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Accounting Notes Strategic Finance, Digitization and Extended Enterprises Notes

Topic 2 Lecture Notes

Updated Topic 2 Lecture Notes Notes

Strategic Finance, Digitization and Extended Enterprises Notes

Strategic Finance, Digitization and Extended Enterprises

Approximately 97 pages

AC310: Management Accounting, Financial Management and Organizational Control - Modules 1 (Strategic Finance, Digitization and Extended Enterprises).

These notes cover the first module of the AC310 Management Accounting course at LSE which covers the following topics: Management and strategic finance, e-business cost management, cyber-marketing and financial controls, internet entrepreneurship, e-business pricing strategies, extended enterprise controls, globalisation and financial management ch...

The following is a more accessible plain text extract of the PDF sample above, taken from our Strategic Finance, Digitization and Extended Enterprises Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Introduction

  • Previously linear relationships

  • “Are we really in a new economy?”

  • Some say the new economy means new business models

  • 2 big changes:

    • ABC An attempt at greater accuracy of costs

      • Is ABC useful in this environment?

    • Balanced scorecard

Do these feature in the new economy?

  • Internet businesses have a different cost structure

    • High fixed costs

    • Low variable costs

  • 4 P’s of marketing:

    • Price

    • Product / competition

    • Promotion / Timing / Availability / Brand

    • Place

What do disruptions cause?

  • Profit is a function of margin and turnover

  • Disruptions often allow changes to traditional profit

    • Better margin?

    • Higher turnover?

Retail businesses

  • Traditional retail businesses typically require 120% return on stock-turn of 2

1890’s Disruption

  • Rise of the department stores

  • Disruption was technological changes:

    • Lifts Taller buildings in smaller places

    • Trains Railway, faster transported

  • Potential stock-turn increase

  • Maybe margins decrease

  • Fixed costs per unit decrease

  • i.e. 40% margin over 3 stock-turns per year

  • e.g. Sears in the US

  • Disadvantages:

    • Didn’t have knowledge of products

    • Lack of customer knowledge

    • No readily available credit

  • Rise of brands, because customers had to trust brands rather than merchants

1920’s Disruption

  • Mail order businesses

  • The disruption was the postal service

  • Still brand oriented

  • Lack of literacy

  • No trained salesperson required

  • Lower margin

  • i.e. 30% margin over 4 stock-turns per year

  • Hard to be kept simple

1960’s Disruption

  • Malls and discounters

  • Disruption was motorcars

  • Malls were a sustaining development from dept. stores

    • Controlled shopping environment

    • First in Minneapolis

  • Discounters e.g. Toys r us

  • Little customer services

  • Low margins

  • 20% margin over 6 stock-turns per year

1995 Disruption

  • Disruption was the internet

  • Prices are low, most of the time

  • Location doesn’t matter

  • Anytime shopping

  • Collaborative filtering

  • Trust must be established in new ways

  • 5% over 25 stock-turn per year

Information richness vs. customer reach

  • There is a trade-off between information richness and customer reach

  • Similar trade-off between margin and stock-turn

  • Internet broke away from the first trade-off

    • Creating a brand new business model

    • Maybe evidence that there is a new economy

Pure E-Business and ABC

  • No real sense of variable costing

Does ABC still apply?

  • It depends on the organisation

  • Amazon uses a modified ABC technique

    • Using automated robots to adjust automatically to changing demand

Strategy and Strategic Management Accounting

Is strategic management accounting relevant for ‘new economy’ enterprises?

  • “… the provision and analysis of management accounting data about a business and its competitors for use in developing and monitoring the business strategy” – Simmonds 1981

  • Two features of SMA techniques:

    • Outward focus

    • Long term/future orientation

    • These are the main notions of new accounting commentators

  • Strategy = “Patterns of decisions about the organisation’s future” – Mintzberg

    • “Concerned with the way resources are focused to convert distinct competencies into...

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