Strategic Management Accounting
3rd edition, 2020
MODULE 1: INTRODUCTION TO STRATEGIC MANAGEMENT ACCOUNTING
Part A: Value 26
Shareholder value 27
Customer value 27
Stakeholder value 27
Which viewpoint should be taken when determining ‘value’? 27
Part B: The strategic management process 30
Strategic management 30
Operational management 32
Part C: The role of management accountants in strategic management 38
Analyst, business adviser, partner 39
Contemporary skills and techniques 40
Part D: The key challenges facing management accountants 43
Challenges 43
Causes of change in the business environment 46
The global economy 47
Technology 54
Sustainability 58
Part E: Analytical techniques available to management accountants 67
Value analysis 68
Strengths, weaknesses, opportunities and threats 70
Internal analysis 71
External analysis 76
Porter’s five forces model 77
© Study Shortcut 2020
www.study-shortcut.com.au
,Strategic Management Accounting
3rd edition, 2020
PART A: Value P26
Value is a broad concept. It can be described as combining resources together in a manner that creates
desirable outcomes.
Shareholder value: generate wealth for the owners of the business
Customer value: create an output that has customer value (need to produce at a price lower than the price the
customer is willing to pay, which leads to profitability)
Stakeholder value: a by-product of generating value in other areas.
To create products or services, an organisation will require community permission to operate, infrastructure,
customers and employees—who will only supply their effort if the wages and conditions are adequate. That is,
the organisation must provide suitable value to its stakeholders.
Types of value for stakeholders
Owners Financial returns, employment / career opportunities (if also employees)
Lenders Receive a return (interest) for the amount loaned to the company (would
destroy vale if the company did not have sufficient funds to repay)
Customers Products that comply with safety, environmental standards etc,
reasonable price, warranty
Suppliers Contracts that generate sufficient revenue for the costs involved, strong
and reliable working relationships
Employees Appropriate reward for the effort contributed to the company (both
monetary and qualitative items, such as recognition and job satisfaction)
Community Groups Products safe to use, sustainable raw materials, recycled at end of use
Which viewpoint should be taken when determining ‘value’? (p27)
Consider an organisational view vs a stakeholder view.
© Study Shortcut 2020
www.study-shortcut.com.au
,Strategic Management Accounting
3rd edition, 2020
Strategic management and strategic management accounting (p29)
Strategic management accounting is aimed specifically at improving organisational outcomes.
Strategic management describes the process by which an organisation decides:
• the direction it will take
• the industry it will operate within
• the types of products or services it will provide
• its structure, systems and processes
• its goals and objectives.
Strategic management accounting aims to provide forward-looking information to assist management in
decision-making.
© Study Shortcut 2020
www.study-shortcut.com.au
,Strategic Management Accounting
3rd edition, 2020
PART B: The strategic management process P30
Defines strategic management accounting and examined the contemporary environment and its impact
on organisations and management accountants
Evolution of management accounting to a strategically focused role.
Creating sustainable value by:
• supporting the formation, selection, implementation and evaluation of organisational strategy; and
• providing information that captures financial and non-financial perspectives for both the internal and
external environments to enable effective resource allocation.
Strategic management accounting – supporting managers p30
Management activities can be classified into the broad categories of:
- strategic management, which focuses on determining the direction and structure of the organisation
and developing plans and objectives for achieving this; and
- operational management, which can be considered as the implementation phase of strategic
management—turning the strategy into reality.
Strategic management
The strategic management process involves:
• addressing key issues, including determining the vision, mission and purpose of an organisation
• setting specific objectives
• creating and implementing the strategies to achieve these objectives.
Strategic analysis Through scanning the internal and external organisational environment
Organisations must continuously analyse the external environment to
understand trends and changes that affect the industry and the economy.
Organisations must also analyse their own resources and capabilities to
understand how they might react to changes in the environment.
Strategy planning and Strategy formulation is the next step in the strategic management process.
choice This includes developing specific strategies, actions and measures.
Strategy implementation Entails crafting an effective organisational structure, organisational processes
and culture.
Strategy evaluation This involves measuring performance, providing feedback and undertaking
continuous review for improvement.
© Study Shortcut 2020
www.study-shortcut.com.au
, Strategic Management Accounting
3rd edition, 2020
Operational management (for middle managers) – p32
Focus on short to medium term tasks
Key differences between strategic and operational management
Strategic management accounting and line managers
Flatter hierarchies have resulted in greater authority and decision making delegated to lower level employees.
Management accountants are required to provide support and training to line managers to enable them to
prepare the information required for the MA to analyse
Strategic management accounting and service industries – p35
The same approaches and tools are used to analyse services, but the main characteristics of services can make
this analysis more difficult. Services differ from products in the following ways:
- A service is intangible, so it can be more difficult to define or measure systematically.
