional performance metrics such as return on
investments along with the criticisms attached to the process of intently focussing only on
monetary figures. Thereafter, the study moves further to illustrate the modern method, the
techniques associated to the new method of assessment of measurement of performance and
proper strategic management of the firm. Furthermore, this study also presents succinct
summary of a specific case to understand restrictions of balanced scorecard mainly from
the Western literature in a bid to ascertain the hurdles related to employment of BSC in
particularly China. In addition to this, the study also presents comparison to previous period,
announcement of a case of failure and success, overall performance in various nations,
analysis as well as objective of the study.