1. Managerial Accounting-Strategic Cost Analysis--Spring 2002 1 Advanced Cost Management Professor William F. O’Brien, MBA, CPA Fall 2001

2. Managerial Accounting-Strategic Cost Analysis--Spring 2002 2 Introduction Cost Management Financial Non-Financial

3. Managerial Accounting-Strategic Cost Analysis--Spring 2002 3 Financial Management Evolution DATA INFORMATION ANALYSIS IMPLEMENTATION Today’s Corporate Focus is on Results!

4. Managerial Accounting-Strategic Cost Analysis--Spring 2002 4 Company F/S Users Economic Decisions Financial Impact (useful & relevant) Financial Accounting Model

5. Managerial Accounting-Strategic Cost Analysis--Spring 2002 5 Managerial Accounting Model Plan Implement Monitor Adjust Accounting Information Communication Environment

6. Managerial Accounting-Strategic Cost Analysis--Spring 2002 6 Managerial vs. Financial Accounting Managerial Internally oriented Prospective Operational and financial focus Timely Not required Non-GAAP Relevant Sub-unit orientation Financial Externally oriented Historical Financial focus only Accurate Required GAAP Objective Entire entity orientation

7. Managerial Accounting-Strategic Cost Analysis--Spring 2002 7 Four Management Functions …another Perspective Strategic Management Planning and Decision Making Management and Operational Control F/S Preparation How is Cost Management Info Used?

8. Managerial Accounting-Strategic Cost Analysis--Spring 2002 8 Strategic Cost Management Strategic cost management is the development of cost management information to facilitate the principal management function-- strategic management.

9. Managerial Accounting-Strategic Cost Analysis--Spring 2002 9 Factors Influencing Today’s Business Environment Global competition Manufacturing and IT advances Customer focus Revised organizational structures Social, political and cultural changes

10. Managerial Accounting-Strategic Cost Analysis--Spring 2002 10 Contemporary Mgt. Techniques Benchmarking Total Quality Management (TQM) Continuous Improvement Activity-Based Costing (ABC) and Mgt. (ABM) Reengineering Theory of Constraints (TOC) Mass Customization Target Costing Life-cycle Costing The Balanced Scorecard

11. Managerial Accounting-Strategic Cost Analysis--Spring 2002 11 Professional Organizations Regulatory IRS FTC SEC FASB CASB

12. Managerial Accounting-Strategic Cost Analysis--Spring 2002 12 Professional Organizations Associations IMA SMA, Canada AICPA FEI IIA

13. Managerial Accounting-Strategic Cost Analysis--Spring 2002 13 Ethics Lack of ethics--everyone loses South Florida Bermuda Triangle of Ethics Sensormatic W.R. Grace Bausch and Lomb Sunbeam

14. Managerial Accounting-Strategic Cost Analysis--Spring 2002 14 Ethics and You You will face an ethical challenge It could impact Your job Your family Your relationships Your financial stability Your physical well-being You have only ONE reputation...

15. Managerial Accounting-Strategic Cost Analysis--Spring 2002 15 Accounting Business Skills “The What” Business Perspective Organizational Focus Bias for Action Communication Excellence People Proficiency

16. Managerial Accounting-Strategic Cost Analysis--Spring 2002 16 Financial Management Guidelines “The How” Cc KTT MBWA R ƒ R 3 responsiveness reliability relevance

17. Managerial Accounting-Strategic Cost Analysis--Spring 2002 17 Just Say “No” to... A B C

18. Managerial Accounting-Strategic Cost Analysis--Spring 2002 18 Scarlet Letter of Accounting Lacks Reality Distraction Lacks Cost Mgt.

19. Managerial Accounting-Strategic Cost Analysis--Spring 2002 19 Ansari: SMA Strategic Triangle (QCT) Competition based on quality, cost & Time Mgt. Acctg. Triangle (TBC) Impacts technical, behavioral & cultural aspects Mgt. Acctg. Links Strategy with Action It is not an end unto itself It is an integrating tool

20. Managerial Accounting-Strategic Cost Analysis--Spring 2002 20 SMA, cont. The two triangles are dependent upon each other This process is a framework to ensure that our management accounting tools possess the attributes necessary to achieve our strategic goals

21. Managerial Accounting-Strategic Cost Analysis--Spring 2002 21 SMA, cont. QCT Triangle Self evident TBC Triangle Provides Technical insight Encourages Behavioral changes Supports Cultural beliefs

22. Managerial Accounting-Strategic Cost Analysis--Spring 2002 22 Strategic Analysis Cost…an economic sacrifice

23. Managerial Accounting-Strategic Cost Analysis--Spring 2002 23 Competitive Strategy Strategic Planning: Mission Stmt. Cost Analysis Shift from Stewardship to Catalyst Shift from Corp. Cop to Business Partner

24. Managerial Accounting-Strategic Cost Analysis--Spring 2002 24 Porter’s Value Processes Core Competency Cost Advantage

25. Managerial Accounting-Strategic Cost Analysis--Spring 2002 25 Types of Competitive Strategy Cost Leadership…cost advantage Differentiation…core competency Focus…pre-requisite to the first two

26. Managerial Accounting-Strategic Cost Analysis--Spring 2002 26 Sustainable Competitive Strategy Process Complete a SWOT Analysis and CSF Identification CSF Measurement CSF Reporting

27. Managerial Accounting-Strategic Cost Analysis--Spring 2002 27 SWOT Analysis Internal Factors Strengths Weaknesses External Factors Opportunities Threats

28. Managerial Accounting-Strategic Cost Analysis--Spring 2002 28 Critical Success Factors CSF’s can be defined in a variety of ways ie…something that must be done well right now!

29. Managerial Accounting-Strategic Cost Analysis--Spring 2002 29 A Changed Perspective Results of Operations vs. operating information for results

30. Managerial Accounting-Strategic Cost Analysis--Spring 2002 30 Balanced Scorecard A Vehicle for Reporting CSF’s 4-Parts More on Nov. 6, 2001

31. Managerial Accounting-Strategic Cost Analysis--Spring 2002 31 Value Chain Analysis Multiple Approaches Porter’s approach…see next slide BCL approach Drivers Cost Core Competency MAG 41 approach

32. Managerial Accounting-Strategic Cost Analysis--Spring 2002 32 Porter’s Value-Chain Developed in 1985 by Michael E. Porter in Competitive Advantage Highlights Cost Advantages and Distinctive Capabilities Value Chain Model Value Chain Elements

33. Managerial Accounting-Strategic Cost Analysis--Spring 2002 33 Value Chain Model from Michael E. Porter’s Competitive Advantage Firm Infrastructure (General Management) Human Resource Management Technology Development Procurement Inbound Logistics Ops. Outbound Logistics Sales & Marketing Service and Support PRIMARY ACTIVITIES SUPPORT ACTIVITIES Customer Value Margin

34. Managerial Accounting-Strategic Cost Analysis--Spring 2002 34 Value Chain Elements Customer Value Added Margin Orientation Primary Activities Inbound Logistics Operations Outbound Logistics Sales and Marketing Service and Support Support Activities Firm Infrastructure Human Resources Tech. Development Procurement

35. Managerial Accounting-Strategic Cost Analysis--Spring 2002 35 Strategic Cost Mgt. Implications Non-traditional reporting Long-term focus Cross-functional perspective

36. Managerial Accounting-Strategic Cost Analysis--Spring 2002 36 Four Key Tools SWOT Analysis CSF’s Balanced Scorecard Value Chain Analysis