Strategic Management

Strategic Management Accounting Purpose of management accounting

• To allow for the allocation of costs for
 Strategic Management internal and external financial reporting

 Understanding Competitors • To provide relevant information when

and Customers making management decisions
• To aid in planning, control, and evaluation
 Cost Leadership
of financial performance
 The Balanced Scorecard
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Strategic Management Understanding Competitors and Customers

Strategic management accounting Information needed in the competitive

• The process of provision and analysis of analysis
management accounting data
Objectives
• Recognition that managers may have some
freedom to choose Strategies
• More concerned with business Assumptions
performance relative to competitors
Resources and capabilities

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 Understanding Competitors and Customers Understanding Competitors and Customers

Benchmarking Steps in benchmarking

Decide which activity to benchmark

Select a competitor who is the market leader in the area to be

benchmarked

Source: https :/ / b2b.wien.info

Decide on the appropriate measurements to be used in defining
• The process of measuring the organization’s performance levels

operations, products and services against Determine the competitor ’s strengths and compare these with the
those of competitors recognized as market company’s own record

leaders
Use the information collected as basis for an action plan
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Understanding Competitors and Customers Understanding Competitors and Customers

Customer Profitability Analysis Customer Profitability Analysis

• Assesses the profitability of each customer
or type of customer
• Similar to an income statement, but the
amounts in the categories are classified
according to the type of customers
• Shows the relevant sales revenues, the
basic cost of creating or buying-in the
goods and services supplied, and any
general selling and administration costs of
their business

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 Cost Leadership
Product
Manufacturing
Planning
Target
costing
Total life-cycle costing
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Cost Leadership
Target costing
• A market-based approach
to managing costs
• In this process, managers from different
departments would be assigned to achieve
the target cost
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Cost Leadership
Total life-cycle costing
After-sales • Based on the fact that costs are not only
service incurred during production
• Concerned with tracking and reporting
Kaizen costs relating to a product from the
costing beginning to the end of its life
• Can be used to manage costs
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Cost Leadership
Kaizen costing
Source: http:/ / www.contegix.com
• The process of continual cost reduction that
Source: http:/ / www.des ign-iv.com
occurs after a product design has been
completed and is now in production
• Involvement of employees is essential in
this type of costing
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 Cost Leadership Cost Leadership

Value Chain Analysis Value Chain Analysis

• Each link in the value chain represents an
activity that will incur costs and affect
profits
• To achieve a cost advantage, the costs
associated with each activity must be
identified and examined whether they can
eliminated

Source: https :/ / www.preplounge.com

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The Balanced Scorecard The Balanced Scorecard

• Both a management system and a

measurement system
• Provides a clear description of what
companies should measure in order to
“balance” the financial perspective

Source: http:/ / s trategic-wis dom.com

Source: http:/ / cities s peak.org

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 The Balanced Scorecard The Balanced Scorecard

Guidelines Criticisms of the Balanced Scorecard

• The organization should set major goals • The business may use too many measures
and define performance measures which in developing the balanced scorecard
demonstrate that the goals are being
achieved • Businesses with limited budgets may
• Kaplan and Norton emphasize that the
struggle with using the balanced scorecard
goals and measures for the internal • The balanced scorecard may be limited
business process, customer, and learning
and growth perspectives must be ultimately
related to the financial perspective
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