Melco Management Accounting Research
Discussion Paper Series
No.MDP2019-004

Utilisation of Management Accounting in Major Product Changes: An Analysis of SUWADA Co. Ltd.
July 2019

Yoko Ogushi*
Professor, Sugiyama Jogakuen University
School of Modern Management
17-3, Hoshigaoka Motomachi, Chikusa-ku, Nagoya-city, 464-8862, Japane-mail: ogushi@sugiyama.ac.jp
Yasuyuki Kazusa
Professor Emeritus, Kyoto University
Professor Emeritus, Fukui Prefectural University*corresponding author

The Melco Foundation
Nagoya, Japan
Discussion Paper Series of the Melco Management Accounting Research, in order to promote
the study of management accounting, has published this unfinished paper onto the Web. Pleaseobtain the permission of the author when citing this paper.

Utilisation of Management Accounting in Major Product Changes: An Analysis of SUWADA Co. Ltd.

Yoko OGUSHIi*
Professor, Sugiyama Jogakuen University
School of Modern Management
17-3, Hoshigaoka Motomachi, Chikusa-ku, Nagoya-city, 464-8862, Japane-mail: ogushi@sugiyama.ac.jp
Yasuyuki Kazusa

Professor Emeritus, Kyoto University
Professor Emeritus, Fukui Prefectural University

Abstract: This study explores the role of management accounting in achieving
business transformation, especially when undertaking major product changes. It
applies semi-structural analysis using a case-study approach. The subject of the casestudy, Suwada Co. Ltd., is a small to medium-sized manufacturer with worldwide
sales. This study explores Suwada’s unique style of managing major product changes,
which jointly considers both the costs involved and employee motivation for
upskilling. It ultimately provides a guideline for human resource development byconsidering management accounting practices from the viewpoint of incentive
systems.
Keywords: Business structure transformation, Major product change, Management
accounting, Performance-based pay, Semi-structural approach

1.

Introduction

Why does business structure transformation occur? When revenue is stagnant ordecreasing, companies opt for a more profitable business structure by reducing
labour or manufacturing costs, thereby resulting in overall cost reduction. According
to product lifecycle theory, it is necessary to transform business structures because1businesses are not indefinitely sustainable (Hirch, 1967).
This study clarifies the specific use and contribution of accounting to achievebusiness structure transformation. It is based on a case study involving SUWADABlacksmith Works, Inc. (hereafter Suwada), headquartered in Sanjo city, Niigata
Prefecture. Suwada is a small to medium-sized enterprise with capital of around ¥10
million and 50 employees. The company is known for the manufacture and sale of
120 varieties of high-end nail clippers. The business began as a producer of kitchen
supplies, becoming a producer of high-end nail clippers when the business wasinherited by the current owners around 20 years ago. At the start of reform 20 years
ago, the company was in crisis of bankruptcy. To drive transformation and results,
Suwada implemented a performance-based pay structure. In addition, costmanagement tied to cost reduction was introduced in the manufacturing stage,focusing on hand processing.

2. Literature Review and Methods
As mention the above, Suwada changed their major product with usage toaccounting data even though they face to bankruptcy. This case study covers thefollowing aspects: 1) Transformation of business structure and management
accounting, and 2) Performance-based pay at the manufacturing stage (performance
management system), which is tied to costing.
2.1．The transformation of the business structure
Previous literature regarding the transformation of the business structure discusses
the creation of and diversification into new businesses to achieve synergy with theexisting business. For example, General Electric (GE) attempted to establish abalance in its business portfolio using a proprietary business screen to achievesynergistic effects (Kagono, 1981). Companies use their core technologies andcompetencies as a method of managing core business transformation (Takai et al.,2011). Conversely, it is argued that many companies that have achieved long-term
survival and development have given up hope of such synergistic effects and have
implemented ‘tenchi’ (a change of air), using new projects to prompt transformationin the core business (Mishina, 2007). From the perspectives of strategy andphilosophy, Isobe (1998) recommends diversification without adhering to theexisting business structure. Takeuchi (2015) focuses on talent as a business resource,2

