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Planning and Control & the Role of Management Accounting (What is…
Planning and Control & the Role of Management Accounting
What is Management?
Planning
Establishing objectives
Developing plans
Control
Ensuring org stays on course to meet objectives
Appropriate/corrective actions
Decision making
Choosing best courses of actions
Weighing relative costs & benefits
Strategic Management
Senior management role
Formulation and implementation of strategies
Strategy: the general direction of an org - setting objectives, ID strategies, evaluate possibilities
SWOT analysis
STEEPLE analysis
Tactical Management
Middle management role
Converts broad business unit strategies into detailed action plans
Allocating resources & responsibilities
Translates strategic plans to tactical plans
Operational Management
Concerned with implementation of tactical plans
Focuses on day-to-day basis
E.g's: purchasing plans, advertising in media etc.
Levels of strategy
Corporate Strategy
Head offices management of portfolios of business divisions
Invest? Yes/No?
Close? Yes/No?
Business Unit Strategy
Concerned with individual divisions and how they compete in their product markets
Competitive advantage (better products, lower prices)
Marketing is heavily involved
Functional Strategy
Related to individual departments (functions) such as:
Production, Marketing, Financial and HR
Porters Five Forces Model
(Michael Porter, 1985)
Used to help understand nature and intensity of competition
Useful in formation of strategy
Degree of current rivalry
Relative bargaining power of suppliers
Relative bargaining power of customers
Potential entry in the market by new competitors
Availability of substitute products/services
Relevant in business and corporate strategies
Porters Value Chain
A tool to help org's develop competitive advantage by better understanding the activities performed and the value they hold
Primary activities
Inbound logistics
Operations activities
Outbound logistic
Marketing & sales
Service (e.g. installations, repair, warranty etc)
Secondary activities
Procurement (purchasing)
HRM
Technology development (R&D)
Infrastructure (functions)
Information required at each level
Tactical Level
Info related to monitoring and control
Info is normally more historical and internal than strategic info
For use by middle managers
Short term (1/4ly, 6mnth etc)
Operational Level
For use by front line managers and supervisors
Info on specific tasks, purchase orders, inventory etc
Detailed internal info for very short term use
Strategic Level
Customised, external, future oriented info. Broad and general
Market info, competitor info, business environment (STEEPLE)
Focus on long term planning for whole org
For use by senior management
Management Information Systems (MIS)
Hard and software used to distribute info to managers enabling them to undertake planning, control and decision making
Collects and processes financial data
Financial and management accounting info prepared from the info provided here
MIS normally include
Accounting system
Production planning & scheduling info
Inventory records
Purchase & sale order processing records
HRM records (employee, appraisals etc)
Marketing data (market research, customer database etc)