A 14907 - Strategic Management Accoun6ng (2018-2019) Session 7 - - PowerPoint PPT Presentation

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A 14907 - Strategic Management Accoun6ng (2018-2019) Session 7 - - PowerPoint PPT Presentation

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A 14907 - Strategic Management Accoun6ng (2018-2019) Session 7 Strategic Management Accoun6ng Paul G. Smith B.A., F.C.A Course Objec6ves Students will learn to use a range of tools for cos2ng, decision making, planning and controlling and

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A 14907 - Strategic Management Accoun6ng (2018-2019)

Session 7 Strategic Management Accoun6ng

Paul G. Smith B.A., F.C.A

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Course Objec6ves

A 14907 Strategic Management Accoun6ng

Students will learn to use a range of tools for cos2ng, decision making, planning and controlling and consider their applicability within the context of Strategic Management. They will also be able to read and understand a financial statement prepared according to Interna2onal accoun2ng Standards

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Course Overview

  • 1. Financial Vs Management Accoun4ng
  • 10. Investment Decisions
  • 2. Accoun4ng Principles and Valua4on Criteria –

Current and Fixed Assets

  • 11. Opera4onal Decisions
  • 3. Accoun4ng Principles and Valua4on Criteria –

Current and Fixed Assets ..Cont’d

  • 12. Exam
  • 4. Financial Statement Analysis
  • 13. Target Cos4ng and Life Cycle Cos4ng
  • 5. Performance Measurement and Cost

Accoun4ng

  • 14. Servi4za4on and Cost Management
  • 6. Exam
  • 15. Performance Measurement, Sustainability and CSR
  • 7. Strategic Management Accoun4ng
  • 16. Voluntary Disclosure and Balanced Scorecard – Case Study
  • 8. Budgets and Performance Management
  • 17. Presenta4on and Discussion of Case Study
  • 9. Pricing Decisions
  • 18. Exam

PT PGS LS PGS A 14907 Strategic Management Accoun6ng 4

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Teaching methods

  • Pre-reading
  • Research
  • Lecture
  • Discussion
  • Exercises
  • Assignments
  • Q&A
  • Final test
  • Office hour each week

Ground Rules

  • 1. Be on 6me and don’t leave early
  • 2. Mobiles and laptops off
  • 3. Don’t come and go
  • 4. Hand in assignments on 6me

Please text or e-mail for an appointment beforehand Memo - Rules

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Reference material

1. Go to www.koganpage.com 2. Choose the format you’d like: a. Paperback £34.99 b. Ebook £29.16 c. Print + ebook bundle – the best of both worlds for only a few pounds more £43.8 3. Enter discount code UDTSLIUC30 at the checkout

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Special price for LIUC students: Get 30% off this course textbook - save up to £10.00

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INTRODUCTIONS

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Introduc6ons

  • Briefly introduce yourself (Max 2 minutes)

– Name – Where you are from – First degree – Experiences of business, management, accoun6ng – What you want to do ager LIUC – What you hope to get out of this course

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SESSION 1 OBJECTIVES

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Objec6ves of Session 1

At the end of this session students will understand the differences between:

  • Strategic Planning,
  • Business Planning and;
  • Budge2ng

And the areas in which Management Accoun1ng can provide support for each of these and in par2cular the role of budgets in the Business Planning Process and the different approach to budge2ng

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Session Overview

Topic Brief Outline Time (mins) What is Strategic Planning? Corporate strategy, Long-range Planning, Strategic

  • Planning. Purpose, vision, mission, goals, objec6ves,

ac6on plans What is Business Planning? Business Planning. What is a Business Plan and why write

  • ne?

What is Budge6ng? The Annual Budget: The func6ons and uses of budgets; the budget sejng process-different approaches; prac6cal budget sejng; flexible budge6ng; zero-based budge6ng; ac6vity based budge6ng The Role of Management Accoun6ng in suppor6ng these Strategic Choices/Decisions: Pricing, Business Development, new product development, mergers and acquisi6ons, investment appraisal Monitoring and repor4ng: variance analysis, excep6on repor6ng, margin analysis, customer profitability

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WHAT IS STRATEGIC PLANNING?

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Strategic Planning & Management

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“Would you tell me, please, which way

  • ught I to go from here?”

“That depends a good deal on where you want to get to,” said the Cat. I don’t much care where-” said Alice. “Then it doesn’t maNer which way you go,” said the Cat. “-so long as I get somewhere,” Alice added as an explana2on. “Oh, you’re sure to do that,” said the Cat, “if only you walk long enough.”

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What is Strategey?

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… the long-term direc6on of the organiza6on (Johnson, Whijngton and Scholes 2012) … the determina6on of long-run goals and objec6ves of an enterprise and the adop6on of courses of ac6on and the alloca6on of resources necessary for carrying out these goals (Chandler 1962) … the con6nuous process of making entrepreneurial (risk taking) decisions systema6cally and with the greatest knowledge of their futurity; organizing systema6cally the efforts needed to carry out these decisions; and measuring the results of these decisions against the expecta6ons through organized systema6c feedback ( Drucker 1973)

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Why Plan?