discussing business transformation in the textile industry while focusing on
managers’ roles as entrepreneurs in leading the transformation of the core business.
This study focuses on an important question, how is management accounting
involved in the transformation of the business structure? They were identified factors
for closure by focusing on marginal revenue. This is one example of the use ofaccounting data in the transformation of core business and highlights the potential
contribution of management accounting (Fujiwara & Aoshima, 2016). Hiki (1992)
analysed cases in which business managers’ performance measurement indicators
were managed multi-dimensionally to motivate them to fulfil the goals and missionof each strategic business unit (SBU) within the company. However, apart from these
two examples, there is very little research on the use of management accounting
when implementing business transformation.
2.2．Costing tied to performance-based pay at the manufacturing stage
In terms of cost control at the manufacturing stage, conventional standard costingis considered the ‘cost calculation most useful to control costs’ (Okamoto, 1969, p.
1). However, as Factory Automation(FA) enabling high-mix low-volume production
become mainstream, the following has been suggested: (1) ‘standard costing has
already withdrawn from the main role of cost control at the manufacturing stage’(Kato, 1993, p. 44), ‘(2) about 70% of the manageability of product cost lies in the
product's planning and development stages, and (3) manageability decreases at the
manufacturing stage’ (Miura et al., 1987, p. 24). As such, negative views concerning
the utility of standard costing have been expressed. Since the 1990s, achieving cost
reductions at the manufacturing stage has been central to discussions of cost planning(e.g. Kato, 1993; Tanaka, 1995; Tanaka & Kobayashi, 1995), and standard costinghas been discussed mainly as a method of cost maintenance.
Regarding performance-based compensation systems, Yokota (2004) highlights
the importance of context in combining personnel management and performance
evaluation systems. There is debate over whether linking results-based principles andperformance management systems has an impact on improvements in work
motivation (Genda et al., 2001; Otake & Karato, 2003). However little papers
mentioned performance-based compensation systems refer to costing system.
2.3．Research Method
We use a semi-structural analysis as our research method. Information and data3

were obtained from interviews with two key management-level employees of
Suwada. First, we interviewed Tomoyuki Kobayashi, the Chief Executive Officer
and the head of business structure transformation. Second, we interviewed Kanako
Kobayashi, who is the Chief Financial Officer and is responsible for the preparation
and use of accounting data during any business structure transformation. We also
make use of archived data, such as internal company documents, and so on, andpublic documents such as papers and magazines.
Five interviews were conducted between 16 January 2015 and 15 September 2017,
totalling 15 hours, confirming the content of interviews via email (Table Figure 1).
Date

Place

Interview resporonder

Position

Time

1st

2015.1.16 SUWADA Co. Ltd.,Mr.Tomoyuki Kobayashi CEO

2PM－5:30PM

2nd

2016.7.5

SUWADA Co. Ltd.,Mr.Tomoyuki Kobayashi CEO

2PM－5:30PM

3rd

2016.7.29 SUWADA Co. Ltd.,Mr.Tomoyuki Kobayashi CEO

2PM－5:40PM

4th

2016.8.9

Mr.Tomoyuki Kobayashi CEO

10:30AM－0:30PM

Mis.Kanako Kobayashi

CFO

11:30AM－1:30PM

5th20165.9.15 SUWADA Co. Ltd.,

Mis.Kanako Kobayashi

CFO

11:30AM－2:30PM

SUWADA Co. Ltd.,

Table 1: Interview details

3. The Case Study
3.1．

Overview of Suwada

Suwada's main product is a high-quality nail clipper under the ‘SUWADA’ brand.
It was developed by improving carpentry nippers and sells for over ¥7,000 apiece.
Not limited to the Japanese, customers also include foreign celebrities, such as
former British Prime Minister David Cameron and football player David Beckham(Nikkei Business, 2016). Although there are nail clipper products that can be foundin hundred-yen stores, back orders average two months for these high-quality
clippers, and popular products have an approximately 2-year wait (Echigo Journal,2016). The company is also taking over the original design manufacturing (ODM),
which is the design and manufacture of a product under a consignor’s brand, of nailclippers from Zwilling Henkels GmbH, a luxury cutlery manufacturer (Buildings
Monthly, Editorial Office, 2012). Although small-scale, the brand is known globally
as a high-quality brand and continues to produce high-quality products.
4

