305 chap 1
SWOT analysis has four elements
(two are internal to the firm and two are external) 1. S - strengths/internal. 2. W - weaknesses/internal Look at product lines, management, R&D, manufacturing, marketing, and strategy. 3. O - opportunities/external. 4. T - threats/external. Look at barriers to entry, intensity of rivalry among competitors, substitute goods, and customer/supplier bargaining power. • Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis provides a system and structure in which to identify a firm's critical success factors (CSFs).
5 steps of strategic decision making
1. Determine the Strategic Issues Surrounding the Problem. 2. Identify the Alternative Actions. 3. Obtain Information and Conduct Analyses of the Alternatives. 4. Based on Strategy and Analysis, Choose and Implement the Desired Alternative. 5. Provide an On-going Evaluation of the Effectiveness of implementation in Step 4.
The Balanced Scorecard (BSC)
A comprehensive performance report that contains the organization's critical success factors; the BSC is used in implementing the organization's strategy. A properly constructed BSC reflects a company's strategy. • One should be able to infer a company's strategy from its balanced scorecard. The emphasis placed on each performance perspective reflects the strategy of the firm. • For a cost leader, the operations perspective might be the most important; for a differentiator, the customer perspective
Once a firm chooses which strategy to follow, there are various means of implementation:
1. SWOT analysis. 2. Focus on execution. 3. Value-chain analysis. 4. Balanced scorecard (BSC).
what are the changes in the contemporary business environment
1. Shift to a global business environment. 2. Lean Manufacturing. 3. Importance of information technology. 4. Focus on the customer. 5. Shifts in management organization. 6. Social, political, and cultural considerations.
what are the 4 functions of cost managements
1. Strategic Management. 2. Planning and Decision Making. 3. Management and Operational Control. 4. Preparation of Financial Statements.
contemporary management techniques
1. The Balanced Scorecard and Strategy Map. (chapter 2) 2. The Value Chain. (chapter 2) 3. Activity Based Costing and Management. (chapter 5) 4. Business Analytics. (chapter 8) 5. Target Costing. (OSCM courses) 6. Life-Cycle Costing. (OSCM courses) 7. Benchmarking. (chapters 14/15 8. Business Process Improvement. (OSCM courses) 9. Total Quality Management. (OSCM courses) 10.Lean Accounting. (OSCM courses) 11.The Theory of Constraints. (chapter 11) 12.Sustainability. (chapters 11, 14, 15) 13.Enterprise Risk Management. (COSO project)
Total Quality Management
A technique by which management develops policies and practices to ensure the firm's products and services exceed customer's expectations.
Which of the following is used to improve the accuracy of cost analysis?
Activity-based costing (ABC)
value-chain analysis
An analysis for better understanding the details of the organization's competitive strategy. • Critical success factors must be implemented in each and every phase of operations. Helps a firm better understand its competitive advantage by analyzing what processes add value. Three Phases (when analyzing value-add): • Upstream: product development, links with suppliers. • Operations: manufacturing or service done. • Downstream: links with customers, delivery, service. • Value-chain analysis builds on the CSFs identified in SWOT analysis by breaking them into detailed activities.
Which of the following uses statistical methods such as regression or correlation analysis to predict consumer behavior or measure customer satisfaction?
Business analytics
Which professional certification is an international designation for accountants?
Certified Management Accountant (CMA)
Focus on the customer
Consumers expect functionality, quality, and innovation.
In a typical organization, the management accountant reports to the
Controller
Shift to a global business environment
Economic interdependence and competition
Steps in an organization's information value chain (in order) are ______.
Event, Data, Information, Knowledge, Decisions
True or false: Not-for-profit and governmental organizations typically do not need cost management.
False
Which of the following are associated with a differential strategy?
Higher priced products Innovation Unique products and services
SWOT analysis
Identification of critical success factors (CSFs) tied to strategy—for example: • Product innovation. • Quality. • Skill development. Core competencies: • Areas of significant competitive advantage. • Building blocks for the organization's overall strategy. Quantitative measures •Are required for each critical success factor
Organizations that promote professionalism and expertise:
Institute of Management Accountants (IMA), Financial Executives Institute (FaEI), and American Institute of Certified Public Accountants (AICPA)
Which of the following statements is FALSE regarding growth in the global business environment?
