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1. Introduction to Strategic
Management Accounting
M. A. ASIEDU

2. Introduction
• Significant internal and external challenges confronting
contemporary business organisations
• The demands to create value for multiple stakeholders
• A must to be achieved in a global environment that is
continuously changing and becoming more competitive
• This subject focuses on the role strategic management
accounting plays in creating, managing and protecting value

3. Introduction Cont’
Strategic management accounting is defined as creating
sustainable value by:
 supporting the formation, selection, implementation and evaluation
of organisational strategy
 synthesising information that captures financial and non-financial
perspectives for both the internal and external environments, to
enable effective resource allocation

4. Introduction Cont’
The essential requirements for successful performance are:
 to generate products and services with value that consumers are
willing to pay for.
 to constantly develop and improve the resources, activities and
processes used to generate that value (Anderson and Narus 1998)

5. Learning Objectives
Upon completion of this lecture you will be able to:
• Discuss what strategy is about
• Define strategic management
• Outline the levels of strategy
• discuss rational/formal approach to strategy development
• Identify and analyse stakeholder power, and interest in strategy
development

6. Concept of Strategy
Content Diagram
The Concept of
Strategy and the
Rational Approach
What is Strategy?
Rational/Formal
Approach to
Strategic
Development
Levels of Strategy

7. What is Strategy?
• Strategy
 A course of action, including specification of resources required, to
achieve a specific objective (CIMA)
• Strategic Plan
 A statement of long-term goals along with definition of the
strategies and policies which will ensure achievement of these
goals (CIMA)

8. Five Fundamental Questions
• Drucker suggested five questions in relation to strategy
Fundmental
Questions
What is Our
Mission?
Who is Our
Customer?
What Does The
Customer Value?
What is Our
Plan?
What Are
Our Reults?

9. Mintzberg’s Five Ps of Strategy
• A direction, a guide, or a course of action into the
future, a path to get from here to there
Plan
• A pattern of consistent behaviour over time, given the impression
of a logically thought out strategy. Eg. Always marketing most
expensive product
Pattern
• An action or manoeuvre within a competitive business game. Eg.
Adding unnecessary plant capacity to discourage a competitor
from entering the market
Ploy
• A means of identifying where an organization places itself within
an environment or marketPosition
• A unique way of perceiving the world or of interpreting
information from it and judging its opportunities and choices.
Different organisations with different strategic perspectives
might respond to same environmental stimulus in different
ways
Perspective

10. • Strategic Management Process is essentially concerned with
the decisions organisations make about their future direction
and the development and implementation of the strategies
which will enhance the competitiveness of the organisation.

11. Levels of Strategy
Corporate Strategy
(Group Level-HO)
Business Strategy
(SBU-Divisions and Subsidiaries)
Functional or Operational Strategy

12. Level of Strategy Cont’
• Corporate:
 What sort of business should we be? What should we do? How
should we do it? For example, a retail company might have to
decide whether to start internet trading and to close down its
physical outlets
• SBU:
 Should the company get out of, say, the Ghana market? Should it
open a manufacturing plant in Nigeria?
• Functional and operational departments:
 What type of delivery vans should we use? What type of hardware
should employees be provided with?

13. Rational/Formal Approach to Strategic
Development
Set
Mission
Establish
Objective
Corporate
Appraisal
(SWOT)
Internal
Analysis
External
Analysis
Generate
Strategy
Options
Strategy
Evaluation
and
Choice
Strategy
Implemen
tation
Review
and
Control

14. Rational/Formal Approach to Strategic
Development Cont’
• Mission: a broad statement of overall purpose of the business and
should reflect the core values of the business
 UEW Mission Statement “To train competent professional teachers for all
levels of education as well as conduct research, disseminate knowledge and
contribute to educational policy and development”
• Vision: a description of the picture of the preferred future. How the
future will look like if the business achieves its mission
 UEW Mission Statement “To be an internationally reputable institution for
teacher education and research”

15. Rational/Formal Approach to Strategic
Development Cont’
• Objective: goals expressed in a form in which they can be measured.
Eg. Profit before interest and tax not less than 20%
• Objectives must be SMART
 Specific
 Measurable
 Achievable
 Relevant/Realistic
 Timely

16. Rational/Formal Approach to Strategic
Development Cont’
• The Prime Functions of Objective: Specific
 Planning
 Responsibility
 Integration
 Motivation
 Evaluation

17. Corporate Appraisal (SWOT)
• Framework to summarise the key outputs from the internal and
external analysis.
• Analysis tools for Corporate Appraisal:
Elements of SWOT Environment Analytical Tools
Strength and Weaknesses Internal
 Resource Audit
 Porter’s Value Chain
Opportunities and Threats Esternal
 PESTLE
 Porter’s Five Forces

18. Corporate Appraisal (SWOT)
• How to carry out a good SWOT analysis:
STRENGTH
Things we do well
Things we do that competitors don’t
Major successes
WEAKNESSES
Things we do badly and need to improve
Things we are not doing but should be
Major failures
OPPORTUNITIES
Events or changes in the external
environment that can be exploited
Things that are likely to go well in the future
THREATS
Events or changes in the external
environment that we need to protect
ourselves from
Things likely to go badly in future
SWOT

19. Strategic Options, Choices and
Implementation
• Strategic Choice is the process of choosing the alternative
strategic options generated by the SWOT analysis
• The process involves making decisions regarding
 What basis should the organisation compete?
 What are the alternative directions available and which product or
market should the organisation enter or leave?
 What alternative methods are available to achieve the chosen
direction?