3.2． Suwada's History and Business Crisis
Suwada was founded by Mr. Shukusaboro Kobayashi to manufacture cutting
nippers for carpentry tools, and mainly produced nipper-type blades in 1926. In 1950,
after the decrease in demand for cutting nippers, they began producing nail clippers
by taking advantage of nail clipper production technology (Home Living, 2010).
The current Suwada Company was established in 1974 by Yuichi Kobayashi, theeldest son of Shukusaburo, with capital of ¥10 million. Riding the bonsai boom of
the 1970s, Suwada grew by selling bonsai clippers. Later, in 1989, Suwada
developed and sold ‘Kuri kuri bozu’, a peeler able to peel chestnuts. Sales rapidly
increased, and earnings grew quickly. Because of this growth, the company madelarge capital investments such as a large-scale forging facility and the constructionof a company building. In addition, a large amount of money was invested in the
research and development of prototypes directed at the next big product. When thebusiness was taken over from Syukuaburo, the number of employees increased from10 to 27. However, the sluggish Japanese economy following the collapse of the
bubble economy, caused sales to drop sharply.
Despite the deterioration of the business environment, the company failed toreduce costs or negotiate with wholesalers to raise sales prices, and salaries for
employees remained unchanged. Thus, the company began operating at a deficit
from the early 1990s. ‘A major cause of this deficit was labour costs’ (Office J&B,
2012, p. 16). According to third-generation CEO Tomoyuki Kobayashi, ‘Throughthe support of banks, and thanks to our successful products of past years, we
somehow avoided collapse; however, thinking back, particularly high interest rates
were set’. Tomoyuki Kobayashi, who inherited the business during a time of decline,
described the situation as follows for responding to the magazine interview, ‘Despite
annual sales of about ¥300 million, there was a deficit of ¥60 million in a single
period’, and ‘furthermore, at the time of inheriting the business, a previously
undisclosed debt of several hundred million yen came to light’ (Design & Business
Forum, 2007, pp. 103-104).
3.3. The Decision to Transform the Business Structure
When Tomoyuki Kobayashi (hereafter, Mr Tomoyuki) took over the familybusiness in 1997, the primary products were kitchen products (Kuri Kuri Bozu),
bonsai clippers, and nail clippers. Only kitchen products were producing a surplus,
accounting for over 60% of sales. According to Suwada internal documents, the other5

