Chapter 9

Question 1

define corporate strategy

Answer 1

outlines a company’s long-term future vision, target customers, and the product/service it offers

Question 2

what’s the use of a corporate strategy

Answer 2

sets out how a company will compete against its peers by taking advantage of its strength to provide better value to its target customers than its competitors

Question 3

how can a company provide better value than its competitors

Answer 3

1. Product differentiation
2. cost leader
3. customer experience

Question 4

define product differentiation

Answer 4

offer better products and or services typically at higher price points that customers are willing to pay

Question 5

define cost leader

Answer 5

offer better prices for its products and/or services than its competitors typically at lower price points

Question 6

define customer experience

Answer 6

offer better customer services than its competitors

Question 7

why is strategy important in accounting?

Answer 7

it starts with strategy for performance management systems

management teams set strategy + make big + small strategic decisions that are aligned with its corporate strategy to advance its strategic position and achieve competitors advantage over their peers

Question 8

what’s the importance of setting strategic goals

Answer 8

measure its performance against these goals to understand if the decision it is making are advancing its strategic position

Question 9

define a performance management system

Answer 9

a system that monitors and measures a company’s overall performance

Question 10

what does a company know from a strategic perspective

Answer 10

1. industry key success factors - things a company must do really well to gain a competitive advantage in the industry in which they operate
2. strategic avenue management is taking to differentiate its product and/or services from its competitors
3. business model, which outlines how the company will make money

Question 11

what should a company know form a corporate perspective

Answer 11

company should know its priorities form an environmental + social perspective + financial expectations of external shareholders

Question 12

Define Key Performance Indicators

Answer 12

important metrics which help executive management teams understand a company’s overall performance, they can be non-financial and financial

Question 13

what’s the relationship between KPI and goal/objective

Answer 13

what the company targets the KPI to be over a short or long-term period

Question 14

define employee rewards systems

Answer 14

programs which companies put in place to motivate employees to achieve company targets

Question 15

what do good management teams do

Answer 15

continuously monitor the industry, competitors, and other factors to make sure the KPIs they are focusing on remain relevant

Question 16

define the modified balanced scorecard

Answer 16

a tool that’s used by management teams to understand company performance from financial, customer, environmental, internal business practices, and learning & growth

Question 17

define the 5 perspectives on the modified balance scorecard

Answer 17

1. financial - measure + monitors business performance form a financial perspective
2. customer = measures + monitors business performance forma customer persective
3. environmental = measures + monitors business performance from an environmental perspective
4. internal business processes - measures + monitors business performance from an efficiency perspective
5. learning + growth - measures + monitors business performance from an employee perspective 0 including the social part of ESG

Question 18

define responsibility centres

Answer 18

segments within a company that are expected to effectively manage revenue, profit, investments and/or costs

Question 19

what are the 3 questions management should ask to understand the segment’s responsibilities

Answer 19

1. what can the management team within the segment control + influence - revenue, cost, investing etc

Question 20

define a revenue centre

Answer 20

if management can only control + influence revenue

Question 21

define a cost centre

Answer 21

if management can only control + influence cost

Question 22

define a profit centre

Answer 22

if management can only control + influence both revenues + costs but it does not have authority to approve investment decisions

Question 23

define an investment centre

Answer 23

if management can only control + influence revenue + costs + have authority to approve investment decisions

Question 24

why is understanding a business segment’s responsibilities useful

Answer 24

to make sure that the KPIs that are being used to measure its performance makes sense

Question 25

define a management reporting cycle

Answer 25

a process that involves setting budget targets, producing management reports, making decision to improve performance + continuously motivating employees to meet company targets