Paper P5 Advanced Performance Management This ACCA Study Text for Paper P5 Advanced Performance Management has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage For exams up to June 2015 BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia • A user-friendly format for easy navigation • Exam focus points describing what the examining team will want you to • Regular Fast Forward summaries emphasising the key points in each chapter • Questions and quick quizzes to test your understanding • A practice question bank containing exam- standard questions with answers • A full index • All you need in one book Study Text Contact us In addition to ACCA examining team reviewed material you get: Advanced Performance Management BPP Learning Media is dedicated to supporting aspiring 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examination-team reviewed Study Text we: Highlight the most important elements in the syllabus and the key skills you need Signpost how each chapter links to the syllabus and the study guide Provide lots of exam focus points demonstrating what is expected of you in the exam Emphasise key points in regular fast forward summaries Test your knowledge in quick quizzes Examine your understanding in our practice question bank Reference all the important topics in our full index BPP's Practice & Revision Kit and i-Pass products also support this paper FOR EXAMS IN DECEMBER 2014 AND JUNE 2015 T E X T First edition 2007 Seventh edition June 2014 ISBN 9781 4727 1089 Previous ISBN 9781 4453 9657 eISBN 9781 4453 6744 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the practice answer bank have been prepared by BPP Learning Media Ltd, unless otherwise stated Published by BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www.bpp.com/learningmedia Printed in the United Kingdom by RICOH UK Limited Unit Wells Place Merstham RH1 3LG Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources © BPP Learning Media Ltd 2014 ii Contents Page Introduction Helping you to pass Studying P5 The exam paper Syllabus and study guide v vii xii xiii Part A Strategic planning and control Introduction to strategic management accounting Performance management and control of the organisation 43 Business structure, IT developments and other environmental and ethical issues 59 Part B External influences on organisational performance Changing business environment and external factors 123 Part C Performance measurement systems and design Performance management information systems 153 Management information, recording and processing and management reports 187 Part D Strategic performance measurement 10a 10b 11 12 Performance hierarchy 223 Scope of strategic performance measures in the private sector 257 Divisional performance and transfer pricing issues 307 Strategic performance measures in not-for-profit organisations 335 Non-financial performance indicators 359 The role of quality in management information and performance measurement systems 379 Performance measurement: strategy, reward and behaviour 429 Part E Performance evaluation and corporate failure 13 14 15 Alternative views of performance measurement and management 469 Strategic performance issues in complex business structures 509 Predicting and preventing corporate failure 541 Part F Current developments and emerging issues in performance management 16 Current developments, issues and trends 569 Mathematical tables 599 Practice question bank 603 Practice answer bank 621 Index 663 Review form Contents iii A note about copyright Dear Customer What does the little © mean and why does it matter? 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BPP Learning Media strive to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that If they act illegally and unethically in one area, can you really trust them? iv Helping you to pass BPP Learning Media – Approved Learning Partner - content As ACCA’s Approved Learning Partner – content, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examining team By incorporating the examination team’s comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies The PER alert Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three year practical experience requirement (PER) To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the ‘PER alert’ feature You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement Your achievement of the PER should now be recorded in your on-line My Experience record Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success Developing exam awareness Our Texts are completely focused on helping you pass your exam Our advice on Studying P5 outlines the content of the paper, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have Exam focus points are included within the chapters to highlight when and how specific topics were examined, how they might be examined in the future, and how different topics within the syllabus fit together Using the Syllabus and Study Guide You can find the syllabus and Study Guide on pages xiii – xxi of this Study Text