two product lines were in the red. To overcome the deficit, radical business reforms
began soon after Mr Tomoyuki became CEO (Design & Business Forum, 2007). It
was necessary to grow sales or reduce costs, such as labour costs, to avoid
bankruptcy,
Mr Tomoyuki had a business policy of ‘not even a single redundancy’; therefore,
it was necessary to increase sales. Before taking over the business, he was a regularexhibitor at one of the world's leading consumer goods trade fairs, the Ambient
Messe Frankfurt, in Germany. Here, he saw nail clippers of the same quality as those
produced by his company being sold for around ¥10,000. He also learned that only
a few global companies were able to manufacture clippers of the same quality.
Therefore, he predicted that of the three businesses, the high-quality nail clippers had
the highest potential for sales growth.
Since that time, orders for nail clippers have increased. The company believed that
‘if production of back orders is increased, this will be directly connected to sales’(Office J &B, 2012, p. 16).
Although there was potential to increase the sales of high-quality clippers, salesof high-profit kitchen items were decreasing by several percent per annum amidst a
trend that saw ‘peeling chestnuts’ vanish from the list of household chores (First
interview). According to Mr. Tomoyuki, who was familiar with these market trends,‘the production of high-quality nail clippers requires long-term, skilled craftsmen,
and since it takes time to train skilled workers, the manufacture of high-quality
clippers could not be imitated by other companies’ (Kanto Bureau of Economy,
Trade and Industry, 2004, p. 36). That is, because high-quality nail clippers can only
be manufactured using a manual process, barriers to entry are high. It was determinedthat it would be possible to increase market share and generate high profits if Suwada
could manufacture the right amount of products for this market (First interview).
3.4．Barriers to business structure transformation‘To begin with, we published the financial statements and said, "We now have a
deficit. If we continue as we are, we will be crushed."... I explained how to read thestatement to the craftsmen... however, the craftsmen gave no reaction’ (Office J&B,
2012, p. 16). When we asked them to increase the output from approximately 100
high-quality nail clippers each month to 1,000 clippers, the craftsmen said, “that's
impossible”; they had no will to do so’ (Office J&B, 2012, p. 17).
When the company decided to make nail clippers their main business, theyrealized that three issues stood in the way. First, due to the requirement of a high6

level of skill, the number of employees able to manufacture clippers is limited.
Second, they could only be sold to wholesalers at low prices. Third, high production
costs were an issue. Concerning production costs, Mr. Tomoyuki’s predecessor feltthat the production of the clippers ‘takes time and effort and is comparatively
unprofitable’. However, a cost analysis of the business was not performed.
To calculate the correct process cost per hour, Mr Tomoyuki and the plant
manager wrote out the entire process relating to production activities. Then, a
database was created in which each craftsman entered the production time for eachprocess for each lot (100 units). Referring to the salary and working hours of atypically-skilled craftsman, and setting a standard process cost such that it equalled
the work time to complete one process for one lot (100 units) multiplied by labourcosts per hour, the manufacturing costs for each of the three types of nail clipper
products were calculated. It was found that there was significant variation in costs
across the products (Fourth interview). There are many manufacturing processes that
require skill in the production of nail clippers. Despite the majority of manufacturingcosts being labour costs, the wholesaler requires fewer nail clippers than otherproducts, and the cost was therefore low and the selling price was also set as fairly
cheap.
3.4．Business reform using cost analysis
3.4.1. Achieving the suggested retail price
It became clear that sales prices thus far had not exceeded costs. Taking theopportunity for a model change, and based on the new product cost, a new
manufacturer recommended a price of ¥8,000 + tax (Japan Chamber of Commerce,2015). However, pricing rights were not obtained so easily.
‘When the suggested retail price was presented to the wholesalers, they were shocked
by the bullish pricing, and no one purchased them’ (Shinkin 2012, p. 7). ‘There were
no nodding heads, some laughed and asked, “what joke is this?”’ (Japan Chamber ofCommerce 2015, p. 36). Although in trouble, ‘I switched promotions from a pushstrategy to a pull strategy and appealed (to end users) with the ¥8,000 value at
exhibitions within Japan and overseas. Upon using the clippers, it was clear that their
sharpness was considerably superior to (other) existing products’. For this reason,‘the number of users saying, “I want to buy these even though they're ¥8,000”
gradually increased, and users began to seek out our products, and orders came infrom wholesalers once again’ (Shinkin, 2012). ‘Because we were able to only
produce an exceedingly small quantity compared to the rapidly increasing demand,7