Not-for profit organizations are not significantly impacted by this growth
Which of the four functions of management involves performance evaluation?
Operational control Management control
Which of the four functions of management involves decisions regarding new product development?
Planning and decision making
The role of the SEC has been strengthened by The ______ Act.
Sarbanes-Oxley
Organizations that set guidelines and regulations regarding management accounting practices include ______.
Securities and Exchange Commission Cost Accounting Standards Board Internal Revenue Service American Institute of Certified Public Accountants
Which of the following is typical in today's business environment?
Shorter product life cycle with new products added quickly.
Examples of companies following the cost leadership strategy include ______.
Southwest Airlines Texas Instruments Walmart
Which of the following contemporary management techniques DOES NOT focus directly on strategy implementation?
Sustainability
IMA statement of ethical professional practice
The Standards: competence, integrity, confidentiality, and credibility. A commitment to these standards is necessary for the management accountant to provide a useful service to management.
What is the most important element of strategic decision making?
The chosen option makes the firm more competitive and successful.
execution
The critical success factors a manager executes depend on the chosen strategy: • Cost leadership: operational performance and quality. • Differentiation: customer satisfaction and innovation. Differentiated firms must pay close attention to marketing and product development: • Management accountants assist by gathering, analyzing, and reporting on relevant information. Can be improved through benchmarking and total quality improvement (for example, Malcolm Baldrige National Quality Award program). • Execution is important in implementing a strategy. Execution depends on the competitive strategy a firm is pursuing.
The Strategy Map.
The strategy map is a method, based on the balanced scorecard, that links the four perspectives in a cause-and-effect diagram.
Examples of the companies following the differentiation strategy include ______.
Tiffany BMW Rolex
Which of the following is a service firm?
Well Fargo Bank
Key changes in the social, political, and cultural environments include ______.
a more ethnically and racially diverse workforce
Changes to management organization include ______.
a shift away from financial measures of performance teamwork and coordination among business functions reports that are useful to cross-functional teams
Firms can improve planning, product costing, and control by using ___________ ________ to develop a detailed description of the specific actions performed in the firm's operations
activity analysis
Increasing competitiveness from global markets ______.
affects both businesses and not-for -profit organizations
the Balanced Scorecard (BSC).
an accounting report that addresses an organization's performance in four perspectives: financial, customer, internal processes, and learning and growth. Financial: Did we achieve our profit target? Customer: Did we achieve our customer satisfaction target? Internal processes: Did we achieve zero defects? Learning/growth: Did we cross-train 75% or more of our employees?
A competitive firm ______.
anticipates regulatory changes recognizes the cultural environment is customer driven
The consequence of shorter product life cycles is that managers must ______.
be more flexible in their decision making take a more integrative approach in their decision making
A process by which a firm identifies its critical success factors, studies the best practices of other firms, and then implements improvements to match or beat competitors is called
benchmarking
The type of information recorded and reported in the management organizations of the contemporary business environment includes ______.
both financial and operational information
An approach to strategy implementation that uses data to understand and analyze business performance is called predictive or
business analytics
A management method where managers and workers commit to a program of continuous improvements in quality and other success factors is ______.
business process improvement
A method of creating competitive advantage in which a firm reorganizes its operating and management functions, often resulting in positions that are modified, combined, or eliminated is ______.
business process reengineering
The management accountant works to implement an organization's strategy ______
by contributing his or her expertise to assist management as a part of a management team in decision making
The management accountant works to implement an organization's strategy ______.
by contributing his or her expertise to assist management as a part of a management team in decision making
who do the internal Audit financial analysis financial planning
chief executive officer
A sound strategy is important because it can help an organization achieve ______.
competitive success
When making a decision, the management accountant follows a five step procedure to assure a strategically-appropriate decision. The five steps include all of the following except ______.
consider information that is irrelevant to the decision
cost management information
consists of financial and nonfinancial information that is developed and used to implement the organization's strategy.
