Post on 22-Dec-2015
Managerial Accounting-Strategic Cost Analysis--Spring 2002
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Advanced Cost Management
Professor William F. O’Brien, MBA, CPA
Fall 2001
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Introduction
• Cost Management• Financial•Non-Financial
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Financial Management Evolution
DATADATA
INFORMATIONINFORMATION
ANALYSISANALYSIS
IMPLEMENTATIONIMPLEMENTATION
Today’sCorporateFocus is on
Results!
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CompanyF/S
Users
EconomicDecisions
Financial Impact
(useful &relevant)
Financial Accounting Model
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Managerial Accounting Model
Plan
Implement
Monitor
Adjust AccountingInformation
Communication Environment
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Managerial vs. Financial Accounting
Managerial
• Internally oriented• Prospective• Operational and financial
focus• Timely• Not required • Non-GAAP• Relevant• Sub-unit orientation
Financial
• Externally oriented• Historical• Financial focus only • Accurate• Required • GAAP• Objective• Entire entity orientation
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Four Management Functions
…another Perspective• Strategic Management• Planning and Decision Making• Management and Operational
Control• F/S Preparation
• How is Cost Management Info Used?
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Strategic Cost Management
• Strategic cost management is the development of cost management information to facilitate the principal management function--strategic management.
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Factors Influencing Today’s Business
Environment• Global competition• Manufacturing and IT advances• Customer focus• Revised organizational
structures• Social, political and cultural
changes
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Contemporary Mgt. Techniques
• Benchmarking• Total Quality Management (TQM)• Continuous Improvement• Activity-Based Costing (ABC) and Mgt. (ABM)• Reengineering• Theory of Constraints (TOC)• Mass Customization• Target Costing• Life-cycle Costing• The Balanced Scorecard
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Professional Organizations
• Regulatory• IRS• FTC•SEC• FASB•CASB
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Professional Organizations
• Associations• IMA•SMA, Canada•AICPA• FEI• IIA
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Ethics
• Lack of ethics--everyone loses• South Florida Bermuda
Triangle of Ethics•Sensormatic•W.R. Grace•Bausch and Lomb•Sunbeam
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Ethics and You
• You will face an ethical challenge• It could impact
• Your job• Your family• Your relationships• Your financial stability• Your physical well-being
• You have only ONE reputation...
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Accounting Business Skills
“The What” • Business Perspective• Organizational Focus• Bias for Action• Communication Excellence• People Proficiency
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Financial Management Guidelines“The How”
• Cc• KTT• MBWA• R ƒ R3
• responsiveness• reliability• relevance
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Just Say “No” to...
A
B
C
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Scarlet Letter of Accounting
• Lacks Reality
• Distraction
• Lacks Cost Mgt.
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Ansari: SMA
• Strategic Triangle (QCT)•Competition based on quality, cost & Time
• Mgt. Acctg. Triangle (TBC)• Impacts technical, behavioral & cultural
aspects
• Mgt. Acctg. Links Strategy with Action• It is not an end unto itself• It is an integrating tool
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SMA, cont.
• The two triangles are dependent upon each other
• This process is a framework to ensure that our management accounting tools possess the attributes necessary to achieve our strategic goals
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SMA, cont.
• QCT Triangle•Self evident
• TBC Triangle•Provides Technical insight• Encourages Behavioral changes•Supports Cultural beliefs
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Strategic Analysis
• Cost…an economic sacrifice
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Competitive Strategy
• Strategic Planning: Mission Stmt.
• Cost Analysis•Shift from Stewardship to
Catalyst•Shift from Corp. Cop to Business
Partner
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Porter’s Value Processes
• Core Competency• Cost Advantage
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Types of Competitive Strategy
• Cost Leadership…cost advantage
• Differentiation…core competency
• Focus…pre-requisite to the first two
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Sustainable Competitive Strategy
Process• Complete a SWOT Analysis and
CSF Identification• CSF Measurement• CSF Reporting
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SWOT Analysis
• Internal Factors•Strengths•Weaknesses
• External Factors•Opportunities• Threats
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Critical Success Factors
• CSF’s can be defined in a variety of ways
• ie…something that must be done well right now!
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A Changed Perspective
• Results of Operations vs. operating information for results
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Balanced Scorecard
• A Vehicle for Reporting CSF’s• 4-Parts• More on Nov. 6, 2001
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Value Chain Analysis
• Multiple Approaches•Porter’s approach…see next slide•BCL approach
•Drivers• Cost• Core Competency
•MAG 41 approach
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Porter’s Value-Chain• Developed in 1985 by Michael
E. Porter in Competitive Advantage
• Highlights Cost Advantages and Distinctive
Capabilities• Value Chain Model• Value Chain Elements
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Value Chain Modelfrom Michael E. Porter’s Competitive
Advantage
Firm Infrastructure (General Management)
Human Resource Management
Technology Development
Procurement
Inbound Logistics
Ops. Outbound Logistics
Sales & Marketing
Service and Support
PRIMARY ACTIVITIES
SUPPORT ACTIVITIES
Custom
er Value
Cus
tom
er V
alue
Margin
Mar
gin
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Value Chain Elements• Customer Value
Added• Margin Orientation• Primary Activities
• Inbound Logistics• Operations• Outbound Logistics• Sales and Marketing• Service and Support
• Support Activities• Firm
Infrastructure• Human
Resources
• Tech. Development
• Procurement
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Strategic Cost Mgt. Implications
• Non-traditional reporting• Long-term focus• Cross-functional perspective
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Four Key Tools
• SWOT Analysis• CSF’s• Balanced Scorecard• Value Chain Analysis