This presentation outlines a strategic management framework, emphasizing its iterative nature and the crucial role of the management accountant in supporting each stage, from analysis to review and control.
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this presentation provides an overview
of a strategic management framework and
gives a brief introduction of how the
management accountant can assist in the
strategic management process it is the
first in a series of presentations that
support the book management accounting
in support of strategy so what is
strategic management strategic
management is more than just producing a
strategic plan it is a process and this
it is difficult to find an agreed
definition of strategic management but
the common elements can be set out this
files having an overall sense of
direction and purpose formulating
strategic goals and plans to achieve
them implementing the plans and
monitoring and evaluating performance
and taking corrective action the diagram
shown here sets out a formal process for
strategic management the dotted lines
illustrate the iterative nature of the
process as in reality organizations do
not necessarily go through a series of
steps one by one
nevertheless the diagram can form the
basis of explaining how the process
works let us start by looking at mission
and objectives the mission is the
rationale behind the business it sets
out the long-term aims and purpose of
the organization as well as indicating
the strategy values policies and
behavior standards organizations often
develop a vision alongside the mission
this is usually broader and shorter than
the mission statement and is often
intended as a point of inspiration for
employees to drive the business forward
the objectives are more specific and set
out what the organization aims to
achieve ideally they should be smart
that is specific measurable agreed
realistic and time-bound the accountant
can contribute here by helping to
develop a range of performance
measurements that will evaluate the
extent to which objectives have been
achieved plus ensuring that appropriate
systems are in place to provide the
information if you think about it there
is little point in developing objectives
of measures of performance that you
can't actually measure [Music]
[Music]
environmental analysis what we're
looking for here are events trends or
changes in the business environment that
could affect the ability of the
organization to achieve its objectives
we are also looking for opportunities
that we can take advantage of in order
to develop the business further in short
we are looking for opportunities and
threats the management accountant can
assist here by monitoring specific
aspects of the environment for example
interest rates inflation foreign
exchange rates and perhaps the state of
the economy competitor analysis is also
part of the environment and the
accountant is well-placed to evaluate
the financial position of competitors
and identify their relative strengths
and weaknesses also accountants are
skilled at techniques such as scenario
building and forecasting in order to
evaluate the financial impact of changes
in the business environment having
looked at the environment we need to
look at the resources we have in order
to deal with any changes in the
environment in the internal appraisal we
are reviewing the organization's
resources to assess the strengths and
weaknesses accountants are able to
provide an assessment of the financial
strengths and weaknesses of the
organization and there are a range of
techniques where accountants can provide
input into the analysis such as a review
of the products and markets in terms of
portfolio analysis the most well-known
form of which is the Boston Consulting
Group matrix allied to this is the
assessment of the relative stage of
products in the product life cycle
the financial implications of these also
the analysis of the customer portfolio
by customer profitability analysis and
the analysis of the value creation
system and this ability to generate
profits via the competitive advantage so
now we have carried out an environmental
analysis and identified the
opportunities and threats and an
internal appraisal to assess the
strengths and weaknesses we can pull
these together in the form of a
corporate appraisal or what is sometimes
called a SWOT analysis in the SWOT
analysis the strengths and weaknesses
come from the internal appraisal and the
opportunities and threats come from the
environmental analysis however when we
did the environmental analysis we might
have spotted a change but did not yet
assess our ability to deal with it the
SWOT enables us to assess the ability to
deal with changes given the current
resources and hence to determine if the
change represents an opportunity or a
threat so the SWOT asks a question given
the changes in the environment can we
still meet the mission and objectives if
the answer is no we have identified a
gap between where we want to get to and
where we will get to if we continue with
the current strategy this is often
referred to as the profits gap here
the management accountant can evaluate
how big the gap is and more importantly
how big it will become if we do nothing
about it [Music]
[Music]
if we have identified a gap we need to
develop a strategy to close the gap this
is the options generation process in
reality many organizations may not
generate every possible option but make
small changes to their existing strategy
but the process allows for innovation
and evolution of new strategies even
reassessing the objectives in the light
of the changes in the environment for
example following the financial crisis
of 2008 many organizations would have
found it necessary to reassess the
appropriateness of their objectives
within options generation the
accountants have a range of techniques
that can aid the process not least of
these is the financial evaluation of
potential strategic options in terms of
investment appraisal techniques it is
also worth 3 evaluating the competitive
strategy at this point for example is
differentiation still a viable strategy
given the changes in the environment or
if the current strategy is that of cost
leadership can it be maintained
evaluating these in financial terms can
give an indication of what needs to be
done in order to remain competitive and profitable
