This website has been established to support the book Management Accounting in Support of Strategy, by Graham S. Pitcher, and published by Business Expert Press.
The book and website complement each other to provide a range of information and resources useful to students studying management accounting and strategy, as well as practicing accountants. The book explores strategy models and management accounting techniques within a strategic management framework. See detailed contents and preface below.
Graham S. Pitcher is currently a consultant in professional and higher education and a senior lecturer at Nottingham Business School in the United Kingdom. Following a successful career as a management accountant and senior manager in manufacturing and service sector organizations, Graham moved into professional education teaching accounting and business strategy to accountants, marketers, lawyers, and human resource professionals. He has held senior positions in private sector higher education institutions, such as the Dean of BPP Business School and Director of Business Education. He has authored numerous articles on management accounting targeted at students and practitioners, and continues his research interests in management accounting in support of strategy.
Management Accounting in Support of Strategy explores how management accounting can support the strategic management process of analysis, formulation, implementation, evaluation, monitoring, and control. If the management accountant is to add value to the business they need to understand how the business works. The toolbox available to the management accountant does not just contain the accounting techniques, but also includes the strategy models and frameworks described in this book. Armed with this array of tools the management accountant is well placed to add significant value to the business.
The reader will gain an understanding of the strategic management framework, strategic models and tools, and how management accounting can support the strategic management process. It will be beneficial for undergraduate and postgraduate course students studying strategy or management accounting. The book will also enable practicing accountants to understand how they can make a significant contribution to the success of their organization by demonstrating how management accounting can be used in support of strategy.
Chapter 1 Management accounting and the strategic management framework
Ø What is management accounting?
Ø The development of strategic management accounting
Ø Strategic management
Ø The strategic management framework
Ø Who sets the strategy?
Ø Formal strategic planning versus emergent strategies
Ø Now management accounting can support the strategic management process
Chapter 2 Understanding the business environment
Ø The changing business environment
Ø Macro and task environment
Ø Why undertake environmental analysis?
Ø The PESTEL framework
Ø Industry analysis
Ø Link between industries
Ø Competitor analysis
Ø Management accounting in support of environmental analysis
Chapter 3 Internal appraisal
Ø Resource audit
Ø The 9M’s framework
Ø Portfolio analysis – the Boston Consulting Group Matrix
Ø Product lifecycle
Ø Value creation system
Ø Supplier analysis
Ø Financial analysis
Ø Management accounting in support of internal appraisal
Chapter 4 Corporate appraisal
Ø The Corporate appraisal SWOT analysis
Ø GAP analysis
Ø Management accounting in support of corporate appraisal
Chapter 5 Competitive strategies
Ø Porter’s competitive strategies
Ø Cost leadership
Ø Focus (or niche) strategy
Ø The danger of being stuck-in-the-middle
Ø The value system revisited
Ø Activity Based Costing (ABC)
Ø Activity based management
Ø Cost of quality
Ø Management accounting in support of the competitive strategies
Chapter 6 Strategic options generation
Ø Ansoff’s growth vector matrix
Ø Strategies for growth
Ø Pricing policy
Ø Evaluating viable international markets
Ø Target costing
Ø Lifecycle costing
Ø Methods of growth
Ø Management accounting in support of strategic options generation
Chapter 7 Strategic evaluation and choice
Ø Elements of strategic evaluation
Ø Stakeholder analysis in relation to strategic choices
Ø Financial evaluation
Ø Methods of investment appraisal
Ø Risk management
Ø Management accounting in support of strategic evaluation
Chapter 8 Implementation issues
Ø Management accounting in support of strategic implementation
Ø Crystallizing the strategy plan into an operational budget
Ø Tailoring the accounting systems to the strategy and using appropriate reporting
Ø Responsibility accounting
Ø Ensuring that the systems are developed to the changing need of the business
Ø Business partnering
Chapter 9 Multi-dimensional performance management
Ø Traditional performance management
Ø A multi-dimensional approach to performance management
Ø Critical success factors and interlocking scorecards
Ø Performance management in service organizations
Ø Simon’s levers of control
Ø Divisional performance
Ø Return On Investment and Residual Income
Ø Economic Value Added
Ø The issue of transfer pricing in divisional performance
Ø Behavioral aspects of performance management
Ø Management accounting in support of performance management
Chapter 10 Sustainability and performance management
Ø What is sustainable development?
Ø Why be sustainable?
Ø Reporting, monitoring and control
Ø Management accounting in support of sustainability
Chapter 11 The future role of the management accountant
Ø 11.0 The continuing need for stewardship and compliance
Ø 11.1 The T-Shaped accountant
Appendix A – Strategic management accounting techniques
Appendix B - Income statement and balance sheet for X Inc. and Y Inc.
Management accounting is primarily about providing information for managers to enable them to manage the business. This includes supporting decision making at operational, business, and strategic levels within the organization. Many of the conventional accounting techniques are said to be too internally focused, primarily financial in nature, and best suited to supporting operational rather than strategic decision making. In the early 1980s authors began to suggest that accountants should look externally and provide information concerning competitors and markets. The term strategic management accounting was used to differentiate accounting techniques that focused on strategic aspects of the business from the more traditional tried and tested techniques. This prompted research into the adoption of strategic management accounting techniques, but still the term is not in common usage by practicing accountants, and the widespread use of strategic management accounting techniques is debatable.
This book takes a different perspective in that the strategic management process includes the analysis, formulation, implementation, evaluation, monitoring, and control of strategy, and that management accounting is able to contribute to each phase. A more recent movement of strategy as practice suggests that strategy is enacted by practitioners at many levels in the organization and is not the preserve of senior managers. It is possible to identify how every role in an organization contributes to the achievement of strategic objectives and therefore many operational decisions are actually more about enacting the strategy and contributing to the strategic management process in the area of implementation.
It was noted in a study undertaken by the author of this book that when making strategic decisions, such as the launch of new products or entering new markets, senior managers commented on “making sure that the margin was right.” The margin, sales minus cost of sales, would not be considered a strategic management accounting technique, but it was clear that management accounting was being utilized to support the strategic decision. The focus of this book is therefore on how management accounting can support the strategic management process, regardless of whether the techniques are considered to fall under the category of conventional or strategic management accounting.
The structure of the book follows a strategic management framework set out in chapter 1, and covers a range of strategic models and tools that can be used to develop strategy in organizations. It is important to state that decisions would not be based on the output of one strategic model or tool, but that the tools can, and should, be used together to provide a balanced view of the business. The focus, however, then turns toward how management accounting can support the various phases and draws out the financial aspects of using the various strategic models and tools in the strategic decision-making process. It has been said that finance is the language of strategy as strategic objectives are often communicated in financial terms. The view adopted in this book is that financial considerations are just part of the decision-making process and strategic decisions should not be made based on numbers alone, hence Management Accounting in Support of Strategy.
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