Digital Transformation of Finance Function and Shift Strategy

Authored by: Xiaomei Guo , Liqun Yuan , Wei Gao

The Routledge Companion to Accounting in China

Print publication date:  September  2018
Online publication date:  September  2018

Print ISBN: 9781138678538
eBook ISBN: 9781315558899
Adobe ISBN:

10.4324/9781315558899-11

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Abstract

Digitalization changes the nature of products and the process of value chains, and it has significant implications on how firms attain and sustain competitive advantage. Digitalization has forced many firms to revisit their strategy and business model to sustain in a complex business environment. In the digitalized world, it is recognized that the traditional way of thinking about strategy is limited in the amorphous, unbounded and fluid business network (Iansiti and Levien, 2004a; Teece, 2007). How should strategy be redesigned, and in particular, how can the accountants help to support the strategy? To answer this question, the authors present a case study of Midea, one of the top five electrical appliance manufacturers in the world. Midea has shifted its strategy since 2011 and has built a new business model incorporating the philosophy of internet and digitalization. During that process, its finance function was redesigned and many innovative practices were introduced, including efficiency management and finance platforms. In particular, the authors discuss the financial practices, construct a process model of the shift strategy and explore the links between the financial practice and the strategy. The insights from the case may shed some light on the management accounting practice that functions in the digital economy and provides some actionable practice for the practitioners.

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