sxtensive Summary of chapters 2-11 of the book Management Accounting from A.A. Atkinson, R.S. Kaplan, E.M. Matsumura and S.M. Young.
This book is used for the course Management Accounting in the Master program Accountancy & Control at the UvA.
Companies must use a mix of nonfnancial and fnancial measures to perform these multple tasks.
The Balanced Scorecard (BSC) provides a framework that contnues to measure fnancial outcomes
but supplements these with nonfnancial measures derived from the company’s strategy. It is used in
private-sector, non-proft and public sector.
The balanced scorecard
The balanced scorecard measures organizatonal performance across four diferent but linked
perspectves that are derived from the organizaton’s mission, vision and strategy. The four
perspectves address 埠uestonss:
Financial – how is success measured by our shareholders?
Customer- how do we create value for our customers?
Process – at which processes must we excel o meet our customer and shareholder
expectatons?
Learning and growth – What employee capabilites, informaton systems, and organizatonal
capabilites do we need to contnually improve our processes and customer relatonships?
Financial measures tent to be lagging indicators of the strategy; they report the fnancial impact of
the current or prior period. The other three perspectves are leading indicators; improvements in
these will lead to beter fnancial performance in the future and vice versa.
,The fnancial and customer perspectve represent the “what” of the strategy. WHAT the company
wants to accomplish with its two most important external consttuentss: shareholders and customers.
The process perspectve describes “how” the strategy will be executed.
The learning and growth perspectve describes another “how” 埠uestons: how will employees obtain
the skills and knowledge to be able to improve the 埠uality and cycle tmes of the company’s
producton process?
Strategy
A strategy accomplishes two principal functonss:
1. It creates a compettve advantage by positoning the company in its external environment
where its internal resources and capabilites deliver something to its customers that is beter
than or diferent from its compettors.
2. Having a clear strategy provides clear guidance for where internal resources should be
allocated and enables all organizatonal units and employees to make decisions and
implement policies that are consistent with achieving and sustaining the company’s
compettve advantage in the market place.
Any good strategy should have two essental components
1. A clear statement of the company’s advantage in the compettve marketplace, what it does
or intends to do diferently, beter, or uni埠uely compared to compettors.
2. The scope of the strategy, where the company intends to compete most aggressively, either
for targeted customers segments, technologies employed, geographic locatons served, or
product line breadth
Balanced scorecard objectives, measures and targets
A company should start building its BSC by developing word statements of strategic
objectives that describe what its trying to accomplish.
Then it can select measures for each objectve, which represent a 埠uanttatve indicator
of how performance on a strategic objectve will be assessed
BSC Objectvess:
, Financial Increase revenues through expanded sales to existng customers
Customer Ofer complete solutons to our targeted customers
Process Achieve excellence in order fulflment through contnuous improvements
Learning and growth Align employee incentves and rewards with the strategy
Measures describe in more precise term how success in achieving an objectve will be determined.
Measurement is a powerful tool for communicatng clearly what the company means in its word
statements of strategic objectves, mission, and vision. Once measures are set, managers select
targets for each measure. The targets, if achieved, should positon the company as one of the best
performers in its industry.
Creating a strategy map
Companies use a picture, a strategy map, to illustrate the causal relatonships among the strategic
objectves across the four BSC principles. Developing a strategy follows the following processs:
1. Identfy long-run fnancial objectves
2. In the customer perspectve, select the targeted customers that will generate the
revenues for the new strategy and the objectves for the value propositon ofered to
atract, retain and grow the business with these customers.
3. In the process perspectve, select objectves that create and deliver the customer value
propositon and also improve efciency and productvity.
4. Identfy the employee skills, informaton needs and company culture and alignment that
will drive improvement in the critcal processes.
, Financial perspective
2 basic approaches
1. Productvity improvements
a. Reduce costs by lowering direct and indirect expenses (produce the same output
with less resources)
b. Utlizing fnancial and physical assets more efciently (same output with less
inventory/unexpected shutdowns/downtme)
2. Revenue growth
a. Generate more revenue and income from existng customers.
b. Generate additonal revenue by introducing new products or selling to new
customers.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller fionavanlieshout. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.11. You're not tied to anything after your purchase.
