Lecture 19+20 - Strategic management accounting Flashcards
(!!!) Describe strategic management accounting / SMA in general & critiques to it
General:
- Understanding business
- Results seen in specific context
- Look outside firm
- Look beyond 1 year acc. period
- Important to incl. non-financial
- Long term: View investment & depreciation different
- Increase MA-role understanding
- Survival by competitiveness
- Expand time & space
- Should be continuously controlled & revised
- Cost reduction initiatives either strengthen, no effect or weaken competitive position: Rule of thumb to revise weakening one
- Value added compared to competitors: Not just floor
- Compete on other than price
- Flexible & quick response if accounting closer to market
- Influenced other management disciplines & led to reflection
- Def. limit to financial info, yet today incl. non-financial PM
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Requirements:
- Understand customer added value: VA + Functionality analysis
- Utilize cost structure: Turn into competitive adv.: Eg. FC to VC
- Pro-active truth: Eye for poss. improvement of performance
Important for endurance, pragmatic truth & willingness to adjust
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Critiques:
General:
- Increased risk & complexity
- Lack implementation: Resist change
- Often not understood
The strategic planning process:
- Assume strategies are plan-able & achieved as planned
Competitor analysis:
- Match competitor > innovation
- Dont consider alliances
- Dont include intuitive, immeasurable aspects
The value chain perspective:
- Links recognised & acted upon without accounting analysis
Describe Bromwich’s economic eye
General:
- Limit SMA to financial info relative to competitors
- Highlight economic consideration in strategy
- Good strategy dont equal profit
Three analysis of company possibilities:
- Commodities: Dansk: Råvare
- Multi-product costs
- Economies of scope
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Barriers of entry:
General:
- Crucial determinant of industry
- Important for strategic behavior
- Protect competition
- Earlier ignored by MA
- Can be favorable cost advantage
Sources:
- Economies of scale: Within range
- Product differentiation
- Absolute cost advantages: Sunk cost or first mover
- Capital requirements
- Strategic pricing
- R&D
- Maintenance of excess capacity
- Vertical integration
- Sales network
(!) Describe the SMA components
Strategic positioning:
General:
- Financial models to support DM: Budgets & investments
Understand:
- Market
- Customer value
- Value chain: Suppliers
- Competitors: Cost structure & financial power
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Getting customer & market focus:
Customer profitability analysis:
- Current & future
Competitor analysis:
- Who
- Marketshare
- Core competencies
Brand value accounting:
- Customer perception
- Possible investment
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Strategic decision support:
Revisit profit & loss accounts:
- Investment & longterm thinking
Revise contribution analysis:
- Synergies
- Main beam > Cont. margin
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Strategic cost management:
- ABC –> ABM: ABC not strategic
- Quality costing
- Life cycle costing
- Target & Kaizen costing
- Environmental costing: Future
Describe a way to analyze determination of product strategy & assumptions
General:
- Used to determine amount of 2 characteristics & product price
- Market share by different bundle
- Combination of characteristics
- Competitive advantage if cheapest bundle of characteristics
- Market share depend on customer taste & price
- Customer taste: Elasticity of demand related to characteristics
- Customer can diversify: Buy diff. product mix w. same charac.
- Line represent larger quantity & therefore more money spend
- New technology create new poss.
- Only introduce new products if better or equal to existing
- Price reductions due to cost reductions by accountants
Assumptions:
- Contestable market
- No barriers of entry
- No new entrants
- Unlimited supply
- All combinations allowed
- Two characteristics
- Uniform preference spectrum
(?) Describe multi product costs
General:
- Firm prod. dissimilar products
- Ray average cost: Constant mix
- Assume costless entry and exit
- Higher volume require demand
Economies of scope:
- Crucial for competitive advantage: Yet difficult
- Mixture cheaper than specialized production
- May outweigh economies of scale: Must be considered
- Eg. Joint products, common info-system or shared service
Describe the four class initiatives
(!) Describe changes in the accounting role
- Important in strategic decisions: Attribute costs & their performance over time
- Reports must include both cost & strategy info
Describe the product package
General:
- Product package of objective attributes or characteristics
- Offered to consumers
- Good: Bundle of characteristics
- Yield by commodities given value at market
- Central for market fit & product diversification
- Marketshare: Match attribute to cust. taste & comp. supply
- Demand for goods underlying characteristics
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Attributes:
- Commodities
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Characteristics:
- Elements differentiating product
- Appeal to customer
Examples:
- Cost saving technology
- Cost structure
- Quality
- Sustainability
- Warranty arrangements
- After sales service
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Differentiation:
Horizontal product differentiation:
- Differ in detailed specification
- Customer has budget for group
Vertical product differentiation:
- Differ in total quality/price
(!!) Describe the relevance of strategic cost management
- Companies function/buy/sell with others
- Match what to sell & how to produce it
- Adapt: No matter strategic school
- Cost analysis: Predict competitor behavior
- Value chain: Synergies
- Both resource access for cost reductions & manouvreability
(?) Describe some SMA practices
Practices:
Attribute costing:
- Product as package of attributes constituting commodities
Brand valuation:
Competitor cost assessment:
- Eg. Economies of scale
Competitive position monitoring:
- Eg. Market share
Competitor appraisal:
- Based on published financial statements
Life cycle costing:
- PLC
Quality costing:
- Prevention cost
- Appraisal cost
- Failture costs
Strategic costing:
- Ansoff
- Relevant costs
Strategic pricing:
- Price elasticity
- Economies of scale
Target costing:
- Kaizen costing
Value chain costing:
- Value chain analysis
- Integration
Other:
- ABM
- Time management
- Benchmarking
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Most popular:
- Strategic pricing
- Competitor accounting
Least popular:
- Strategic costing
- Quality costing
- Value chain costing
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Strategic performance measurement:
- BSC: Mission & vision as center
- Intellectual capital statement
- EVA
- Shareholder value
