Week 6: Strategic Management Accounting Flashcards
What is strategy?
(the) broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals
What are the 4 models for strategy?
1) Classic model
2) Systematic model
3) Evolutionary model
4) Processual model
What is the classic model?
Assumes there is no bias, managers will always be rational with the aim of profit maximisation.
What is the processual model?
Processual theory understand that humans are not like robots and can not be fully rational at all times. They understand that decisions have bounded rationally due to unavoidable bias. Strategies are not deliberately planed, but emerges.
What is the evolutionary model?
This method does not plan too far ahead. Aims to keep costs low and and not guess what’s going to happen in the next 10-15 years.
What is the systematic model?
Systemic argues that decisions are not rational. Managers decisions are based on experiences, cultures, upbringing, etc.
Differs per country, due to differing cultures.
Why may conventional management accounting no longer fit for purpose?
- Focuses too much on internal and not extrenal
- Too much focus on financial measures.
- Unable to provide timely information for decision making
Why was Strategic management accounting made?
In response to traditional management accountings limitations. Rather than focus on short-term financial performances, looked at long term measures and non-financial perspectives.
Who was the Value chain perspective introduced by (SMA) ?
Porter 1985
What is the value chain perspective?
1) Series of value-creating activities, from supplier to customer
Has components such as r&d, marketing, customer service.
Argues traditional MA starts to late and finishes too soon.
How is SMA market orientated?
1) Target costing
2) Strategic pricing
3) Tries to understand customer.
SMA criticism?
- Unclear boundaries- what counts as an SMA practice
- No single agreed definition
- Too much emphasis on compeition- looking sideways rather than ahead.
Strategy/ Accounting- double paradox:
Strategy will be most useful when accounting numbers will be an accurate reflection on future numbers. But if the future is going to be the same as the past, what is the point of creating a strategy.
What is benchmarking (SCM):
identify, compare to improve key activities or business processes
What is Business Re-engineering (BPR) (SCM)?
involves examining current business processes and making substantial changes to achieve:
1) Cost reduction
2) Simplification
3) Improved quality & customer satisfaction