© Study Shortcut 2020
www.study-shortcut.com.au
3rd edition, 2020
MODULE 1: INTRODUCTION TO STRATEGIC MANAGEMENT ACCOUNTING
Part A: Value 26
Shareholder value 27
Customer value 27
Stakeholder value 27
Which viewpoint should be taken when determining ‘value’? 27
Part B: The strategic management process 30
Strategic management 30
Operational management 32
Part C: The role of management accountants in strategic management 38
Analyst, business adviser, partner 39
Contemporary skills and techniques 40
Part D: The key challenges facing management accountants 43
Challenges 43
Causes of change in the business environment 46
The global economy 47
Technology 54
Sustainability 58
Part E: Analytical techniques available to management accountants 67
Value analysis 68
Strengths, weaknesses, opportunities and threats 70
Internal analysis 71
External analysis 76
Porter’s five forces model 77
© Study Shortcut 2020
www.study-shortcut.com.au
,Strategic Management Accounting
3rd edition, 2020
PART A: Value P26
Value is a broad concept. It can be described as combining resources together in a manner that creates
desirable outcomes.
Shareholder value: generate wealth for the owners of the business
Customer value: create an output that has customer value (need to produce at a price lower than the price the
customer is willing to pay, which leads to profitability)
Stakeholder value: a by-product of generating value in other areas.
To create products or services, an organisation will require community permission to operate, infrastructure,
customers and employees—who will only supply their effort if the wages and conditions are adequate. That is,
the organisation must provide suitable value to its stakeholders.
Types of value for stakeholders
Owners Financial returns, employment / career opportunities (if also employees)
Lenders Receive a return (interest) for the amount loaned to the company (would
destroy vale if the company did not have sufficient funds to repay)
Customers Products that comply with safety, environmental standards etc,
reasonable price, warranty
Suppliers Contracts that generate sufficient revenue for the costs involved, strong
and reliable working relationships
Employees Appropriate reward for the effort contributed to the company (both
monetary and qualitative items, such as recognition and job satisfaction)
Community Groups Products safe to use, sustainable raw materials, recycled at end of use
Which viewpoint should be taken when determining ‘value’? (p27)
Consider an organisational view vs a stakeholder view.
© Study Shortcut 2020
www.study-shortcut.com.au
,Strategic Management Accounting
3rd edition, 2020
Strategic management and strategic management accounting (p29)
Strategic management accounting is aimed specifically at improving organisational outcomes.
Strategic management describes the process by which an organisation decides:
• the direction it will take
• the industry it will operate within
• the types of products or services it will provide
• its structure, systems and processes
• its goals and objectives.
Strategic management accounting aims to provide forward-looking information to assist management in
decision-making.
© Study Shortcut 2020
www.study-shortcut.com.au
,Strategic Management Accounting
3rd edition, 2020
PART B: The strategic management process P30
Defines strategic management accounting and examined the contemporary environment and its impact
on organisations and management accountants
Evolution of management accounting to a strategically focused role.
Creating sustainable value by:
• supporting the formation, selection, implementation and evaluation of organisational strategy; and
• providing information that captures financial and non-financial perspectives for both the internal and
external environments to enable effective resource allocation.
Strategic management accounting – supporting managers p30
Management activities can be classified into the broad categories of:
- strategic management, which focuses on determining the direction and structure of the organisation
and developing plans and objectives for achieving this; and
- operational management, which can be considered as the implementation phase of strategic
management—turning the strategy into reality.
Strategic management
The strategic management process involves:
• addressing key issues, including determining the vision, mission and purpose of an organisation
• setting specific objectives
• creating and implementing the strategies to achieve these objectives.
Strategic analysis Through scanning the internal and external organisational environment
Organisations must continuously analyse the external environment to
understand trends and changes that affect the industry and the economy.
Organisations must also analyse their own resources and capabilities to
understand how they might react to changes in the environment.
Strategy planning and Strategy formulation is the next step in the strategic management process.
choice This includes developing specific strategies, actions and measures.
Strategy implementation Entails crafting an effective organisational structure, organisational processes
and culture.
Strategy evaluation This involves measuring performance, providing feedback and undertaking
continuous review for improvement.
© Study Shortcut 2020
www.study-shortcut.com.au
, Strategic Management Accounting
3rd edition, 2020
Operational management (for middle managers) – p32
Focus on short to medium term tasks
Key differences between strategic and operational management
Strategic management accounting and line managers
Flatter hierarchies have resulted in greater authority and decision making delegated to lower level employees.
Management accountants are required to provide support and training to line managers to enable them to
prepare the information required for the MA to analyse
Strategic management accounting and service industries – p35
The same approaches and tools are used to analyse services, but the main characteristics of services can make
this analysis more difficult. Services differ from products in the following ways:
- A service is intangible, so it can be more difficult to define or measure systematically.
© Study Shortcut 2020
www.study-shortcut.com.au
