Welcome to BUSN8003

Advanced Managerial
Decision Making
Introduction to the course
Class Summary & Wattle
• Your number one source of
reference
• Contains relevant information
about the structure of the course
and its requirements
• Additional readings

2
Textbook
• Blocher, Stout, Juras, Smith,
Stevenson, Langfield-Smith,
Smith, Andon, Hilton,
Thorne (2019)
• Strategic Decision Making
and Operations
Management (Customised)
McGraw Hill Education
▫ E-book
▫ Hardcopy
• Library reserve
3
About the Course
• Lecturer/Course Convenor:
▫ Alex Wang (alex.wang@anu.edu.au)
 Consult: 3-5pm Monday
 3.24 CBE Bld 26c (NOT 3.14!)
• 2 hour lecture (online pre-recorded)
▫ Notes on Wattle by Friday 2pm the week
before
• 1 hour tutorial
(on campus or online live) 4
Tutorials
• Starts Week 2
▫ Tutorial discussion questions on Wattle by
Friday 2pm the week before

• Attend tutorials with your answers ready

for discussion

5
To Succeed…
1. Lecture: 2 hours/week
2. Tutorial: 1 hour/week
3. Private study: at least 7 hrs

vital for you to achieve the

expected learning outcomes

6
Assessment Tasks
• Detailed in class summary:
▫ Online Quizzes (10%)
▫ Team assignment (25%)
▫ Final exam (65%)

7
What is this course about?
• management accounting techniques
• cost management practices;
• forms and behavioural consequences of the
implementation of management accounting systems
in organisations;
• use of management information and control systems.
• Course learning outcomes and weekly topics:
Specified in the Class Summary

8
Reading and Doing
• The most important work is doing
readings before class.
• Reminder: Check Wattle regularly
for updates and relevant
information
• Opportunity to meet your peers

9
Week 1: Intro to Strategic
Management Accounting and
Control

Textbook (Blocher et al., 2019) - Chapter 1

Objectives of Organisations
• Create and sustain “value”
• What constitute value?
▫ Stakeholder View of Value
▫ Balancing competing expectations

11
Stakeholders
• Environment defining stakeholders
▫ define organisation's external
environment
▫ owners, customers, community
• Process defining stakeholders
▫ operate within the internal environment,
and influencing organisational processes
▫ employees, suppliers
12
Value through Design - Customers

• Specify product function and service

performance offered.
▫ Of course, need to understand customer
expectations.
• If product design is of little value,
the execution is also going to be of
little value.
13
Value through Execution - Customers

• Value resulting from how the

product/service is made, delivered
and supported.
▫ e.g. through process design, scheduling,
supply chain management.
• Process improvement and
innovation!!
14
Value parameters

1. Time ▫ Duration
▫ Timeliness

2.Quality ▫ Product
▫ Service

3.Cost ▫ Acquiring
▫ Using
▫ Disposing
15
Four Management Functions
1. Strategic Management
2. Planning and Decision
Making
3. Management and
Operational Control
4. Preparation of Financial
Statements
16
1. Strategic Management
• Most important function
• Involves identifying and
implementing goals and action
plans to maintain a competitive
advantage -> information is needed!

17
2. Planning & Decision Making
• Information is needed to support
recurring decisions such as
scheduling production, pricing,
repairing and replacing equipment

18
3. Mgmt & Operational Control
• Information is needed to identify
inefficient and/or problematic
operations and reward effective
management practices

19
4. Preparation of Financial Stmts
• Information is needed to guarantee
compliance with regulatory
reporting requirements

20
The Strategic Emphasis
• cost management focus = working with
management to achieve the goals
▫ understanding competitive environment and
implementing strategy to succeed in this
environment
• often means using all of the
organization’s resources to identify
and satisfy the customers’ needs
• often requires creative and integrative
thinking from a cross-functional
viewpoint 21
Contemporary Business
Environment
1. Shift to a global business environment
▫ Economic interdependence and increased
competition
▫ Recent trend to economic nationalism
2.Lean Manufacturing
▫ Just-in-time (JIT) inventory methods,
inventory reduction and quality control
▫ Flexible manufacturing systems
▫ Emphasis on speed-to-market (i.e., time-
based competition)
22
Contemporary Business
Environment (continued)
3. Importance of information technology
▫ Increased use of the internet has reduced
processing time, increased access to
important information, and facilitated
information exchange
4. Focus on the customer
▫ Consumers expect functionality, quality,
and innovation
▫ Shorter product life-cycles have intensified
competition
23
Contemporary Business
Environment (continued)
5. Shifts in management organization
▫ Shift from financial to customer-based measures
▫ The focus has shifted from financial measures and
hierarchal command-and-control organizations to
nonfinancial measures and flexible organizational
structures
6. Social, political and cultural considerations
▫ Changes include a more diverse workforce,
changes in regulatory requirements, and a
renewed sense of ethical responsibility
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25
Contemporary Mgmt Techniques

• Thirteen techniques

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Contemporary Mgmt Techniques
1. The Balanced Scorecard and the
Strategy Map
▫ The Balanced Scorecard (BSC) = An
accounting report that addresses
performance in 4 perspectives: financial,
customer, internal processes, and
learning and growth
▫ The strategy map links the four
perspectives in a cause-and-effect
diagram
27
Contemporary Mgmt Techniques

2. The Value Chain

▫ An analysis tool used to identify the specific
steps required to provide a competitive
product/service
▫ Helps identify steps that can be eliminated,
improved, or outsourced