The Institute of Management Accountants guidelines to assist the management accountant in applying the Statement of Ethical Practice include ______.
consult an attorney if needed follow the organization's established policies discuss the matter with an immediate supervisor
The competitive strategies are
cost leadership and differentiation
The functions of the controller typically include ______.
cost management financial reporting
Strategic thinking requires special skills including ______.
creativity and flexibility
Standards of the Institute of Management Accountants Statement of Ethical Professional Practice include ______.
credibility competence integrity
Measures of those aspects of a firm's performance that are essential to its competitive advantage and, therefore, to its advancement are called
critical success factors
The end goal in Stage 5 of the information value chain is ______.
decisions by management teams
Multiple select question.
delayed investments by companies increased economic uncertainty
Finding a strategy for an organization begins with ______.
developing the organization's mission statement
A firm's tendency to undermine its strength by attempting to lower costs or ignoring the necessity of having a continual, aggressive marketing plan is a weakness of the____________ strategy
differentiation
The competitive strategies are ______.
differentiation cost leadership
The ideology that promotes domestic growth and opposes globalization, fair trade and immigration is known as
economic nationalism
The commitment of the management accountant to provide a useful service for management can be summed up as professional
ethics
True or false: Current changes in the business environment tend to focus the firm on factors related to the production of its product or provision of its service to the ultimate consumer.
false
True or false: Enterprise risk management is only concerned with risks that could negatively affect the company's competitiveness and success.
false
Cost management information can be best described as ______ information.
financial and non-financial
When faced with an ethical issue, the management accountant should first ______.
follow the organization's established policies on the resolution of such conflict
Management accounting
g is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy
Due to a focus on the customer, firms now offer a ______.
greater variety of products with shorter life cycles
Management accounting involves ______.
helping formulate organizational strategy devising planning systems decision making
The theory of constraints ______.
helps a firm improve cycle time focuses on speed helps identify and eliminate bottlenecks
A competitive firm ______.
incorporates changes in the contemporary business environment in business planning and practice
The consequences of a lack of strategic information include ______.
incorrect investment decisions inability to effectively benchmark failure to identify most profitable products, customers, and markets
The most fundamental of all business changes in recent years has been ______.
increased use of information technology, the Internet and other technologies
The new economy is reflected by ______.
increased use of the Internet for communication rapid-growth of Internet-based firms
In the IMA Statement of Ethical Professional Practice, the responsibility to mitigate actual conflicts of interest is an element of ______.
integrity
strategy map
is a cause-and-effect diagram of the relationships among the critical success factors in a BSC. The strategy map: • Shows how the achievement of CSFs in one perspective should affect the achievement of goals in another perspective. • Focuses on the financial perspective because financial performance is the ultimate goal for most profit-seeking organizations. • Illustrates how success in the customer, internal processes, and learning & growth perspectives leads directly to improved financial performance.
Enterprise risk management
is a framework and process that firms use to manage the risks that could negatively or positively affect the company's competitiveness and success
Target costing ______.
is common when small price differences attract customers forces firms to be more competitive may require product or process redesign
Cost management
is the development and use of cost management information by the management accountant.
when presented with an ethical issue
it is important to understand the organization's business and strategy in order to understand the intent of the act; then follow the Institute of Management Accountants (IMA) guidelines - (1) discuss the issue with your immediate supervisor, (2) discussion with IMA helpline, and (3) consult an attorney
The consequences of a lack of strategic information include ______.
lack of clarity about direction and goals lack of a clear and favorable perception of the firm decision making based on intuition
A firm's products and services are placed into value streams, each of which is a group of related products or services when _____________ accounting is in use
lean
The perspectives of the Balanced Scorecard (BSC) include ______.
learning and growth customer satisfaction
The sequence that links the elements of the strategy map are ______.
learning and growth, internal processes, customer satisfaction, financial performance
Both upstream and downstream costs are considered when using the ______ ______ costing method
life cycle
Some of the distinctive aspects of the cost leadership strategy include ______.
low cost large market share
The balanced scorecard is best described as a(n) ______.
management accounting report
the control area of responsibility consists of 2 functions
management and operational control
Sustainability
means the balancing of the company's short and long term goals in all three dimensions of performance - social, environmental, and financial.