we sold preferentially to wholesalers who would comply with our suggested retail
pricing. Furthermore, hearing they were popular among nail technicians, we
maintained the suggested retail price by branding them as a professional productunder the SUWADA brand’ (First interview).
3.4.2. Process review to increase output and reduce costs
Increasing the output was a priority. To do so, it was necessary to increase thenumber of craftsmen, which would also increase labour costs. Because it took over
10 years to train craftsmen capable of handling the difficult process, craftsmen werea bottleneck to increasing output. CEO Kobayashi stated that, ‘In the past, it was
about...100 nail clippers per month. I plan to make that 1,000. However, thecraftsmen said, "that's impossible" and showed no enthusiasm whatsoever’ (Office
J&B, 2012, p. 17). Thus, by reviewing the processes, ‘splitting the processes into 50
stages, and letting craftsmen with different proficiencies take charge of each process,with more difficult work for skilled craftsmen and work according to other levels ofmastery for apprentice craftsmen, optimisation of the process began, and output wasincreased while preserving the same quality as before’ (Daiichi Life Insurance Co,
2014, p. 2). That is, rather than having a single craftsman in charge of all processes,
placing them in charge of only two processes that require highly skilled machining(the blade joining and edging processes), the amount of production will increase by
the amount of time previously spent on other processes. Because labour costs are
fixed, all things being equal, an increase in output leads directly to reduction in
production costs.
However, ‘the process itself did not change at all. All I did was organise theprocesses for efficiency and assign roles. It's rather like reengineering, no?’ (Office
J&B, 2012, p. 17). Explained more definitively, ‘processes were thoroughly
reviewed, the slack tradition in the conventional work of craftsmen was abolished, aprocess manual codified, and concrete numerical targets were set. The factory was
not arranged for flowing work, but rather “stacked work” in which processes werecarried out at the touch of a button, and we changed the mind-set to one where eachprocess operated with responsibility’ (Sanjo Chamber of Commerce and Industry,
2012, p. 46).
By using the database of costs per-process and per-craftsman, an optimal processplan was created to fit the production plan, resulting in increased output and cost
reductions (Fifth interview).
3.4.3.

The introduction of a performance-based pay system8In addition to increased production through the aforementioned processmodification, the acquisition of semi-skilled workers and new talent significantly
increased production.
A standard process was defined as 50–80 processes per product, and each process
was classified by its degree of difficulty. Further, the sales price was calculated lessa certain multiplier to correspond to the level of difficulty present in each process
and it was determined that ‘what the product should cost = process cost’ (third andfourth interviews). To create a motivation to acquire skills, the degree of difficulty
was set and indexed for each process, and ‘process unit prices’ set such that thegreater the difficulty, the higher the unit cost.
For example, as outlined in Figure 2, ¥2,000, which is the ¥4,000 sales price ofthe product less indirect costs of ¥1,000 and material costs of ¥1,000, was allocatedto each process according to the difficulty. Where the total process unit price is¥2,000, by adding a ¥200-unit price for one level of difficulty, a process with adifficulty level of 4 has a unit price of ¥800. Although the craftsmen are aware ofwhich processes are difficult, by visualising this numerically and setting a unit pricefor each process, the value of performing a certain process was made obvious (Fourthand fifth interviews).