Testing what you can Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt We include Questions – lots of them – both within chapters and in the Practice Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content Introduction v Chapter features Each chapter contains a number of helpful features to guide you through each topic Topic list Topic list Syllabus reference What you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references Introduction Puts the chapter content in the context of the syllabus as a whole Study Guide Links the chapter content with ACCA guidance Exam Guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined Knowledge brought forward from earlier studies What you are assumed to know from previous studies/exams FAST FORWARD Summarises the content of main chapter headings, allowing you to preview and review each section easily Examples Demonstrate how to apply key knowledge and techniques Key terms Definitions of important concepts that can often earn you easy marks in exams Exam focus points When and how specific topics were examined, or how they may be examined in the future Formula to learn Formulae that are not given in the exam but which have to be learnt Gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) vi Introduction Question Gives you essential practice of techniques covered in the chapter Case Study Real world examples of theories and techniques Chapter Roundup A full list of the Fast Forwards included in the chapter, providing an easy source of review Quick Quiz A quick test of your knowledge of the main topics in the chapter Practice Question Bank Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation Studying P5 As the name suggests, this paper examines advanced performance management topics and is particularly suited to those who are thinking about a career in management accountancy or are likely to be involved in strategic management decisions ACCA expects you to demonstrate a professional approach to all questions – not just presenting information in a professional manner, but also integrating knowledge and understanding of topics from across the syllabus The examining team has stressed that candidates should not expect topics in P5 exams to be examined in isolation One of the major skills you will be expected to demonstrate in the P5 exam is being able to draw on knowledge gained across your studies to date, in order to present complete solutions to relatively broad business issues or problems What P5 is about The syllabus for Paper P5 further develops key aspects and skills introduced in Paper F5, and it draws on aspects of the material about strategic and operational planning and performance covered in Paper P3, Business Analysis However, whereas Paper P3 only assesses principles of management accounting as part of the wider analysis of a business situation, Paper P5 could examine aspects of management accounting – such as budgeting or costing techniques – in their own right The stated aim of the P5 syllabus is: ‘To apply relevant knowledge, skills and exercise professional judgement in selecting and applying strategic management accounting techniques in different business contexts and to contribute to the evaluation of the performance of an organisation and its strategic development.' Read this aim carefully You are no longer just a 'number cruncher' drawing up budgets and producing calculations to include management reports You are expected to understand the wider issues that affect organisations These issues are often written about in newspapers and journals such as the Financial Times and the Economist, so it is important you read the financial press to help you identify how the issues you are studying in P5 relate to the real world context At this level in your studies, you also need to recognise how the subjects you previously studied begin to fit together You need to begin to take a holistic view of an organisation, and to see how the various parts of it and various processes affect overall performance – rather than looking at individual issues in isolation Importantly, the P5 exam is likely to also test your ability to assess different approaches to performance management, from a variety of perspectives As well as knowing what the approaches are, you will also need to be able to compare them with one another in the context of a scenario; for example, the comparing the long-term and short-term issues affecting an organisation’s performance Snapshot of the syllabus The syllabus expects you to understand how organisations set their strategy and the external influences that affect strategic plans and operational outcomes You will be expected to evaluate different systems of performance management and apply strategic performance measurement techniques in evaluating and improving performance You may also be expected to advise on strategic performance evaluation and the possibility of corporate failure Finally you need to be aware of the current developments in management accounting and performance management as