Critical success factors are ______.
measures of aspects of the firm's performance that are essential to its competitive success
Lean accounting
measures the financial benefits of a firm's progress in implementing lean manufacturing. Only have just enough inventory to meet production needs at that time and only produce enough units to meet known demand (a "pull" system)
Organizations that provide services for which no direct relationship exists between the amount paid and services provided include _____ organizations.
not-for-profit governmental
Budgeting and profit planning is a component of the management function of ______.
planning and decision making
Most subsequent life-cycle costs are determined by decision made in the ______ stage.
product design
The main purpose of professional certifications for the management accountant is to ______.
provide a distinct measure of experience, training, and ability
Which is NOT one of the broad risks associated with enterprise risk management?
reporting risk
Sustainability refers to the balancing of ______ organizational goals.
social environmental financial
The most important management function is ______.
strategic management
A plan for using resources to achieve sustainable goals within a competitive environment is called a(n)
strategy
A diagram that links the various perspectives in a balanced scorecard is called a(n)
strategy map
Benchmarking ______.
studies best practices of other firms or units includes identifying critical success factors for the firm implements improvements to match or beat competitors
The balancing of an organization's short and long term goals in social, environmental, and financial performance is called
sustainability
Contemporary management techniques that support process improvement include ______.
sustainability total quality management lean accounting
The cost management technique that determines product cost based on a given competitive price and desired profit is ______.
target costing
An additional cost that importers must pay, increasing the cost of imported products and making domestic products more attractive is called a(n)
tariff
It is often referred to as a "trade war" when two or more countries adopt ______ against each other
tariffs
who do the cost management financial reporting financial information system
the controller who reports to the CFO who reports to the CEO
For strategic purposes, "stuck in the middle" refers to a strategy that is not likely to succeed because ______.
the firm it is not able to sustain a competitive advantage the strategy is not clearly either cost leaderships or differentiation
A firm's degree of reliance on cost management information depends upon ______.
the nature of its competitive strategy
Effectively improving cycle time is a goal of ______.
the theory of constraints
A useful tool to determine where costs can be reduced or which activities should be outsourced is ______.
the value chain
A method by which management develops policies and practices to ensure products and services exceed customer expectations is ______.
total quality management
True or false: Cost leaders only remain competitive as long as consumers view their products and services substantially equivalent to more expensive competitors.
true
True or false: Strict adherence to accuracy can compromise the usefulness and timeliness of information.
true
Handling situations in which an ethical issue arises requires the management accountant to ______.
understand the firm's business and strategy
The main focus of cost management information must be ______.
usefulness timeliness
Lean accounting ______.
uses value streams to help understand profitability is used by firms that have adopted lean manufacturing helps firms understand the profitability impact of lean manufacturing
An analysis tool organizations use to identify specific steps needed to provide a competitive product or service is called a(n)
value chain
Consequences of tariffs include ______.
volatility in costs and prices delayed investments by companies increased economic uncertainty
A firm is likely to work hard at process improvement ______.
whether a cost leader or differentiator
competitive strategy
• A firm succeeds by implementing a strategy, that is, a plan for using resources to achieve sustainable goals within a competitive environment. • Strategy must have a long-term focus and adapt to the changing environment. • Cost management is used to develop cost and other information to help an organization achieve its strategic goals.
Target Costing
• A method that has resulted from intensely competitive markets. • Target Cost = Market-determined price - Desired Profit. - doesn't matter how much it costs to make -set selling price first then make it in a way that is profit
Activity-Based Costing and Management
• Activity-Based Costing (ABC) improves the tracing of costs to individual products, services or customers. • Activity-Based Management (ABM) is used to improve operational and management control - what are people actually doing?
The Value Chain
• An analysis tool used to identify the specific steps required to provide a competitive product or service to the customer. • Helps identify steps that can be eliminated, improved, or outsourced. Upstream (development), Operations (manufacturing), Downstream (customers) - does this add value... if no get rid of it ... if yes yes can we make it better?
Business Analytics
• An approach to strategy implementation in which the management accountant uses data to understand and analyze business performance.
There are three important certifications that are relevant for management accountants in the U.S. (other similar certifications are available outside the U.S.):
• Certified Management Accountant (CMA). • Certified in Strategy and Competitive Analysis (CSCA). • Certified Public Accountant (CPA). • Certified Global Management Accountant (CGMA).
Social, political, and cultural considerations
• Changes include a more diverse workforce, changes in regulatory requirements, and a renewed sense of ethical responsibility.
