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STRATEGIC MANAGEMENT ACCOUNTING (SMA). WEEK 14. What is strategic management accounting (SMA)?. Information to assist strategic decision makers

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what is strategic management accounting sma
What is strategic management accounting (SMA)?
  • Information to assist strategic decision makers
  • The provision and analysis of management accounting data relating to business strategy, particularly the relative levels and trends in real costs and prices, volumes, market share, cash flow and the demands on a firm’s total resources
    • CIMA
what is strategy
What is strategy?
  • Long-term
    • 3-5 years
  • Concerned with the organisation/environment interface
    • Sustainable competitive advantage
  • Impact of competitors, customers (market share) and suppliers
    • and their strategies
shareholder value
Shareholder value
  • Obtaining finance (debt & equity) on capital markets
    • Cost of capital
  • Investing in product market to generate profits that exceed the cost of capital
  • Evaluation of strategic alternatives
    • Invest? Expand/Contract/Stable?
  • Objectives SWOT strategic decisions
    • Ansoff
  • Logical incrementalism
    • Quinn
  • Deliberate & emergent strategies
    • Mintzberg & Waters
sma for competitive advantage
SMA for competitive advantage
  • Value chain analysis
    • Finding value creating activities that can be provided at a lower cost than customers are prepared to pay for them
    • Within firm, or
    • With suppliers, distribution channels, or customers (supply chain)
  • Cost reduction opportunities
  • Competitor information and benchmarking
strategic management accounting
Strategic management accounting
  • Linked to business strategy
    • ‘the provision and analysis of management accounting data about a business and its competitors which is of use in the development and monitoring of the strategy of that business’
    • Simmonds
  • Should SMA be concerned only with financial data?
    • Capacity utilisation, market share, price taker/maker, cost structure, quality, reliability, etc. – relative to competitors
strategic management accounting1
Strategic management accounting
  • Accounting should be more outward-looking
    • extends cost management along value chain, supply chain and life cycle
  • Collection of competitor information: pricing, costs, volume, market share, cash flows, resources, etc.
  • Exploitation of cost reduction opportunities: continuous improvement and non-financial performance measures
    • Lord

Matching the accounting emphasis with the firm’s strategic position

    • Cost leadership: traditional costing
    • Differentiation/Focus: cost of marketing to maintain brand/differentiation
  • Strategic management accounting should provide information to support strategic decision making
role of accountants
Role of accountants
  • Why strategic management accounting?
    • Responsibility of accounting, operations or marketing?
  • The results of SMA are the natural outcomes of effective operational management processes … firms successfully collect and use competitor information without any input from the management accountant
    • Lord
  • “The costs of capturing, collating, interpreting and analysing the appropriate data out-weighs the benefits”
    • Dixon
sources of information
Sources of information
  • Employees – movement within industry
  • Suppliers
  • Customers
  • Industry associations
  • Consultants & publications
  • Annual reports
  • Credit agency reports
  • Internet


  • Retail
  • Automotive
  • Construction
  • Banks
  • Professional firms
    • Accountants, lawyers
information about competitors
Information about competitors
  • Market share (gaining or losing?)
  • Pricing (increasing, stable or decreasing?)
  • Cost structure (fixed & variable, new investments?)
  • Volume (and capacity utilisation)
  • Strategy (cost leadership, differentiation, focus)
  • Competitor profitability
information about customers
Information about customers
  • Satisfaction/retention
  • Their price sensitivity
  • Are they in a dominant position? (e.g. retail)
  • Dependence of us (e.g. fuel)
  • Customer profitability
information about suppliers
Information about suppliers
  • Our price sensitivity
  • Dominant position? (e.g. banks)
  • Alternative suppliers
  • Reliability