Key Concepts in Strategic Management Accounting (SMA)

Strategic Management Accounting (SMA)

• Definition: Provision and analysis of management accounting data about a business and competitors for strategy development and monitoring (Simmonds, 1981).

Strategic Choices

• Companies can choose which industry to enter and their competitive strategy.

• Effective SMA provides essential information for decision-making, helping avoid uncompetitiveness.

SMA Techniques

• Focuses on both internal costs and external environment.

• Understanding customers and how products are supplied is crucial.

• Key relationships:

  • Upstream: Suppliers

  • Midstream: Competitors

  • Downstream: Customers

Porter's Five Forces Model (1985)

• Analyzes industry competition:

  • Rivalry among existing firms

  • Threat of new entrants

  • Threat of substitute goods

  • Bargaining power of suppliers

  • Bargaining power of customers

• Ideal market conditions exist with low supplier/customer power and high entry barriers.

Strategic Choice and Porter’s Competitive Strategies

• Generic strategies:

  • Cost Leadership: Lowest cost to survive and compete.

  • Differentiation: Premium pricing based on perceived product status.

  • Focus Strategies: Niche markets with focused cost or differentiation.

External Influences (PESTEL Analysis)

• Political, Economic, Social, Technological, Environmental, Legal factors that create uncertainty in markets.

Globalisation Impacts

• Access to new markets and competitive business structures enhancing opportunities.

Case Study Preparation

• Prepare informed comments on the provided case study "Ortiga Sports" for tutorial discussions.