Accounting Notes Strategic Finance, Digitization and Extended Enterprises Notes
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...
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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?
Traditional retail businesses typically require 120% return on stock-turn of 2
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
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
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
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
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
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
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...
Buy the full version of these notes or essay plans and more in our Strategic Finance, Digitization and Extended Enterprises Notes.
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...
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