these affect organisations Introduction vii There are six parts to the syllabus, as summarised below: (a) Use strategic planning and control models to plan and monitor organisational performance (b) Assess and identify relevant macro-economic, fiscal and market factors and key external influences on organisational performance (c) Identify and evaluate the design features of effective performance management information and monitoring systems (d) Apply appropriate strategic performance measurement techniques in evaluating and improving organisational performance (e) Advise clients and senior management on strategic business performance evaluation and on recognising vulnerability to corporate failure (f) Identify and assess the impact of current developments in management accounting and performance management on measuring, evaluating and improving organisational performance We expect most of these capabilities (if not all) to be tested to some extent in every P5 exam What skills are required? Look back at the action verbs in the six parts of the syllabus outlined above You are expected to be able to assess, advise and evaluate, as well as to identify and monitor The need for these skills of assessing, advising and evaluating highlights that, at P5 level, you are expected to have moved beyond merely demonstrating your knowledge of a model or technique, and instead you have to apply that knowledge to practical situations For example, the examiner will expect that, by the time you reach P5, you can already calculate basic financial ratios In P5, though, the examiner will expect you to be able to interpret the information provided by those ratios to understand how an organisation is performing, and to make sensible suggestions (where appropriate) about how its performance could be improved The questions set in P5 exams will be based around case study scenarios which describe an organisation, its objectives and its business environment You will need to relate your answers specifically to the scenario given in the question There will be very few marks available for simply describing models or theories Evidence from past exam sittings suggests that candidates who simply learn models and theories, but then not apply their knowledge to the question scenarios, typically score between 20-30% in their P5 exams The P5 paper has a large written element, with well over half the marks being earned for written answers (discussion, analysis, evaluation) rather than calculations Again, this is designed to reflect the position of a qualified accountant working in a business The accountant can expect a number of the routine calculations and figures to be produced by their more junior colleagues, but the accountant should then expect to identify the issues or implications being identified by those figures We have summarised here the skills you are expected to demonstrate in P5 (a) Core knowledge The contents of Paper F5 Performance Management – assumed knowledge brought forward for Paper P5 (b) Numerical skills Those skills demonstrated in Paper F5 You only learn a small number of new mathematical techniques in this paper, but, alongside these, you are also expected to remember those you learnt previously (c) Written skills These are key skills on this paper You will be expected to write reports and notes explaining issues you encounter (d) Analysis and interpretation of question data or calculations The examiner has stressed that candidates will be expected to analyse (not merely calculate) numerical data given in a scenario Wider business awareness or application of skills in a practical context (e) viii Introduction How to pass The examiner provides a lot of useful feedback in the ‘Examiner's reports’ to past exams This feedback highlights areas where students have struggled in exams, and also indicates the skills the examiner expects candidates to be able to demonstrate Looking at the post exam guidance can also be useful for reminding yourself about essential areas of exam technique Therefore you are strongly recommended to read these guides which are available in the ‘Qualification resources’ section of ACCA’s website: http://www.accaglobal.com The points highlighted in the Examiner’s reports include the following: (a) Read questions very carefully and answer the question asked, not the question you hoped had been asked In particular, if a question asks you to ‘evaluate’ or ‘assess’ the usefulness of a performance measure for assessing performance in an organisation, this is not asking you to evaluate or assess the organisation’s performance Instead, the focus of your answer must be on the performance measure itself (b) Answers which consist of rote-learned definitions or explanations with no application to the scenario will score very few marks It is vital that you apply your knowledge to the context described by the question scenario (c) Look at the mark allocation to help you manage your time allocation and plan your answer (d) Read all the parts of the question before you prepare