Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Management Accounting > Strategic management: Accounting and the balanced scorecard > Flashcards

Strategic management: Accounting and the balanced scorecard Flashcards

1
Q

What two main sections does management tend to include?

A
  • Strategy (top-down managerial requirements)

* Control (goal-related feedback and adjustments)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What has been the rise in strategy?

A

• Reform to strategic management thinking from the 1990s

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Who can be credited with the move to more strategic management? and state aim of papers

A
  • Michael Porter and his competitive strategy texts
  • Adapting a firm to its competitive environment and trying to gain a competitive advantage
  • Two types of competitive advantage- lower cost and differentiation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is strategy?

A

The determination of the basic long term goals of a firm and the adoption of courses of action and the allocation of resources necessary to carry out these goals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the strategic planning framework?

A
  • Step 1-Establish mission, vision and objectives
  • Step 2-Undertake a position analysis (internal capabilities)
  • Step 3- Identify and assess the strategic options
  • Step 4- Select strategic options and formulate plans
  • Step 5- Perform review and control
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are some strategic options that may need to be decided upon in the framework?

A

• Product differentiation or cost leadership (Porter)
Miles and Snow:
• Defender position-limited product range(leading on cost, quality, service)
• Prospector position- new product innovation, market development e,g, apple

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What parts of the Strategic planning framework can management accountants have the most impactful input?

A

• Steps 4+5 mainly but can input in the others as well

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What do management accountants need to be more concerned with to facilitate a strategic planning process?

A
  • The external environment
  • Developing methods to help outperform competitors
  • Monitoring and successfully implementing business strategies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the strategic management accounting definition by CIMA? despite no comprehensive framework for SMA

A

“A form of management accounting in which emphasis is placed on information which relates to factors external to the firm, as well as non-financial information and internally generated information.” (CIMA, 2005)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How many SMA tool is there and give one example. What must all these tools have?

A
  • 12 tools inc Balanced scorecard BSC

* Tools must have an environmental (market) orientation, focus on competitors, long term and forward-looking

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the similarities and differences between traditional and strategic MA?

A

• Both: set out obj, quantify into specified actions/plans and have systems devised to measure and control actions
• Differences : -internally formed obj compared with plans vs performance and targets based on competitors
-financial vs financial and non-financial

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is the issue with traditional Performace measurement systems?

A
  • Measurements are not in tune with strategic objectives
  • Measurements are not customer driven
  • Financial measures are too late for any corrective action and encourage a short term focus
  • Many key non-financial performance indicators are ignored e.g., customer satisfaction
  • Measures are often used for punishment rather than for learning e.g. no promotion if sales target not met
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a Performance Measurement system?

A

A process of assessing progress toward achieving predetermined goals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What are traditional financial indicators?

A

Return on Investment (ROI), Residual Income (RI), Economic Value Added (EVA), and profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the issue with traditional financial indicators?

A
  • Tendency to rely on short term views
  • Distorted perception- historical data used to make future plans and decision making and controlling
  • Time lag from preparation to use - Management accounting needs timely data
  • Qualitative information not taken into account therefore unbalanced perceptions
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How created the BSC?

A

Kaplan and Norton in 1992

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What are the aims of the BSC?

A
  • Designed to combat short-termism of traditional accounting systems
  • Links short-term performance & long-term strategy-and turn this into operational terms
  • Different companies will have different scorecards owing to different strategies
  • Applicable to both for-profit and not-for-profit organisations- mostly used in healthcare and manufacturing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is the BSC?

A

A strategic planning and management system used to align business activities to the vision and strategy of the firm by monitoring performance against strategic goals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the benefits of a BSC?

A
  • Improve organizational performance if successfully implemented (CIMA) by measuring what matters
  • Increase focus on strategy and results-all metrics in one place
  • Align organization strategy with workers on a day-to-day basis- something to work towards
  • Focus on the drivers key to future performance
  • Improve communication of the organization’s vision and strategy to all employees
  • Flexible model
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are the main original components of the BSC?

A
  • Financial- how to create value for shareholders
  • Customers- how to create customer value
  • Internal business perspective- what processes to excel at to drive value
  • Learning and growth- how to sustain innovation and create future value
21
Q

What are the stages in constructing a BSC?

A
  • Answering the questions of the 4 components
  • Leads to the determination of critical success factors
  • Measured through critical measurements (KPIs)
22
Q

Explain the critical success factors (goals)?

A
  • 4 goals/ targets per component e.g. customers
  • Stretch targets are hard but achievable
  • e.g. internal business target of having satisfied employees measured by critical measurement of 5% staff turnover
23
Q

What are the interconnections between the 4 components?

A

•Upward chain of cause and effect
-Improvements in learning and growth (e.g. Employee
Skills )lead to
- Improved internal business practices (process quality and process cycle time) leading to
- Improved customer satisfaction (on-time delivery and satisfaction) leading to
- Improved financial performance (ROCE)

24
Q

How is the financial perspecitve measured?