Credibility
• Communicate information fairly and objectively. • Provide all relevant information that could reasonably be expected to influence an intended user's understanding of the reports, analyses, or recommendations. • Report any delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law.
Michael porter: 2 competitve strategies
• Cost Leadership—outperform competitors by producing at the lowest cost, consistent with quality demanded by the consumer. - compete based on price • Differentiation—creating value for the customer through product innovation, product features, customer service, etc. The customer is willing to pay more for these added values. - compete based on features
Life-Cycle Costing
• Costs should be monitored throughout a product's entire life cycle - from research and development to sales and service.
This BSC groups the organization's CSFs into four perspectives:
• Financial perspective (financial measures). • Customer perspective (customer satisfaction). • Internal process perspective (for example, productivity and speed). • Learning and growth (for example, training and number of new patents or products).
The Theory of Constraints
• Helps firms improve cycle-time (That is, the rate at which raw materials can be converted to finished products). - what can we do within constraints
Value-chain analysis has two steps:
• Identify the value-chain activities at the smallest level possible. • Develop a competitive advantage by reducing cost or adding value.
Importance of information technology
• Increased use of the internet has reduced processing time, increased access to important information, and facilitated information exchange.
preparation of financial statements
• Information is needed to guarantee compliance with regulatory reporting requirements.
Management and operational control
• Information is needed to identify inefficient operations and reward effective management practices
planning and decision-making
• Information is needed to support recurring decisions such as scheduling production, pricing, repairing and replacing equipment.
Organizations that provide guidelines and regulations:
• Internal Revenue Service (IRS), Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), Cost Accounting Standards Board (CASB).
Lean Manufacturing
• Inventory reduction and quality control. • Flexible manufacturing systems. • Emphasis on speed-to-market. • not just manufacturing but waiting until have a customer that wants to buy
Confidentiality
• Keep information confidential except when disclosure is authorized or legally required. • Inform all relevant parties regarding appropriate use of confidential information. Monitor to ensure compliance. • Refrain from using confidential information for unethical or illegal advantage.
competence
• Maintain appropriate level of professional leadership and expertise by enhancing knowledge and skills. • Perform professional duties in accordance with relevant laws, regulations, and technical standards. • Provide decision support information and recommendations that are accurate, clear, concise, and timely. Recognize and help manage risk.
Integrity
• Mitigate actual conflicts of interest. Regularly communicate with business associates to avoid apparent conflicts of interest. Advise all parties of any potential conflicts of interest. • Refrain from engaging in any conduct that would prejudice carrying out duties ethically. • Contribute to a positive ethical culture and place integrity of the profession above personal interests.
Strategic management
• Most important of the management functions. • Involves identifying and implementing goals and action plans to maintain a competitive advantage. -What directions are we going? • The focus of cost management is on working with management to achieve the organization's goals, through understanding the organization's competitive environment and implementing the organization's strategy to succeed in this environment. • This often means using all of the organization's resources to identify and satisfy the customers' needs. • The strategic emphasis often requires creative and integrative thinking from a cross-functional viewpoint.
Benchmarking.
• Process by which a firm identifies its critical success factors (CSFs), studies the best practices of other firms in achieving these CSFs, and institutes change based on the assessment results. -who's doing well and how can we meet/expand them
new management accountants role
• Provide strategically relevant cost management information to help the organization keep up with the ever-changing environment. • This requires the development of critical success factors (CSF s), measures of performance that are essential to competitive advantage. • Management accountants have responded to the contemporary business environment with thirteen Contemporary Management Techniques.
Benefits of BSC
• Provides a means for tracking progress on implementing strategy. • Aligns managers' efforts with strategy. • When an organization changes strategy, the BSC provides a means to achieve the desired change. • Can be used to determine management's compensation and rewards. • Coordinates efforts within the firm to achieve CSFs.
Shifts in management organization.
• Shift from financial to customer-based measures. • The focus has shifted from financial measures and hierarchal command-and-control organizations to nonfinancial measures and flexible organizational structures
Business Process Improvement.
• This technique involves managers and workers committing to a program of continuous improvement in quality and other critical success factors (CSF s).
To develop a competitive advantage, a firm must consider the following:
• What is our competitive advantage (strategy)? • Where can we add value for the customer? • Where can we reduce costs?