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Strategic Analysis Of Costs Notes

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This is an extract of our Strategic Analysis Of Costs document, which we sell as part of our Managerial Accounting Notes collection written by the top tier of LSE students.

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Lecture 4: The Strategic Analysis of Costs 25 October 2010

Topics

* Strategic Typologies and Control Issues

* Strategic Management Accounting

Reading

* Required Reading:
* Bhimani (2008) Chapters 5, 6, 7 (pp. 219-231) and 8

* Further Reading:
* BHDF Chapter 22
* HNS Chapter 7

Key Points

* Strategy

* Normative view of strategy

* Descriptive view of strategy

* BCG view on strategy

* Porter view on strategy

Strategic Typologies and Control Issues

* Strategy = Patterns of decisions about the organisation's future

* "Concerned with the way resources are focused to convert distinct competencies into competitive advantage" - (Andrew)

* Strategic changes are rare

* They have a long life cycle:

* Conception

* Elaboration

* Decay

* Death

* Miles and Snow view on strategy

* Strategic management accounting

* Strategic appraisal of investments

* Relative performance measures

* Short-term vs. long-term costs

* Strategic cost analysis

* Customer profitability analysis

* Target costing

* Target cost vs. traditional costing methods

* Kaizen costing

The Normative View of Strategy

* Proactive

* Sequential and structured

* Orderly and linear

* Focus on formulation

Definitions

The Descriptive View of Strategy
* Complex
* Dynamic
* Multi-level
* Shaped by diverse interest groups
* Emergent
* Focus on formation Linkages
* Strategy-Structure
* Political
* Perceptual BCG View on Strategy
* Harvest
* Hold
* Build Porter View on Strategy
* Cost leadership
* Differentiator
* See Porter's value chain
* Shank and Govindarajan (1996) place considerable weight on Porter's notion of strategic positioning
* A value chain perspective on strategic cost management requires that firms recognise their product in the total value-creating chain of activities Miles and Snow View on Strategy
* Defender
* Analyser
* Prospector Porter's (1985) Strategy Typology

*

Strategic Management Accounting
* SMA = "The Provision and analysis of management accounting data about a business and its competitors for the use in developing and monitoring the business strategy" - (Simmonds, 1981)
* Two features of SMA:
* Outward focus
* Long term/future orientation The Product Life Cycle and Its Strategic Implications

Course Notes Page 13

* SMA = "The Provision and analysis of management accounting data about a business and its competitors for the use in developing and monitoring the business strategy" - (Simmonds, 1981)

* Strategy = Patterns of decisions about the organisation's future

* Target Cost = The allowable amount of cost that can be incurred on a product and still earn the required profit from that product

* Target Costing = Reducing the price of a product over its entire life towards the target cost

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