20. Strategic Options, Choices and
Implementation Cont’
• Strategic Direction: Decision on how a business might
develop in the future to exploit strength and opportunities or
minimise threats and weaknesses
 Market Penetration: seeks to maintain or increase its share of
existing markets with existing products
 Product Development: launching new product or making products
enhancement which are offered to existing markets
 Market Development: finding new markets for existing products
 Diversification: launching new products into new market

21. Strategic Options, Choices and
Implementation Cont’
• Strategic Methods:
 Internal Development: organisation uses its own internal
resources to pursue its chosen strategy
 Takeovers/acquisitions or mergers: acquiring resources by taking
over or merging with another organisation, in order to acquire
knowledge of a particular product/market area
 Strategic Alliances: often aims at increasing exposure to potential
customers or gaining access to technology

22. Strategic Options, Choices and
Implementation Cont’
• Strategy Evaluation and Choice: the stage considers each
strategic option in detail for its feasibility and fit with the
mission and circumstances of the business.
• A powerful method of choosing a suitable strategy is to look
at its
 suitability
 feasibility and
 acceptability.

23. Strategic Options, Choices and
Implementation Cont’
• Strategy Implementation:
 Formulation of detailed plans and budgets
 Target Setting for KPIs
 Monitoring and Control

24. Strategic Options, Choices and
Implementation Cont’
• Review and Control: a continues process of reviewing both
the implementation and the overall continuing suitability,
feasibility and acceptability of the strategy. It considers two
aspects –
 Does the performance of the strategy still put the business on
course for reaching its strategic objective?
 Are the forecast of the environment for which the strategy was
based still accurate, or have unforeseen threats and opprotunies
arisen that might necessitate a reconsideration of the strategy?
• Reading assignment: Stakeholder analysis

25. Stakeholder Analysis in Strategic
Development
• Identification of stakeholder and the understanding of their
objectives
• These are individuals and interest group both internal and
external who can affect or be affected by the performance of
the organisation
• Strategic decision-making requires that stateholders be
considered when setting the mission, vision, and objectives
for two reasons: Stakeholder power, and organisational
legitimacy

26. Stakeholder Analysis Table
Stakeholder Group General
Concerns/Objective
Example
Shareholders • A study flow of income
(dividends)
• Possible Capital Growth
• Continuation of business
If a strategy involves a large capital
injection, the shareholder will be unhappy
if the injection has an adverse effect on
their income stream
Directors/Managers • Pay and status
• Job security
• Individual performance
measures
if a strategy results in a particular
department being reduced in size or
abolished, the manager of that department
is likely to be hostile to the plans
Employees • Job Security
• Pay and conditions
• Job satisfaction
If a strategy results in workers being
given more responsibility for monitoring
quality, the employees may be unhappy,
unless it is supported by an increase in
wage

27. Stakeholder Analysis Table Cont’
Stakeholder Group General
Concerns/Objective
Example
Trade Union • The problem of employees
• Taking an active part in the
decision-making process
If a strategy results in manufacturing
plant being closed, the union will be
unhappy if it has not been consulted and
if there is no scheme for helping the
employees find alternative employment
Customers • Receiving goods and services
of a reasonable quality
• Paying reasonable price for
those goods and service
if a strategy increases the quality of a
product at the same time as increasing the
price, existing customers may not be
willing to pay more for the product, while
new customers are not attracted to a
product that they will view as being of
low quality
Suppliers • Being paid promptly for goods
and services delivered
• Receiving regular repayment of
If a strategy improves the working capital
management by paying suppliers late,
existing suppliers may decide to stop

28. Managing Stakeholder Conflict
• Objectives of stakeholder groups are different and may be in
direct conflict
• Management is to develop and implement strategy with the
differences in mind
• Mendelow Matrix
• Cyert and March Technique
 Satisficing
 Sequential Attention
 Side Payment
 Exercise of Power

29. Summary of Strategy Development
The Concept of
Strategy and The
Rational Approach
Levels of Strategy
• Corporate
• Business
• Functional
Corporate Appraisal
• Strength
• Weaknesses
• Opportunities
• Threats
Cyert and March
• Satisficing
• Sequential
Attention
• Side Payment
• Exercise of
Power
What is Strategy
• Mintzberg’s Five Ps
• Druker’s Fundamental
Questions
• Strategic Management
Mission
• Why do we exist
• For whom do we exist?
• What are we providing?
Stakeholders
• Objectives
• Power and
interest
• Conflict
Mendelow Matrix
• Minimal effort
• Keep informed
• Keep satisfied
• Key player
Rational/Formal Approach
• Mission
• Objectives
• Analysis
• Options
• Choice
• Implementation
• Review and Control

30. Strategic Management Accounting
• “The provision and analysis of financial information on
the firm’s product, markets and competitors’ costs and
cost structures and the monitoring of the enterprise’s
strategies and those of its competitors in these markets
over a number of periods”(Bromwich, 1990: 28)

31. Strategic Management and Accounting Focus
• Stakeholder analysis
• Corporate objectives
• Sustainable competitive advantages
• Strategic Management Accounting
• Appropriate analysis
• Long-term considerations
• Nonfinancial data

32. Strategic Management and Analysis
• Strategic considerations
• Strategic Marketing Analysis
• Total Value-Chain Analysis
• Target Costing
• Life-Cycle Management and Costing
• Operational considerations
• Activity Based Analysis
• JIT Operations: A Management Philosophy
• Total-Quality Management and Costing

33. Strategic Cost Management
• Strategic position analysis--an organization’s basic way of
competing to sell products or services.
• Value chain analysis--the study of value-producing activities,
stretching from basic raw materials to the final consumer of a
product or service.
• Cost driver analysis--the study of factors that cause or
influence costs.

34. Group Activities
• Case Study 1
• Case Study 2

35. Qs and As