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An integrated framework for strategic and

An integrated framework for strategic and






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    An integrated framework for strategic and An integrated framework for strategic and Presentation Transcript

    • Strategic management accounting An integrated framework for strategic and financial decision-making and for interpreting business performance which brings together competitive, operational and financial analysis
    • What business are we in?
      • Products and services
      • Customer types
      • Markets (geographical)
      • Delivery channels
    • SBU and Business Unit Strategy A strategic business unit is part of an organization for which there is a distinct external market for goods or services that is different from another SBU A business unit strategy is about how to compete successfully in particular markets
    • Virgin founded by Richard Branson Group presentation page 83 to 89 Virgin Corporate level Virgin Travel Virgin Rail Virgin Cinemas Virgin Media Virgin Hotels Virgin Direct … ..Net … ..Money … ..Mobile Virgin Music Virgin Trading www.Virginmoney.com Business level
    • Virgin The Virgin Group is evaluating around 50 business proposals and ideas every week. Only a few will pass the initial test. 4 new business proposals are under more close testing at all the time.
    • Focus on a segment Examples on Focus Strategies
      • Cars: BMW (Sporty, prestige cars )
      • Banking: First Direct (Telephone - and internet banking)
      How can a focus strategy be measured?
    • How can a focus strategy be measured?
      • Extra costs by positioning
      • Extra pay-off due to exceptional performance e.g. outstanding quality, service, brand
    • Cost leadership
      • Example: TOYOTA
      • Difficult to measure: In practice it is done by defining cost leadership relative to a group of competitors (or ”strategic group”)
    • Differentiation
      • Creating uniqueness compared to competitors. Example : Safeskin gloves
      • Involves adding more real or perceived value to target customers relative to competitors.
      • Additional costs are tolerated if they ad disproportionate value to customers, harvested through premium price.
    • The Life-cycle problem
      • Emerging
      • Growth
      • Maturity
      • Decline
      • Renewal?
      Long term versus short term cash-flow?
    • Identifying performance improvements
      • Products against market segments
      • Products against geographic segments
      • Market segments against distribution channels
      • Products against distribution channels
      • Customer types against products
    • The PIMS (Profit Impact of Market Strategy) Database contains the experiences of over 3.000 businesses Increased market share gives economies of scale
    • The PIMS (Profit Impact of Market Strategy) Database contains the experiences of over 3.000 businesses % Marketing costs Perceived relative quality Increased marketing and advertising ads little to ROCE if the quality is bad.
    • Evaluating business and financial performance
      • Fishbone analysis
      • Cost/benefit analysis
      • Performance driver analysis
    • Income statement divided into businesses ( products or segments ) In what business is it very difficult to make money? Where should we increase investments or reduce assets? Time? Short-term or long-term returns? 12,1% 25,0% 20,0% 5,0% ROAE 3300 800 500 2000 Assets employed 400 200 100 100 Operating profit 600 300 200 100 Cost of sales 1000 500 300 200 Sales Total Z Y X Business
    • Break-even, contribution and value analysis , Ronnie’s Garage page 77-78 Sales Total costs Fixed costs Sales € €
    • Exercise
      • Fixed costs: 1.000.000 €
      • Contribution margin: 30%
      • Actual sales equal to: 4.000.000 €
      • What is Break-even point?
      • By how per cent can sales fall before we reach break-even? (Security margin)