your answer, so that you avoid repeating the same points in answering different parts of the question We recommend you read the ‘P5 Examiner's approach’ article published in October 2012 and available on ACCA’s website This illustrates how some of the skills required to pass P5 have been tested in recent exam sittings, and provides some useful hints about how to approach the paper Approach to the exam – In the article, the Examiner suggested that the best approach to the exam can be summarised as: (a) Cover the whole syllabus – Candidates often appear to over-concentrate on Section D of the syllabus (strategic performance measurement) However, it is important to understand how, for example the choice of performance measures fits with planning and control structures (Section A of the syllabus) or how well the measures chosen relate to external drivers of performance (Section B of the syllabus) (b) Be prepared to apply your knowledge of syllabus topics to a business scenario – answers which provide lists of rote-learned points (or rote-learned advantages and disadvantages for different techniques and approaches) will not earn sufficient marks to pass a question Candidates will be expected to tailor their knowledge specifically to the situation given in the question scenario (c) Read and answer the question set – Candidates earn marks where their answers are technically correct and relevant to the question asked However, candidates have a tendency to write answers to the question they wish had been asked, rather than the question the examiner actually set This approach scores little or no credit though (d) Add value to the organisation that is being advised – Candidates need to demonstrate their ability to add value by taking data already produced and identifying and analysis the key issues in that data and the commercial implications of it Candidates need to be prepared to analyse numerical data given in a scenario, not merely to perform calculations on it Importantly, the Examiner’s article also stresses that P5 is a paper about performance management, not simply about performance measurement Whilst it is important for an organisation to measure how well it is performing, this performance measurement takes place within the wider context of strategic planning and control, and is subject to both internal and external factors which can affect performance In Paper P5 you need to be aware of this context and its impact on performance, not simply how an organisation can measure performance Performance management also considers how the management of an organisation Introduction ix A common tool used in Six Sigma is DMAIC (explained below) (i) Define the customer requirements that are Critical to Quality (CTQ) and map the process at a high level (ii) Establish a valid Measurement system, collect the data and describe the distribution of the process data (iii) Analyse Determine the process capability and identify and validate root causes of variation using statistical tools (iv) Improve Develop and implement solutions (v) Control Establish ongoing process controls to avoid the problem recurring by implementing control charts, assigning clear process ownership and documenting the improved workflow 660 Practice answer bank Index 661 662 Note Key Terms and their page references are given in bold Absorption costing, 128 Accountability, 453 Acid test ratio, 294 Activity analysis, 493 Activity based budgeting, 47 Activity based costing (ABC), 491 Activity based management (ABM) , 491, 492 Activity schedule, 234 Advanced manufacturing technology (AMT), 127 Agency theory, 453 Alliances, 159 Analytic/systematic processing, 177 and responsibility accounting, 179 Ansoff's growth vector matrix, 246, 523 Anthony, Robert, Appraisal costs, 402, 411, 415 Argenti's A score, 550 Arm's length transfer price, 329 Asset turnover, 274 Audits (VFM audits), 354 Balanced scorecard, 368, 471 BCG matrix, 518, 521 Behavioural control, 455 Benchmarking, 35, 95, 198, 349 and public sector league tables, 577 Benefits of lean production, 166 Brand awareness, 373 Brand loyalty, 374 Branding, 372, 373 Bribery, 110, 241 Budgeting, 21 Building blocks (Fitzgerald and Moon), 480 Burns and Scapens, 581 Business integration, 71 Business process re-engineering (BPR), 67, 68 Business strategy, 14 Calculative contract, 434 Capital markets and funding, 140 Capital structure, 288 Changes to management accounting systems due to empowering employees, 79 Changes to management accounting systems due to team working, 78 Characteristics of service businesses, 83 Codependency, 533 Codes of conduct, 113 Coercive contract, 434 Company profile, 375 Comparisons of accounting figures, 301 Competitive performance, 481 Competitive strategy, 12, 75 Competitor benchmarking, 36 Computer Telephony Integration (CTI), 205 Connected stakeholders, 237 Consumer panels, 192 Consumer protection legislation, 113 Consumer safety, 112 Consumerism, 112, 113 Contingency approach to management accounting, 170 Contingent variables, 171 Continuous