28
Contemporary Mgmt Techniques
3. Activity-based costing and mgmt
▫ Activity-Based Costing (ABC) improves the
tracing of costs to products, services or
customers
▫ Activity-Based Management (ABM) is used to
improve operational and management control
4. Business Analytics
▫ an approach to strategy implementation in
which the management accountant uses data
to understand and analyze business
performance 29
Contemporary Mgmt Techniques

5. Target costing
▫ A method that has resulted from intensely
competitive markets
▫ Target Cost = Market-determined price –
Desired Profit
6. Life-cycle costing
▫ Costs should be monitored throughout a
product’s entire life cycle – from research and
development to sales and service
30
Contemporary Mgmt Techniques

7. Benchmarking
▫ Process by which a firm identifies its CSFs,
studies the best practices of other firms in
achieving these CSFs, and institutes change
based on the assessment results
8. Business Process Improvement
▫ involves managers and workers committing to
a program of continuous improvement in
quality and other critical success factors
(CSFs) 31
Contemporary Mgmt Techniques
9. Total Quality Management
▫ policies and practices to ensure the firm’s
products/services exceed customer’s expectations
10. Lean Accounting
▫ measures the financial benefits of a firm’s
progress in implementing lean manufacturing
11. Theory of Constraints
▫ Helps firms improve cycle-time (i.e., the rate at
which raw materials can be converted to finished
products) 32
Contemporary Mgmt Techniques

12. Sustainability
▫ balancing of the company’s short and long
term goals in all three dimensions of
performance – social, environmental, and
financial
13. Enterprise risk management
▫ framework and process that firms use to
manage the risks that could negatively or
positively affect the company’s
competitiveness and success 33
Management Accounting…
• is a profession that involves partnering
in management decision making,
devising planning and performance
management systems, and providing
expertise in financial reporting and
control to assist management in the
formulation and implementation of an
organization’s strategy” (Institute of
Management Accountants)
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Management Accounting - Role
• Creating and Sustaining Value

• The design and use of management accounting information systems

(MIS) to support and direct the “efficient” acquisition, use, and
disposal of organisational resources

• Cost Management System - development and use of

management accounting information for cost control purpose (e.g.
planning, performance measurement) and ultimatey achieving
strategic objectives (e.g. cost management)

• Cost management information

▫ consists of financial and nonfinancial information that is
developed and used to implement the organization’s strategy

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Cost Management – Strategic Focus
• Developing Cost Management Systems (CMS) –
Kaplan’s stages
Stage 1 basic transaction reporting systems
Stage 2 CMS focus on external reporting and reliable
reports–decision usefulness of cost
management data is limited
Stage 3 CMS track key operating data and relevant
cost information for decision-making
Stage 4 Strategically relevant cost management
information is an integral part of the system
36
Contemporary Environment –
Impact on Cost Management
• The management accountant’s role:
Provide strategically relevant cost
management information to help
keep up with the ever-changing
environment
▫ requires the development of critical
success factors (CSFs), measures of
performance that are essential to
competitive advantage
37
Cost Management Systems
• Promotes process view of
organisations
▫ Link between processes and “value”
• (Re)align task and resource use
▫ Change process
 Identify what to change
 Indicate what to change to
 Explore how to cause the change
38
Cost Management Systems
• Constructively challenge existing
systems
▫ Question “everything”
 Why do we do it this way? What stops us
from doing it differently? How can we
overcome these impediments? How do we
know what constitutes improvement?
• Translating process improvement into
financial improvement 39
Management Control Systems
(MCS)
• include all the
devices/mechanisms
managers use to ensure
that the behavior of
employees is consistent
with the organization’s
objectives and
strategies 40
Management Control
• Process by which management ensures that people
in the organization carry out organizational
objectives and strategies
Objective Setting

Strategy Formulation

Management Control

41
Management Control
• Management control is about
encouraging, enabling, or, sometimes
“forcing” employees to act in the
organization’s best interest
▫ i.e., it guards against the possibilities that
employees will do something the
organization does not want them to do, or,
fail to do something they should do.
▫ It increases the probability that the
organization’s objectives will be achieved
42
Management Control Problem
• Hence, management control has a

Behavioural Orientation!
▫ If all personnel could always be relied on
to do what is best for the organization,
there would be no need for a
management control system
43
Competitive Strategy
• A firm succeeds by implementing a strategy
▫ a plan for using resources to achieve sustainable goals
within a competitive environment
▫ Strategy must have a long-term focus and adapt to the
changing environment
• Cost management is used to develop cost and
other information to help an organization
achieve its strategic goals

44
Michael Porter:
Two Competitive Strategies
• Cost Leadership—outperform
competitors by producing at the lowest
cost, consistent with quality demanded
by the consumer
• Differentiation—creating value for
the customer through product
innovation, product features, customer
service, etc. The customer is willing to
pay more for these added values.
45
Competitive Strategies (cont’d)
Aspect Cost Leadership Differentiation
Strategic Broad cross section Focused section of
Target of the market the market
Competitive Lowest cost in the Unique product or
advantage industry service
Product line Limited selection Wide variety
Production Lowest possible Innovation in
emphasis cost and essential differentiating
features products
Marketing Low price Premium price and
emphasis innovative features 46
The Five Steps of
Strategic Decision Making
1. Determine the Strategic Issues Surrounding
the Problem
2. Identify the Alternative Actions
3. Obtain Information and Conduct Analyses of
the Alternatives
4. Based on Strategy and Analysis, Choose and
Implement the Desired Alternative
5. Provide an On-going Evaluation of the
Effectiveness of implementation in Step 4.
47