Which of the following is a contemporary management technique used by management accountant to identify?

2

CHAPTER ONE

Cost Management

and Strategy

After studying this chapter you should be able to . . .

1. Explain the use of cost management information in each of the four functions of management and

in different types of organizations, with emphasis on the strategic management function

2. Explain the contemporary business environment and how it has influenced cost management

3. Explain the contemporary management techniques and how they are used in cost management to

respond to the contemporary business environment

4. Explain the different types of competitive strategies

5. Describe the professional environment of the management accountant, including professional

organizations and professional certifications

6. Understand the principles and rules of professional ethics and explain how to apply them

Talk about a success story! Wal-Mart has grown from its first discount store in 1962 to

become the world’s largest company, with almost $400 billion in sales. It has achieved this

through clear day-to-day attention to accomplishing its business strategy and to living up to

its motto of “Save Money—Live Better.” Wal-Mart achieves success through extensive use of

technology and aggressive efforts to grow the business globally. And the environment is very

competitive! A key competitor, Target, with a different strategy and a different motto (“Expect

More, Pay Less”) is challenging Wal-Mart with aggressive new advertising campaigns and

new stores. During the 2004–2006 period, Target was outpacing Wal-Mart in sales growth and

stock price growth. This reversed in the 2006–2008 period, as the global economic outlook

weakened for many consumers and the low-cost strategy of Wal-Mart has been more success-

ful. Now Target is facing the heat of increased competition from Wal-Mart.

1 The stakes are

high and the competition is fierce. Imagine yourself as a manager for one of these companies;

how would you help your company be more competitive?

This book is about how managers use cost management to build a successful company as

those at Wal-Mart and Target have done. Everyone wants to be a winner, and so it is in busi-

ness and accounting. We are interested in how the management accountant can play a key

role in making a firm or organization successful. Now you might be asking, Don’t we have to

know what you mean by success? Absolutely! A firm must define clearly what it means by

success in its mission statement. Then it must develop a road map to accomplish that mission,

which we call strategy. Briefly, strategy is a plan to achieve competitive success. In Wal-

Mart’s case, the mission is to achieve customer value, and the strategy involves the extensive

use of technology to reduce cost, a management structure that welcomes change, and a con-

stant focus on customer service. For Target, the competitive focus is promise of value through

brand recognition, customer service, store location, differentiated offerings, quality, fashion,

and price.

Because we are interested in how the management accountant can help a company be suc-

cessful, we take a strategic approach throughout the book, beginning with an introduction to

1 Same-store sales were up 5% for Wal-Mart in the third quarter of 2008, while same store sales at Target were down by 0.4%.

Karen Talley and Ann Zimmerman, “Wal-Mart Forecasts Gains as Rivals Stumble,” The Wall Street Journal, February 18, 2009,

p. B1; Ann Zimmerman, “Target’s Profit Continues to Slide,” The Wall Street Journal, November 18, 2008, p. B1.

Which of the following is a contemporary management technique used by the management accountant to identify?

What should a management accountant do if a significant ethical situation Cannot be resolved?

Is the practice of accounting in which the accountant develops and uses cost management information?

Which of the following best describes the type of information that cost management must provide that is most important for the success of the organization *?