Product A

Process 1

Process 2

Process 3

Process 4

Difficulty level

1

2

3

4

Process unit price

¥200

¥400

¥600

¥800

Total
¥2,000

Table 2 Degree of Difficulty of Product A and Per-Process Unit Cost

With this new system, the number of processes handled by employees in a monthmultiplied by the unit cost of the process they led was expected to be greater than
one month’s salary.
Since the performance-based pay was set according to the degree of difficulty ofthe manufacturing process and the number of processes handled, if one acquired theskills to complete more difficult manufacturing processes, the more one will be paid
under performance-based pay (Shoko Research Institute, 2011; Building Materials
Monthly - Editorial Office, 2012). To increase performance-based salaries, it isnecessary to either increase production volume to improve productivity, or to acquire
skills so that high-difficulty processes can be completed. Since these are limited to9how dramatically production can increase in a short space of time, this provided
motivation to acquire higher unit-price skills and be promoted by passing ontechnologies (First interview).
As a result, ‘there was the possibility that even veteran employees’ wages could
stagnate due to slower technical improvements ’ (Japan Organization for Employmentof the Elderly, Persons with Disabilities and Job Seekers 2012, p. 29). Thus, this became
the salary system and productivity improved (Second interview).
3.2.4. Towards personnel evaluations balancing productivity improvements
and skill inheritance
The visualisation of added value and introduction of performance-based pay
through the setting of process unit prices improved productivity and employee
motivation to acquire skills. However, comprehensive efficiency wages createddiscord among craftsmen. As the system became more pervasive, this became moreof a motivation for employees to push forward with their own work rather thancarefully teaching the increasing number of new employees, gradually resulting in
an increase in work-in-process between processes. When a craftsman individually
improves productivity in isolation, work-in-process increases between processes,
and skill inheritance does not take place. The atmosphere in the workplace
deteriorates, resulting in a decrease in productivity and giving rise to safety issues.
Therefore, as an assessment of performance-based pay, ‘in order to create ameasure with which to judge ability, after flushing out all the processes of all
products, tasks that had thus far been taken lightly at the production site, such as
cleaning and tidying, were also counted as processes and made a target for wages. A
mechanism was also created allowing individuals to record, using a computer, detailsof the work they did that day’ (Design & Business Forum, 2007, p. 105). In the latter
half of the 2000s, a system was established to not only improve the productivity andskills of each employee, but also to enhance their contribution to human resources
development and skills training. The system encourages skills acquisition by pairing
seasoned employees with young staff (Second interview). In addition to a
performance-based salary derived from calculating the costs of the manufacturing
processes, it is also able to evaluate time spent on talent development.
In the annual employee appraisals conducted by management, those being
evaluated are first asked to evaluate themselves. Management creates a checklist
based on that self-assessment table and conducts individual appraisals while keeping
process cost x number of cycle times = added value at hand, which can also be said
to be an individual’s results sheets. However, regarding the manufacture of custom10

order products, the time for training and development is eliminated, and a production
system has been established, which is optimal only for skilled workers and tailored
to delivery date and cost (Third interview).
3.2.5．Achieving business structure transformation
As a result of the series of efforts described above, Suwada has escaped fromoperating at a deficit, and the high-end nail clipper business has overcome the threeproblems of 1) selling at a low price on the market, 2) producing in small quantities,
and 3) incurring high production costs.
Figure 1 shows changes in the sales and business structures, assuming 100 sales
in 1997. It reveals that the nail clipper business has grown to equal 60% of thecompany's sales composition, that is, the achievement of transforming a businessstructure to a business that focuses on high-quality nail clippers as its main business.

Figure 1. Sales Distribution Ratio*

4.

Discussion

11

As we have seen thus far, in 1997, it was necessary to choose whether to increase
sales (S1→S0) or reduce costs (C1→C0) to avoid bankruptcy (See Figure 2).

Figure 2. Net sales and marginal profit
Mr Kobayashi, who sought to increase sales rather than cost reductions directly
linked to personnel reductions, predicted that luxury nail clippers could become thenext major business based on information from overseas markets. However, as
described above, there were three problems: 1) they could only be sold at low prices
on the market, 2) only a small number could be produced, and 3) production costs
would be high. To overcome these issues, standard costs were calculated based on
the process cost of each product as follows:・Standard cost for each product = Σmaterials costs + Σstandard process cost +overhead costs
The aims of calculating the standard cost of each product are as follows:121) Determine the profit-yielding price: standard product cost + profit = suggested
retail price.
2) Cost reduction: understand the process operating time and process cost for eachworker during the manufacturing process as well as examine and create an optimal
process plan.
3) Identify the three points necessary to provide basic data quantifying the degree ofprocess difficulty.
By displaying the process cost calculations for each product together withindividual performance evaluations directly linked to performance-based pay in atable (see Table.3), process costing was successful in motivating skills acquisitionand productivity improvements.

