Week 1 Flashcards
MAS Acronym
Management Accounting Systems
MAS Define
The formal procedures and routines an organisation puts in place to collect and communicate information in order to support the implementation of business strategy.
MAS is used to assist
effective planning and monitoring
effective management control
quality decision-making
effective planning and monitoring
Planning: the development of plans that support the strategic objectives of a business
Monitoring: the checking of performance to ensure plans are being met
effective management control
the means by which managers influence other members of the organisation to perform in ways that support the organisation’s strategies
quality decision-making
Decisions are made that support achievement of strategic objectives
Why do organisations need MAS’s?
Because the elements that make up organisations need to be managed and organised. Very few organisations will be able to achieve strategic objectives without some formal process to manage the complex and diverse elements it comprises. The MAS provides relevant, timely information essential for successful INTERNAL management.
Examples of internal and external reports - photo in favourites 8/3
“I’m drunk in the back of the car”
The common theme in all definitions of MAS is:
“Supporting Strategy”
“Supporting Strategy”
The fundamental role of an MAS is to provide information to support strategy implementation and achievement. MAS support the management and coordination (control) of individual personnel, complex and diverse activities and associated scarce resources. The 3 elements are not independent of each other i.e. Individuals use resources to carry out the activities that make up their job.
Individual Personnel
with different skills
with different motivations for being part of the organisation
with different values
Scarce resources
inputs of production: land (natural resources)labour& capital
Organisations must make choices between different items because the resources necessary to fulfil their strategies are limited.
Planning + example
Plans should indicate how individuals, resources and activities will be coordinated.
An example of an MAS procedure that supports the planning function? - Preparation of a Production Cost Budget
Monitoring + example
Will check whether individuals used resources effectively to carry out the activities they were meant to.
An example of an MAS procedure that would support the monitoring function?
Variance Analysis based on the Production Cost Budget
Management control + example
Individuals should be influenced to use resources to carry out activities in ways that support strategy achievement.
An example of an MAS procedure which supports this function?
Performance Measurement
Decision making + example
Individuals make quality decisions about how to use resources and which activities to carry out
CVP Analysis
Why can’t businesses use Financial Accounting System (FAS) information for internal management?
Financial Accounting information has a different purpose. It is used in the preparation of Financial Reports for business governance, NOT internal management. Financial Accounting information is too aggregated, not timely, often not relevant for internal management. Therefore internal management requires it’s own Accounting System - the MAS
How can behaviour be influenced?
In two broad ways
Directional influence on behaviour
Motivational influence on behaviour
Directional influence
MAS’s can direct individuals to towards behaviours valued by the organisation (and away from behaviours not valued) by:
MAS’s can direct individuals to towards behaviours valued by the organisation (and away from behaviours not valued) by:
Successfully communicating organisational goals/objectives
Providing performance targets that reflect valued behaviours
Providing information to support decision making and target achievement
Providing feedback on behaviour
Motivational influence
MAS’s can motivate individuals to actually undertake valued behaviours by providing performance targets that are easily understood and challenging but achievable and rewarding target achievement.
Mapping MAS design - photo in favourites 8/3
I knew you were trouble when you walked in
Corporate strategy
Concerned with where to compete
Which industry/ies should we be in
Business (unit) strategy
Two elements of business strategy that are useful when designing MAS’s:
Business (unit) planning
Basis of competitive advantage
A number of different concepts of “Strategy” exist.
Corporate strategy
Business (unit) strategy
Basis of competitive advantage
Cost leadership > Differentiation
Business (unit) planning
The approach by which a business intends to achieve its strategic objectives
Hold, Build, Harvest, Divest (Boston Consulting Group)
Hold,
Objective is to increase market share
Build,
Objective is to protect market share
Harvest,
Objective is to maximise short-term profit
Divest
Objective is to withdraw from the business
Boston Consulting Group Model
example - favourites 8/3
“You call me up again just to break me like a promise / So casually cruel in the name of being honest”
Different business plans and MAS design
Business Planning (build, hold, harvest, divest) differ on a number of dimensions (in addition to KSF’s and performance objectives and goals), influence MAS design
For example:
Degree of environmental uncertainty
Market share expectations
Significance of externalities (factors outside the control of the organisation
Business competitive advantage
The way in which a business intends to achieve its plans
Generic Competitive Advantage options
Cost Leadership
Differentiation
Niche Market
Cost leadership
achieving low costs relative to competitors
How does a company achieve low costs?
Economies of scale
Productivity and efficiency improvements
Elimination of waste
Tight cost control
Differentiation
offering products and services that are perceived by customers as being superior and unique relative to those of its competitors
Could differentiate based on
Brand loyalty Function Image Customer service Quality
Niche markets
smaller, targeted customer group
May have differentiation or cost leadership strategy
Competitive advantage and MAS design
Porter’s Five Forces model highlight the key influences on company strategies. Thus, Cost Leaders and Differentiators differ on a number of dimensions which influence MAS design. i.e.:
Importance of cost management vs other factors (e.g. quality)
Degree of environmental uncertainty
Importance of marketing
Porters competitive forces model - photo 8/3
“You made a rebel of a careless man’s careful daughter / You are the best thing that’s ever been mine”
Business competitive advantage model
photo 8/3
“You can plan for a change in weather and time / But I never planned on you changing your mind”
Different Business Strategies may vary along several dimensions, which influence MAS design
Two fundamental dimensions are:
Key Success Factors (KSF’s)
Strategic Performance Objectives
Key Success Factors (KSF’s)
the factors that each organisation in an industry must be able to perform successfully in order to compete and achieve strategy
Strategic Performance Objectives
ends/results that management desires to achieve in implementing business strategy
KSF’s for Cost Leaders and Differentiators 8/3
“You said it was a great love, one for the ages / But if the story’s over, why am I still writing pages?”
KSF’s represent the most important areas on which an MAS should focus its procedures/routines/techniques for:
Planning Monitoring plans Evaluating performance Comparing performance against competitors Directing/motivating behaviour Providing feedback Rewarding performance
The importance of understanding business strategy for MAS design
An MAS should be unique and specific to its organisation’s business strategy. Different Business Strategies have different KSF’s and Strategic performance objectives. Therefore we cannot design one MAS to suit ALL businesses. A business’s MAS needs to be custom-designed to suit its business strategy