Reac4on to Change Pain

An4cipatory Reac4ve Crisis Management

Slow Fast Low High

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Plans

Strategic Plan Business Plans Business A Business B Opera1ng Plans/ Budget Opera6ng Plan/Budget Business A

Management Objec1ves

Opera6ng Plan/Budget Business B Management Objec6ves Business A Management Objec6ves Business B Employee Objec1ves Employee Objec6ves Business A Employee Objec6ves Business A 5 – 10 Years 1 Year 3 – 5 Years 1 Year 1 Year and 3 – 5 Year Company/ Group

Profits Rewards Investments/Dividends

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Purpose/Vision/Mission

  • Guiding Philosophy

– Core beliefs and values

  • Business
  • Life/society
  • Have not should have
  • Should not be violated

– Purpose

  • Reason for existence
  • Reason for being
  • Never achieved – should

last 100 years

  • Tangible Image

– Mission

  • What it wishes to

accomplish

  • Achievable but stretch
  • Measurable

– Vivid descrip6on

  • Picture of what it will look

like when accomplished

  • Made alive
  • Made engaging

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Should arract or repel Should have a finish line

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Mission

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“….achieving the goal, before this decade is out, landing a man on the moon and returning him safely to earth” President J.F. Kennedy 1961

July 20,1969

What comes next though ?

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Purpose - Shell

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Shell’s purpose is to power progress together with more and cleaner energy solu2ons. Our strategy is to strengthen our posi2on as a leading energy company by providing oil and gas and low-carbon energy as the world’s energy system changes. Safety and social responsibility are fundamental to our business approach. Shell will only succeed by working with customers, governments, business partners, investors and

  • ther stakeholders.

Source: Annual Report 2017

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Purpose - BASF

Purpose

We create chemistry for a sustainable future

Principles

As strategic basis for our success in the market

Values

as guidelines for our conduct and ac6ons

We live our corporate purpose by:

  • Sourcing and producing

responsibly

  • Ac6ng as a fair and reliable

partner

  • Connec6ng crea6ve minds

to find the best solu6ons for market need

  • We add value as one

company

  • We innovate to make our

customers more successful

  • We drive sustainable

solu6ons

  • We form the best team
  • Crea6ve
  • Open
  • Responsible
  • Entrepreneurial

A 14907 Strategic Management Accoun6ng 20 Source: BASF Report 2015

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Mission - Google

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Google’s mission is to organize the world’s informa2on and make it universally accessible and useful.

Source: Google Corporate Website

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Mission - Facebook

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Founded in 2004, Facebook’s mission is to give people the power to share and make the world more open and connected. People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what maNers to them.

Source: Facebook Corporate Website

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The Wheel of Compe66ve Strategy

23 Source: Michael Porter Compe66ve Strategy A 14907 Strategic Management Accoun6ng

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Compe66ve Strategy - Context

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Source: Michael E. Porter Compe66ve Strategy

Strengths Opportuni6es Weaknesses Threats

SWOT Analysis

Rela6ve Compe66ve Advantages/ Disadvantages

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Compe66ve Strategy

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Source: Michael E. Porter Compe66ve Strategy

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Compe66ve Strategy

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Source: Michael E. Porter Compe66ve Strategy (Adapted from)

Profitability/ Return

  • n Investment

Market share

Don’t Get Stuck in the Middle

Differen6a6on Cost Leadership e.g. FIAT, GM, Toyota e.g. Ferrari, Aston Mar6n e.g. Bri6sh Leyland

Design Brand Technology Customer service Dealer network

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Tradi6onal Product Life Cycle

(Parern however, does not always hold)

Introduc6on Growth Maturity Decline

Industry sales Time

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Corporate Strategy Matrix

Exis4ng products New Products Exis6ng markets Product penetra6on strategy Product development strategy New markets Market development strategy Diversifica6on strategy

A 14907 Strategic Management Accoun6ng 28 Source: Igor Ansoff 1968

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Industry Structure/Posi6on

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Leader ♯2/3

Follower Niche player

Entrant

Market Evolu4on Growth Early Maturity Maturity Decline Nature of Conflict Win/Win Limited Warfare Win/Lose Lose/Lose

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Compe66ve Strategy

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Source: Boston Consul6ng Group

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Company Posi6on/Industry Arrac6veness

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Arributed to: General Electric, McKinsey and Company, and Shell

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Resources and their alloca6on

Resources Tradi4onal (Karl Marx) Today Strategy Physical Land + Technology Financial Capital Debt/Equity Human Labour + Intellectual property

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Configure resources to meet

  • rganiza6onal
  • bjec6ves
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Mission- Strategic Intent vs Strategic Fit

  • Strategic Intent

– Leverage resources to reach goals – Outlearn compe6tors in building new advantages – Devalue compe6tors advantages – Broad portolio of advantages – Invest in core competencies – Business-corporate consistency from allegiance to the intent

  • Focus on future
  • Strategic Fit

– Trim ambi6ons to match resources – Search for sustainable compe66ve advantage – Search for niches – Build balanced cash portolio – Invest in product/market – Consistency between corporate and business level through conformity of financial objec6ves

  • Focus on present

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Source: Hamel and Prahalad 1989

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WHAT IS BUSINESS PLANNING?

