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Management Accountancy in Strategy Decisions

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A series of independent situations in which a firm is about to make a strategic decision follow.

Decisions:

a. Roger Phones is about to decide whether to launch production and sale of a cell phone with standard features.
b. Computer Magic is trying to decide whether to produce and sell a new home computer software package that includes the ability to interface with a sewing machine and a vacuum cleaner. There is no such software currently on the market.
c. Christina Cosmetics has been asked to provide a "store brand" lip gloss that will be sold at discount retail stores.
d. Marcus Meats is entertaining the idea of developing a special line of gourmet bologna made with sun dried tomatoes, pine buts, and artichoke hearts.

Required:

1. For each decision, state whether the company is following a low price or a differentiated product strategy.
2. For each decision, discuss what information the management account can provide about the source of competitive advantage for these firms.

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Solution Summary

This posting gives you pointers about when a low cost strategy should be used and when a differentiation strategy should be used. It also discusses the role of management accountant in strategy decisions.

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Decisions:

a. Roger Phones is about to decide whether to launch production and sale of a cell phone with standard features.
The company is following a low price strategy. The management accounts will give the pricing of the product and the purchasing process, including the volume, stock records and creditors. The pricing can be compared with that of others in the market and low cost bulk purchases will indicate a low cost strategy.

b. Computer Magic is trying to decide whether to produce and sell a new ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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