STRATEGIC MANAGEMENT ACCOUNTING

Dr. George H. Papadopoulos

STRATEGIC MANAGEMENT ACCOUNTING

Corporate and Business Strategy

Corporate Strategy: The way that a firm attempts to maximize the value of resources it controls

Business Strategy: How to compete in defined product markets

STRATEGIC MANAGEMENT ACCOUNTING

Corporate and Business Strategy

Hierarchy of Business Strategy

SWOT: Strengths, Weaknesses, Opportunities, Threats

STRATEGIC MANAGEMENT ACCOUNTING

Corporate Strategy Five forces of Competitive Markets

Customers: Who are our customers?Is any customer particularly important?How do we appeal to different segments of the market?How sensitive are they to price?

Suppliers:Who are our major suppliers? How much do we buy?Is any supplier particularly important to us?What supply factors are critical to us-quality, price, reliability, service etc.How costly is it for us to switch to alternate suppliers or sources?

Substitute Products:What substitutes for our products or services exist in the market?How are they different form our offering in terms of price, quality and performance?How likely are our customers to switch to competitors’ products and services?

New EntrantsWhat are the barriers to entry to deter new competitors?How strong is our brand franchise?How difficult would it be for a new competitor to imitate the way we do business?-

Competitive RivalryIs the industry growing or shrinking?Are there few or many competitors?Is there overcapacity?What are the switching costs for customers to move to competitors?What is the ownership structure of competing firms? How important is our market to each of them?

STRATEGIC MANAGEMENT ACCOUNTING

Corporate Strategy

Resources and Capabilities

Balance Sheet AssetsTangible Assets Cash Marketable securities Accounts receivable Inventory Prepaid expenses Buildings Manufacturing equipment Office furniture and equipment

Intangible Assets Copyrights, patents and trademarks Goodwill Valuable licenses (e.g. broadcast rights) Leases

STRATEGIC MANAGEMENT ACCOUNTING

Corporate Strategy

The four P’s of Strategy

Perspective: Mission refers to the broad purpose, or reason that a business exists.

Position: (a) How to create value for customers (b) How to differentiate from competitors.

Plan: (a) Set Goals, (b) Create plans to achieve these, (c) Communicate business strategy within the organization and (d) coordinate internal resources to implement strategy

STRATEGIC MANAGEMENT ACCOUNTING

Corporate Strategy

Johnson & Johnson Credo

STRATEGIC MANAGEMENT ACCOUNTING

Corporate Strategy

Patterns: Putting strategy in action, measuring, getting feedback and adjusting.

Emergent strategy: Strategy can be planned, but it can also emerge in unexpected and unanticipated ways. This is Emergent Strategy.

STRATEGIC MANAGEMENT ACCOUNTING

Corporate Strategy

Emergent Strategy at 3M

Five forces of Competitive Markets

STRATEGIC MANAGEMENT ACCOUNTING

Corporate Strategy

• Getting strategy right is not simple-if it was, top managers would not command the high salaries and bonuses that are the rewards of success. Implementing successful strategies requires the ability to conduct SWOT analysis of market dynamics and internal capabilities. Then, managers must be able to control the multiple dimensions of strategy reflected in the four P’s of strategy implementation .

• Ideals, values, and history must be woven together into an overall perspective that provides a lens through which to view the opportunities that surround the business. This is strategy as perspective. Managers must also have a deep understanding-a gut level intimacy-of the market dynamics in their industry. They must use a five-forces analysis to understand customers, suppliers, products, and competitors. Based οn a SWOT assessment of their own business’s strengths and weaknesses, they must choose how to create value for customers. Will they compete οn price? Οn quality? Οn service? Οn product features? This is strategy as position. Once strategy is set, managers must possess the tools to implement it. They must prepare plans, communicate goals, coordinate resources, motivate people, and measure and monitor implementation. This is strategy as plan. Finally, to succeed over the long term, managers must keep their eyes focused οn customers and competitors and their ears to the ground. They must listen and learn. They must encourage employees to experiment and constantly challenge subordinates to share their ideas and successes so this information can be used to realign strategy over time. This is strategy as emerging patterns of actions.

STRATEGIC MANAGEMENT ACCOUNTING

Corporate Strategy

Basics for Successful Strategy