introd - 1 strategic management accountants dynamic business partners
TRANSCRIPT
Introd - 1
STRATEGIC MANAGEMENT ACCOUNTANTS
Dynamic Business Partners
Introd - 2
Peter Drucker made the following comments:
“Accounting has become the most intellectually challenging area in the field of management, and the most turbulent one.”
Accounting is the primary discipline attempting to answer questions … “few executives yet know how to ask: What information do I need to do my job? When do I need it? And from whom should I be getting it?”Drucker, Peter E., “Be Data Literate—Know What to Know,” The Wall Street Journal,
December 1, 1992, p. A16.
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Should Imake this product?
How can Iimprove marketshare?
Is therea better way
to provide this Service?
What willthis change cost me?
MANAGEMENT DECISIONS
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MANAGEMENT vs. FINANCIAL ACCOUNTING
Management Internal focus Decision driven Emphasis on
future Detailed Segment
evaluation Subjective (if
relevant)
Financial External focus G.A.A.P. driven Historical
orientation Aggregate Entity-wide
evaluation Objective
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Strategic position analysis--an
organization’s basic way of competing to sell
products or services.
Strategic position analysis--an
organization’s basic way of competing to sell
products or services.
Value chain analysis--the study of value-
producing activities, stretching from basic raw materials to the final consumer of a product or service.
Value chain analysis--the study of value-
producing activities, stretching from basic raw materials to the final consumer of a product or service.
Strategic Cost ManagementStrategic Cost Management
Cost driver analysis--the study of factors that cause or influence costs.
Cost driver analysis--the study of factors that cause or influence costs.
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STRATEGIC MANAGEMENT ACCOUNTING
“Accounting exists within an business primarily to facilitate the development and implementation of business strategy...
Three important generalizations emerge from this way of viewing management accounting:
Accounting is not an end in itself, but only a means to help achieve business success
Specific accounting techniques or systems must be considered in terms of the role they are intended to play
In evaluating the overall accounting system... the key question is whether the overall fit with strategy is appropriate.”
Shank, John K. and Vijay Govindarajan, Strategic Cost Management, The Free Press, Macmillan, Inc., 1993, pp. 6-7.
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EMERGING THEMES OF BUSINESS AND MANAGEMENT
Highly Competitive Environment
Advanced Technologies
Continuous Change
Process Orientation
De-regulation
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Competition takes place on
these dimensions.
Competition takes place on
these dimensions.
Quality
Price/cost
Service
CompetitionCompetition
Diversity
Time
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Mission - the basic purpose toward which activities are directed.
Mission - the basic purpose toward which activities are directed.
Missions, Goals, and StrategiesMissions, Goals, and Strategies
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Goal - a definable measurable target or
objective based on the organization’s
mission.
Goal - a definable measurable target or
objective based on the organization’s
mission.
Missions, Goals, and StrategiesMissions, Goals, and Strategies
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Strategy - a course of action that will assist in achieving one or
more goals.
Strategy - a course of action that will assist in achieving one or
more goals.
Missions, Goals, and StrategiesMissions, Goals, and Strategies
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Cost leadership
Product or service
differentiation
Focus on market
niche
Porter’s Strategic PositionsPorter’s Strategic Positions
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MANAGEMENT DECISION - MAKING
CYCLE
Planning
Organizing
Action
Control
Establishment of goals
Developing means toachieve goalsReview of results
Revision of plans
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Seat customer and offer menu Take customer order Bring order to kitchen Bring food to customer Replenish beverages Determine and bring bill to customer Collect money and give change Clear table
An Activity (A Unit of Work)An Activity (A Unit of Work)
Waiter or Waitress Activity
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Structural cost drivers are fundamental choices about the size and scope of
operations and technology employed in delivering products or services to customers.
Structural Cost DriversStructural Cost Drivers
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For a chain of discount stores--
Determine the size of the stores
Determine the size of the stores
Determine the type of
construction
Determine the type of
construction
Determine the location
Determine the location
Determine the kind of
technology employed in
the store
Determine the kind of
technology employed in
the store
Structural Cost DriversStructural Cost Drivers
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Organizational cost drivers are choices concerning the organization of activities and choices concerning
the involvement of persons inside and outside the organization in decision making.
Organizational Cost DriversOrganizational Cost Drivers
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Deciding to work closely with a limited number of suppliers.
Providing employees with cost information and authorizing them to make decisions.
Deciding to reorganize the existing equipment in the plant so that sequential operations are closer.
Organizational Cost DriversOrganizational Cost Drivers
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Designing components of a product so they can only fit together in the correct manner.
Deciding to manufacture a low volume product on low-speed, general-purpose equipment rather than high-speed, special-purpose equipment.
Organizational Cost DriversOrganizational Cost Drivers
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Activity cost drivers are specific units of
work (activities) performed to serve customer needs that
consume costly resources.
Activity Cost DriversActivity Cost Drivers
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CustomersCustomers
Served by activities
ActivitiesActivities
ResourcesResources
Activities consume resources
CostsCosts
Resources cost money
Activity Cost DriversActivity Cost Drivers