Defining strategy and strategic management accounting - Coggle Diagram
Defining strategy and strategic management accounting
Strategic Management Accounting and Value-Based Management
4.) Techniques learned in previous units, such as
profit and shareholder value planning and control
, can be used as a foundation for strategic management accounting.
3.) Plays a
strategic role in formulating
supporting the overall strategy of an organization
by developing an appropriate
framework for performance measurement.
5.) Profit planning involves techniques like
cost behavior analysis, CVP analysis, flexible budgets
pricing to determine the cost structure
profit objectives of a business
2.) SMA goes beyond traditional management accounting
by incorporating external information about competitors and exploiting linkages in the value chain to gain a competitive advantage
1.) Strategic management accounting (SMA) involves the provision and analysis of management accounting data
about a business and its competitors
helps in developing and monitoring business strategy
6.) It is important to
consider the limitations of basic profit planning techniques
short-term profit increases may come at the expense of long-term profit
, and there may be no analysis of the use of capital resources.
Basic profit planning techniques often
focus inwardly and fail to consider external factors
, such as how competitors may react to price cuts.
increasing shareholder wealth by using an integrated framework for measuring and managing businesses
, with the goal of creating long-term value for shareholders.
Strategic Management Accounting and Positional Strategies
can also be
linked to the value chain
, which consists of
business functions that add value
Value-chain analysis aims to
value-creating activities to lower cost
Some criticism exists regarding strategic positioning models, with the argument that companies can succeed by being in the middle and failure results from incompetence.
prioritize new product development
over traditional costing.
Depending on the strategic position adopted, different techniques in management accounting should be emphasized.
Strategies to consider include being a
, concentrating on
pursuing a differentiation strategy
For companies seeking cost leadership,
standard costing with flexible budgets
may be used for
manufacturing cost control
face increasingly sophisticated customers
have access to product knowledge
can search for the best deals online
Technological advancements and reduced trade barriers
have intensified competition between firms
cost management is crucial
, and it should
include feedforward features like target costing
Strategic management accounting focuses on a
, including its
Cost management depends on the
, and the
product life cycle's length
The Balanced Scorecard and Strategic Performance Management
evaluates how well the business is running
if it provides what customers want.
The learning and growth perspective
looks at improving skills, training, leadership
knowledge to create value
The customer perspective
examines customer satisfaction
how customers perceive the organization.
form the company's vision
and can be
represented in a strategy map
top-level financial objectives
, considering shareholders' perspective.
trategic objectives are identified within each perspective
, with targets set and regular measurement to determine success.
The Balanced Scorecard consists of
learning and growth
are used to assess the organization's performance
, with a focus on leading measures that can be influenced and make a difference.
The tool was created based on
their examination of successful businesses
clear vision and strategy in key areas
recommended to concentrate on a small number of objectives
rather than having too many objectives.
strategic performance management tool
developed by Dr. Robert Kaplan and Dr. David Norton in 1992.
improves communication through a common language
leads to a better-performing organization
in tune with its business strategy.
The Balanced Scorecard and Strategic Performance Management Continued
Longer throughput time
leads to longer delivery times
anufacturing cycle efficiency
compares throughput time to delivery time.
aim to reduce throughput time
to significantly decrease delivery time.
total time required to convert raw materials into finished products
. It includes
MCE below 1 indicates that a significant portion of production time is spent on non-value added activities
like inspection and moving materials.
elivery cycle time
time between receiving an order from a customer
shipping the completed order
. Shorter delivery times can give a company a
, such as
0.5 or 0.25
, means a
higher proportion of production time is wasted on non-value added activities
rformance measurements in manufacturing
three specific ones
Delivery Cycle Time
Manufacturing Cycle Efficiency
Some Criticisms of Balanced Scorecard
Another criticism is the
absence of a mechanism to monitor competitor actions
, which can be important for strategic decision-making.
The balanced scorecard also
does not propose a specific remuneration system
, which may
limit its effectiveness in incentivizing performance
One criticism is the
lack of clear cause-and-effect relationship
non-financial and financial indicators
. It questions whether improvements in non-financial areas, like
customer satisfaction, always lead to positive financial outcomes.
The balanced scorecard
has been subject to criticisms
, especially from academics.
Despite these criticisms, the widespread adoption of the balanced scorecard can be attributed, at least in part,
to the effective rhetoric used by its proponents.