improvement, 126, 397, 497 Contribution tables, 136 Control, Controllability, 483 Controls over generating and distributing internal information, 208 Core activity, 495 Core business processes, 413 Corporate appraisal, 12 Corporate code(s), 242, 243 Corporate long-range planning, 11 Corporate objectives, 11, 231, 232 Corporate planning, 11 Corporate planning process, 231, 337 Corporate policy statement, 412 Corporate profit maximisation, 313, 316, 318, 319 Corporate social responsibility, 99 Corporate strategy, 14 Cost accounting methods, 128 Cost driver analysis, 495 Cost gap, 392 Cost leadership, 14 Cost of appraisal, 401 Cost of conformance, 402 Cost of external failure, 401 Cost of internal failure, 401 Cost of internally-sourced information, 195 Cost of non-conformance, 402 Cost of obtaining external data, 196 Cost of prevention, 401 Cost of quality, 383, 401, 411 Cost reduction, 493 Crisis stabilisation, 562 Critical success factors (CSFs), 19 Culture, 173, 176 Current ratio, 294 Customer satisfaction, 370 Index 663 Dashboards, 216 Data mart, 90 Data mining, 91 Data warehousing, 90 Database controls, 211 Database information, 193 Database management systems (DBMS), 90 Database packages, 204 Database providers, 193 Databases, 89, 158 Decision making, Decision support systems (DSS), 95 Declining companies, 545 Declining industries, 544 Dedicated cell layout, 127 Delayering, 79 Departmental plans and objectives, 234 Development potential of a system, 199 Differentiation, 14 Dimensions (in Building Block model), 481 Discretionary activities, 495 Disintegration, 545 Diversified form, 62 Diversionary activities, 495 Divestment, 524 Divisional (or diversified) form, 62 Divisional autonomy, 315, 318, 319 Divisional performance measurement, 316, 318, 319 DMAIC, 422 Double loop feedback, 252 Double taxation agreements, 329 Drill down reports, 216 Dual pricing, 320 E arnings per share (EPS), 272 EBITDA, 270 Economic capital, 239 Economic environment, 139 Economic profit, 502 Economic Value Added (EVA)®, 282 Economies of scale, 82 Economy, 343, 354 Effectiveness, 343, 354 Efficiency, 343, 354 Elkington – triple bottom line, 239 Empowerment, 79, 126, 422 Encryption, 212 Enterprise Resource Planning Systems (ERPS), 91, 163 Environment (contingent variables), 172 Environmental considerations, Environmental costs, 576 Environmental management accounting (EMA), 573 664 Index Environmental performance, 577 Environmental taxes, 576 Ethical conduct, 241 Ethical organisations, 242 Ethical stance, 108 Ethics, 241 Evaluating output reports, 215 Exception reports, 216 Executive Information Systems (EIS), 96 Exogenous variables, 129 Expected values, 131 Experience curve and learning effect, 82 Expert systems, 96 External failure costs, 402, 411 External information and the management accounting system, 197 External sources of information, 190 External stakeholders, 237 Extranet, 89 F alse alarms, 18 Feedback, 252 Feedforward control, 252 Financial leverage/gearing, 288 Financial performance, 481 Financial performance indicators, 360 Financial risk, 288 Firewalls, 212 Five forces model, 511, 516 and business performance, 517 Fixed budget, 47 Flexibility, 200, 481, 482 Flexible budget, 47 Flexible firms, 158 Flow cost accounting, 574 Focus, 15 Formal goals, 231 Freewheeling opportunism, 30, 38 Fully diluted EPS, 273 Functional analysis, 394 Functional benchmarking, 36 Functional departmentation or organisation, 61 Functional strategies, 15 Funding, 139 Funding and achieving objectives, 51, 339 Gaming, 459 Gap analysis, 12, 245, 246 Gaps, 19 Gearing, 287 Gearing ratios, 288 Goal congruence, 8, 230 Goals, 12, 229 Government agencies, 191 Government regulation, 145 Groupware, 88 Growth vs survival, 263 H ard accountability, 453, 454, 455 Hard elements of business behaviour, 72 Heuristic/holistic processing, 177 Hierarchy of objectives, 235 Human behaviour, 175 Icarus paradox, 547 Ideological goals, 231 Impact of instant access to data on the business, 92 Implementing lean principles –the ‘S’s, 167 Importance of leadership, 557 Informal control, 20 Information for control purposes, 194 Information from customers, 192 Information from suppliers, 192 Information needs divisional structures, 64 functional structures, 62 manufacturing businesses, 80 Information requirements, 157 Innovation, 82, 126, 482, 483 Input/output analysis, 574 Inseparability, 83 Inspection costs, 411 Instant access to data, 87 Institutional strategies, 12 Intangibility, 83, 481 Integrated reporting, 586 Integration, 71 Interdependence of organisations, 158 Interest and pressure groups, 103 Intermediate product, 317 Internal audit, 414 Internal benchmarking, 35 Internal failure costs, 402, 411, 415 Internal rate of return, 279 Internal sources of management accounting information, 189 Internal stakeholders, 236 Internally sourced information for control purposes, 194 Internet businesses, 262 Internet companies, 299 Interoperability, 200 Intranet, 88 ISO 9000:2000 series, 409, 422 Just-in-time (JIT), 385 production, 385 purchasing, 