A

3 main areas to measure are:
•Revenue growth: Increase number of new products
• Cost reduction: Cut back on labour, materials, overheads, etc
• Asset utilization: Increase usage of assets

25
Q

How is 1) revenue growth, 2) cost reduction and 3) asset utilisation measure?

A
  • % revenue increase from new products
  • % reduction in cost per unit produced
  • Return on investment
26
Q

How can the financial perspective be applied to an organisation?

A

ADD

27
Q

What are the main objectives and measures of the customer perspective?

A
  • Increase customer satisfaction- Customer survey satisfaction ratings
  • Improve delivery times- Percentage of on-time deliveries
  • Increase customer retention- % growth in business from existing customers
  • Increase market share- % of market share
  • Increase customer profitability- Customer profitability analysis
28
Q

What needs to occur in the customer perspective

A

•

•

29
Q

What are the key objectives and measures of the in ternal business perspective?

A

•Innovation: % of sales from new markets
-Develop new markets and customers

•Operations: Relationship between inputs and outputs(measure error rate e.g. in tax returns)
-Increase process efficiency

•Post-sales service: % of customer requests handled with a single call
-Increase service quality

30
Q

What are the delivery performance measures?

A

• Delivery cycle time-wait time plus throughput time
• Throughput time- time to convert raw materials to completed products
-Queue time-time it takes to be worked on
-process time-only value-adding time
-inspection time
-move time
•wait time -time to get production started from order

31
Q

What is the calculation for manufacturing cycle efficiency? and meaning of values

A

=Value-added time/ manufacturing cycle time
• The higher the value the btter
• < 1 means there are non-value added time aspects in the production process

32
Q

What is looked at in the learning and growth perspective?

A
  • Focuses on what infrastructure the business needs in order to create long-term growth and improvement
  • Business unlikely to meet long term targets using today’s tech and capabilities
  • L&D comes people, systems and firm procedures
33
Q

What are the main objectives of L&D?

A
  • Improve employee capabilties
  • Improve information systems
  • Motivation and empowerment
34
Q

What are the measures of 1) Improve employee capabilties, 2) improve information systems and 3)motivation and empowerment?

A

1) -Training courses
- Employee satisfaction surveys
- Sales revenue generated per employee
2) % of customer-facing staff having on-line access to customer and product information

3) -% of employees achieving personal goals
-Number of suggestions implemented per
Employee

35
Q

What is a strategy map?

A

A newer framework for describing and implementing strategy – a ‘management system’

36
Q

Explain a strategy map?

A
  • Based on the 4 perspectives of the BSC
  • Describes the cause – and – effect linkages of a particular strategy, using the BSC-said to aid strategy by visualising the relationships between quadrants
  • Starts from the top (destination) and works down
37
Q

What are the Kaplan and Norton five guiding principles for implementing the BSC ?

A

1• Translate strategy into operational terms
2• Align the organization to the strategy-rather than too many objectives
3• Make strategy everyone’s job-employees in all departments
4• Make strategy a continual process – strategy management meetings and the learning process-adapting the BSC with the environment
5• Mobilising change through executive leadership

38
Q

What are the four key benefits of the BSC?

A
  • Translating the vision
  • Feedback and learning
  • Business planning
  • Communicating and linking
39
Q

What is the ‘translating the vision’ benefit of the BSC?

A
  • Clarifying the vision into specific goals/ terms

* Gaining consensus

40
Q

What is the feedback and learning benefit of the BSC?

A
  • Articulating the shared vision0seeing how one element impacts another
  • Supplying strategic feedback
  • Facilitating strategy review & learning
41
Q

What are the business planning benefits of the BSC?

A
  • Setting targets and applying specific measures
  • Aligning strategic initiatives
  • Allocating resources to the right places
  • Establishing milestones
42
Q

What are the communicating and linkages benefits of the BSC?

A
  • communicating & educating
  • setting goals
  • linking rewards to performance measures
43
Q

What are the limitations of the BSC?

A
  • Assumes cause and effect in an intuitive way but unproven-AAA hasn’t yet found relationship
  • Relative importance of different perspectives is unclear-how to balance the different needs
  • Implies a multiple stakeholder perspectives but in reality shareholder interests remain dominant
  • Non-financial measures are not evaluated in monetary terms-can be difficult for financially centred managers but also a positive change
44
Q

What are the potential pitfalls of the BSC?

A
  • Lack of well-defined strategy
  • Too much focus on the lagging measures
  • Use of generic measures
  • Self-serving managers
45
Q

Explain the pitfall of a lack of a well-defined strategy?

A
  • BSC relies on a well-defined strategy and understanding of linkages between strategic objections and metrics.
  • Without this, the strategy could fail
46
Q

Explain the pitfall of too much focus on the lagging measures?

A

Focusing on only the lagging measures may cause a lack of priority or opportunity for the leading measures.

47
Q

Explain the pitfall of use of Generic Metrics?

A

Do not just copy metrics from another firm. Identify the measures that apply to your strategy and competitive position. e.g. tesco implemented a successful BSC

48
Q

Explain the pitfall of Self-serving managers

A

Managers whose goal is to achieve a desired result in order to obtain a bonus or other self-reward so ignore the BSC??

Management Accounting (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions