Strategic Investment Decisions : The Importance of Scm. A Comparative Analysis of 51 Case Studies in U.K., U.S. And German Companies

John Shank (in this special edition) summarises the argument for complementing a capital budgeting approach to investment decisions with a broader strategic cost management (SCM) accounting approach incorporating three additional tools __ value chain analysis, cost driver analysis and competitive advantage analysis. This article first discusses how this new framework might be assessed empirically and then examines the application of these techniques in practice, drawing on 51 case studies of strategic investment decision in 44 companies in Britain and Germany (including U.S. subsidiaries in both countries). There are substantial international differences, German companies placing much more emphasis on strategy in their approach. In general, compared with successful companies, successful companies placed proportionately five times as much attention on the issue of competitive advantage, almost three times as much on value chain considerations and twice as much on cost drivers; commensurably less attention was placed on traditional capital budgeting techniques. Finally, we draw conclusions on the role of the finance function and of such techniques within the context of strategic planning