Process cost calculation

Personal
Evaluation

Product A

Process 1

Process 2

Process 3

Process 4

Total ¥

Difficulty level

1

2

3

4

Process price： ¥

@200

@400

@600

@800

2,000

Craftsman a

0

0

0

80 cycle- time

64,000

Craftsman b00

80 cycle- time0

48,000

Craftsman c

80 cycle- time

80 cycle -time00

48,000

Accumulation of process¥16,000¥32,000¥48,000¥64,000

price（200×80）（400×80）（600×80）(80×800)

Table.3 Process cost calculation with personal evaluation (Conceptual diagram)

Although the improvement of productivity and the training of skilled workers is
an important core competency for the company, when the performance-based pay
was strictly applied, the balance between the two broke down and the working
environment deteriorated. Furthermore, each process optimally advanced processing
only at an individual level, and a large volume of in-process inventory was generated.
Therefore, in addition to the system of performance-based pay through productivity
improvements and skill acquisition, a system evaluating the ability of employees totrain new employees was also established.
Furthermore, because Suwada's production process centred on manual processing,13

that is, the processes were hardly mechanised, flexible recombination of processes
could be achieved. Conversely, since the product is characterised by a small numberof parts, cost reduction during the design and planning stage is difficult, and cost
reduction was therefore performed at the manufacturing stage.
Figure 3 shows the cost reduction mechanism for the manufacturing stage at
Suwada.

Figure 3.

The cost reduction mechanism at the manufacturing stageThus, the process cost calculation adopted by Suwada also has an individual
performance evaluation aspect. Combining with performance-based pay, 1) afunction that motivates productivity increases and skill acquisition, and 2)
recombining of flexible manufacturing processes, have made it possible to reduce
costs at the manufacturing stage. Thus, transformation of the business structure wasachieved.

5.

Summary and Remaining Issues

To make high-quality nail clippers the primary business at Suwada, it was
14necessary to train and develop craftsmen and increase output while reducing the
manufacturing cost. By using the manufacturing cost of each process, calculated bysub-dividing the manufacturing process, as unit prices constituting performancebased pay, the value of skills could be visualised and shown to employees. It wasclarified that the mechanism closely linking process cost and performance-based pay,
namely, the adoption of costing with a built-in motivation toward productivity
increases, and skill contributed to achieving the transformation of the businessstructure. This is also concrete proof that management accounting can positively
impact a business (Itami & Aoki, 2016).
The case study firm systematically manufactures labour-intensive products andhas a high value-added created by its craftsmen. By clarifying concretely how they
have used management accounting when transforming the business structure, wehave been able to explain one element of the use and contribution of management
accounting in the transformation of business structure. Furthermore, it was also
understood that negative effects from performance-based pay could be mitigatedthrough a new appraisal system and through the promotion of skill transfer.
The method described above can be applied when analysing the transformation ofcompanies with a similar business structure, manufacturing process, and market
characteristics as Suwada. Examples include luxury watches, lens polishing, andlarge-scale radio telescopes.
However, there are challenges in generalising the function and utility ofmanagement accounting in the Suwada case to the transformation of businessstructure. To acquire further knowledge, it is recommended to expand research sites
to perform empirical research on companies with characteristics different from thoseof Suwada.
Moreover, more than 20 years after Suwada began its reforms, it continues to seek
additional business structure transformations. Since facing near bankruptcy almost
twenty years ago, attempts to disclose statements of accounts to employees andsharing detailed business information about the company continues, andmanagement accounting changes can still be seen. In recent years, further
diversification of the revenue base has being promoted, such as attracting customers
to an open factory and opening an on-site retail shop. (Fourth interview). The
generalisation of the contribution of management accounting to the transformationof business structure described above, and an explanation of the change in Suwada's
calendar year are to be reviewed as future issues.
Acknowledgements: We would like to express our deep gratitude to Mr Tomoyuki
15

Kobayashi, CEO and Representative Director of Suwada Co. Ltd. as well as to Ms
Kanako Kobayashi of general affairs.
Note: This research has received partial grants-in-aid from JSPS research grant
JP17K04046
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