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Topic 2 Lecture Notes

Accounting Notes > Strategic Finance, Digitization and Extended Enterprises Notes

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AC310 Module 1: Topic 2

TOPIC 2: THE NEW ECONOMY, TROUBLE WITH COSTING AND STRATEGY INTRODUCTION

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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: o ABC - An attempt at greater accuracy of costs
? Is ABC useful in this environment?
o Balanced scorecard Do these feature in the new economy?

* Internet businesses have a different cost structure o High fixed costs o Low variable costs

* 4 P's of marketing: o Price o Product / competition o Promotion / Timing / Availability / Brand o Place What do disruptions cause?

* Profit is a function of margin and turnover

* Disruptions often allow changes to traditional profit o Better margin?
o Higher turnover?

RETAIL BUSINESSES

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

1890'S DISRUPTION

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Rise of the department stores Disruption was technological changes: o Lifts - Taller buildings in smaller places o 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: o Didn't have knowledge of products o Lack of customer knowledge o No readily available credit Rise of brands, because customers had to trust brands rather than merchants

1920'S DISRUPTION

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Mail order businesses The disruption was the postal service Still brand oriented Lack of literacy No trained salesperson required

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