30 Questions
What is the primary purpose of stakeholder classification using the ICE mnemonic?
To identify stakeholders who are able to affect the organization’s activities
What is the recommended management strategy for dealing with stakeholders who have high interest but low power?
Keep Informed
What is the definition of a stakeholder?
A group or individual who is affected by or can affect the organization’s activities
What is an incremental budget?
A budget that is based on the previous year, adjusted for known changes
What is the purpose of stakeholder mapping?
To understand the dynamics of stakeholder influence on a strategic decision
Which statement about the participation of junior management in the budget setting process is NOT true?
Junior management should not be involved in the budget setting process
What is the primary purpose of an organization's strategy?
To achieve a specific goal
What type of linkages deal with the impact of strategy implementation on strategy formulation?
Both Forward and Backward Linkages
What is the key characteristic of an emergent corporate strategy?
Its final objective is unclear and develops during its life
What happens to emergent strategies over time?
They evolve and change as needs arise
What is the main difference between Mintzberg's intended strategy and other types of strategies?
It is a mix of deliberate and emergent strategy
Which of the following statements is NOT true about emergent strategies?
They are proactive and well-developed in advance
What is a characteristic of the emergent approach?
Consistent with actual practice in organisations
What is the primary effect of barriers to entry on firms outside an industry?
Affect the ability of firms to enter and take advantage of profit opportunities
What is a characteristic of a substitute in Porter's five forces model?
An alternative product or service that performs the same function
What is a limitation of the unrealised intent and unmet objectives approach?
It does not account for experimentation and learning
What is a characteristic of deliberate strategy?
It is a planned and intentional strategy
What is an example of a barrier to entry?
The relative size of existing firms in the industry
What is a pitfall in selecting benchmarks?
Selecting benchmarks that are consistently performing below industry averages
What is a characteristic of an activity-based costing system?
It allocates costs to products based on direct labour-hours
What is the role of a cost driver in activity-based costing?
It is a factor that causes a change in the cost of an activity
What is a limitation of traditional absorption costing?
It under-estimates overhead costs for high volume products
What is a benefit of incorporating a continuous improvement mindset based on benchmarking results?
It helps to identify areas where industry averages are not being met
What is a characteristic of a well-designed benchmarking process?
It incorporates a continuous improvement mindset
What is an advantage of involving lower-level personnel in the budgeting process?
It improves morale and motivation
What is a characteristic of the top-down approach to budgeting?
It imposes budgets on junior managers
What is a criticism of traditional budgets based on fixed annual periods?
They ignore key drivers of shareholder value
What is the most appropriate system of budgeting when there are high levels of discretionary spending and powerful stakeholders to whom spending choices must be justified?
Rolling budgets
What is a difference between the top-down and bottom-up approaches to budgeting?
The realism of budget targets
What is a potential consequence of traditional budgeting techniques in a fast-moving business environment?
Inadequate budget flexibility
Study Notes
Unrealised Intent and Unmet Objectives
- Deliberate and unrealised strategy is when an organisation's actual strategy differs from the intended one.
Emergent Approach to Strategy
- Allows experimentation about the strategy to take place
- Organisation may be slow to respond to market changes
- Consistent with actual practice in organisations
- Managers of divisions granted significant autonomy
Barriers to Entry
- Affect the ability of firms outside an industry to enter and take advantage of profit opportunities
- Examples: relative size of existing firms in the industry, capital requirements, switching costs, product differentiation
Porter's Five Forces Model
- Substitute refers to an alternative product or service that performs the same function for the consumer
Stakeholders
- Any group or individual who is affected by or can affect the organisation's activities
- Stakeholder mapping is a technique used to understand the dynamics of stakeholder influence on a strategic decision
- Recommended management strategy for dealing with stakeholders with high interest but low power is 'Keep Informed'
Budgeting for Strategy in Action
- Incremental budget: a budget based on the previous year, adjusted for known changes
- Participation of junior management in the budget setting process can lead to more realistic budgets and increased motivation
Strategy Formulation
- Forward Linkages deal with the impact of strategy implementation on strategy formulation
- Emergent corporate strategy is a strategy whose final objective is unclear and whose elements are developed during the course of its life
- Emergent strategies generally evolve and change as needs arise
Activity-Based Costing
- Uses a number of activity cost pools, each of which is allocated to products on the basis of direct labour-hours
- A cost driver is a factor that causes a change in the cost of an activity
- Traditional absorption costing tends to under-estimate overhead costs for high volume products
Test your understanding of management accounting and strategy with this tutorial quiz, covering topics such as strategy implementation and formulation. Evaluate your knowledge of forward and backward linkages, and more. Take the challenge!
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