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What is a Business Plan

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A Business Plan serves 3 func6ons:

  • 1. A plan to develop ideas about how the

business should be conducted by examining the company from all perspec6ves such as marke6ng, finance and opera6ons

  • 2. A retrospec6ve tool against which a business

person can assess a company’s actual performance over 6me. For example it can form the basis for an opera6ng budget

  • 3. To raise money
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What should a Business Plan include?

  • Market and sales strategy (target markets,

product mix, pricing etc)

  • Produc6on, service and quality strategy

(Opera6ons planning and cos6ngs)

  • Research and development strategy (new

products, product replacement etc.)

  • Organiza6on and management strategy

(controls, skills and talent)

  • Financial strategy (Funding and rewards)

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WHAT IS BUDGETING?

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Topics covered

  • Business planning and the role of budgets in that

process.

  • The func6on and uses of budgets.
  • The budget-sejng process – different

approaches.

  • Prac6cal budget-sejng.
  • Flexible budge6ng.
  • Zero-based budge6ng.
  • Ac6vity-based budge6ng.

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Why budget?

  • Budge6ng is an important part of the

management process – the way in which an

  • rganiza6on:

– sets goals – plans ac6ons – allocates resources – controls – measures performance – rewards people.

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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The planning and control process

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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The budget-seing process

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Levels of budge4ng

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Planning is Mul6-dimensional

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  • Geography
  • Product/service
  • Market segment

Country A Country B Country C Product 1 Product 2 MNCs SMEs

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Approaches to budge4ng

  • Top-down approach
  • Borom-up approach

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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The budget prepara4on sequence

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Budget prepara4on worked example

  • See worked example 5.1.

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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The sales budget

  • The first step will be to produce the sales
  • budget. This will detail both the physical

quan6ty of sales and their financial value. In the example this is a rela6vely straightorward task as these figures are given:

  • 180,000 units × $20 =

$3,600,000

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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The produc4on budget

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Direct material usage budget

Tubing (8m × 184,000 units) = 1,472,000m Sheet metal (0.7m² × 184,000 units) = 128,800m²

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Direct material purchases budget

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Machine usage budget

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Fixed overhead budget

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Cash budget

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Budgeted income statement

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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Budgeted balance sheets

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Source: Accoun6ng and Finance for Managers Mar Bamber & Simon Perry

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THE ROLE OF MANAGEMENT ACCOUNTING IN SUPPORTING PLANNING AND BUDGETING

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Strategic Management Process

A 14907 Strategic Management Accoun6ng 57 Source: Modified from Ward 1992

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Factors influencing the Accountant’s Involvement in the Strategic Management Process

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Source CIMA Research Report 2015

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Strategic Management Accoun6ng Techniques

A 14907 Strategic Management Accoun6ng 59 Source: CIMA Research Report 2015

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Key Techniques used in Prac6ce

A 14907 Strategic Management Accoun6ng 60 Source: CIMA Research Report 2015

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REQUIRED READING AND RESEARCH

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Required reading and research

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  • Reading -required
  • Accoun6ng and Finance for Managers – Chapter 5 Business

Planning

  • Reading – op4onal
  • Compe66ve Strategy – Techniques for analyzing Industries and

Compe6tors – Michael E Porter

  • Management Accoun6ng in Support of the Strategic Management

Process – Chartered Ins6tute of Management Accountants (CIMA) Research Report 2015.

  • Exercises
  • Comprehension Ques6ons 1 -7
  • Exercises 5.1 – 5.4
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SESSION SUMMARY, VALIDATION AND OVERVIEW SESSION 8

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Session Summary

  • Introduc6ons and course objec6ves
  • Strategic Planning: Purpose, vision, mission,

goals, objec6ves

  • Business Planning: Business Plans
  • Budge6ng: Budget process, flexible budge6ng,

zero-based, ac6vity based

  • The role of Management Accoun6ng in

suppor6ng:

– Strategic choices/decisions – Monitoring and repor6ng

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Overview Session 8

  • Budgets and Performance Measures

– Responsibility centres – Standard cos6ng and variance analysis – Performance management in investment centres – Non financial performance measures – Beahavioural aspects and external influences

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Session Valida6on

  • What do we mean by strategic planning?
  • What is the difference between Statements of

Purpose, Vision and Mission?

  • What are the differences between Strategic

Plans, Business Plans and Budgets?

  • What is a SWOT analysis?
  • Describe the budget sejng process
  • How does Management Accoun6ng support the

Strategic Management Process?

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