385 Kaizen costing, 394 Kanban, 386 L eague tables, 348, 351 Lean management information systems, 164 Lean production, 164, 165 Learning curve theory, 176 Learning curves, 175 Life cycle costing, 389, 574, 594 Limitations of external data, 196 Linkages, 74 Liquidity, 292 Liquidity ratios, 548 Logical access systems, 211 Long range planning, 11 Long run process drift, 421 Long-term objectives, 244 Machinery bureaucracy, 436 Management accounting, 30, 38, 160 Management accounting information, 160 objectives of, 160 within the management information system, 162 Management accounting system, 94, 96, 97 Management control, 6, 155 Management information system (MIS), 94, 162, 193 Management structure and information, 157 Management styles, 462 Managing the business, not just the numbers, 572 Market development, 523 Market penetration, 523 Mass service, 83 Maximax, 131, 134 Maximin, 131, 134 McKinsey 7S model, 71, 72 Measure fixation, 352, 459 Measurement, analysis and improvement, 413 Milestones of performance, 19 Minimax regret, 135 Misinterpretation, 459 Misrepresentation, 459 Mission, 12, 224, 225 Mission statements, 227, 412 Modified internal rate of return (MIRR), 279, 281 Motivation, 483 Multi skilled/multi-disciplinary teams, 78, 79 Multidimensional data analysis, 90 Multinational organisations, 22 Multinational transfer pricing, 328 Myopia, 459 Index 665 Natural capital, 239 Negative feedback, 252 Network organisations, 65, 157 Network technology, 207 Non-competitor benchmarking, 36 Non-financial information, 84 Non-financial performance indicators (NFPIs), 360 Non-financial performance measures, 365 Non-monetary information, 84 Non-operational goals, 229 Non-value-added activities, 494 Not-for-profit organisation, 51, 338 Objectives, 12, 229, 244 long-term and short-term, 244 Objectives, critical success factors and key performance indicators, 248 Online databases, 193 Operating gearing or leverage, 291 Operational control, 6, 155, 497 Operational goals, 229 Operational performance, 250 compared to strategic and tactical performance, 251 Operational planning, 6, 155 Operational strategies, 15 Operations planning, 14 Opportunity cost and transfer prices, 323 Organisation structure, 233 Organisational control mechanism (Ouchi), 457 Ossification, 459 Ownership, 483 Passwords, 211 Penetration pricing policy, 521 Performance evaluation, 497 Performance measurement, 458 benefits of, 458 in not-for-profit organisations, 341 problems in complex business structures, 526 problems of, 458 Performance measures, 128 Performance pyramid, 478 Perishability of services, 83, 481 Personnel control, 456 PEST analysis, 138 Physical access controls, 211 Planning, 5, 328 Planning and control at different levels, 251 Planning gap, 245 Political factors (PEST), 138 666 Index Politics in public sector organisations, 350 Positive feedback, 252 Potential conflict between survival and growth, 263, 264 Predicting business failure, 543 Prevention costs, 402, 411, 415 Price earnings (P/E) ratio, 298 Primary activity, 74, 495 Primary corporate objective, 232 Prior charge capital, 288 Process, 67 improvement, 418, 493 quality, 421 redesign, 419 reengineering, 418 Product development, 524 Product differentiation, 511 Product failures, 414 Product life cycle, 126, 559 Product-market mix, 246 Product-market strategies, 12 Profit before interest and tax (PBIT), 268 Profit margin, 274 Profitability, 268 Profits and share value, 298 Project management techniques, 422 Psychological contracts, 433, 434 Public sector organisations, 339 Qualitative information, 84 recording and processing, 207 Qualitative issues, 372 Qualitative models, 554 Qualities of good information, 416 Quality, 346, 407 assurance, 408 certification, 409 control, 408 Quality management, 406 Quality management in information systems, 416 Quality management system, 407, 408, 410 Quality manager, 408 Quality manual, 408, 411 Quality objectives, 414 Quality of service, 370, 481 Quality policies, 412 Quality procedure, 412, 413 Quality process, 412 Quality-related costs, 401 Quantitative information, 84 Quantitative models of business failure, 548 Quick ratio, 294 Radio frequency identification (RFID), 205 Ranking objectives, 233 Rational model of strategic planning, 11 Recording and processing information, 201 developments in IT, 203 Regret, 135 Regulation of prices, 146 of quality, 146 of supply, 146 Remote input of data, 94 Residual income (RI), 276, 310 Resource utilisation, 482 Responsibility accounting, 179 Responsibility centre, 179 Responsibility charts, 234 Results control, 456 Return on capital employed (ROCE), 273 Return on investment (ROI), 274, 309 Reward, 440, 483 Reward schemes and performance measurement, 452 Reward structures, 483 Reward system, 440 Risk, 129 Risk averse, 132 Risk neutral, 132 Risk seeker, 132 Rolling budget, 47 S/L trade-off, 244, 245 Sales growth, 274 Sales margin, 269 Secondary activity, 495 Secondary objectives, 232 Secondary ratios, 274 Security of information, 210 Services, 83 Shadow price, 326 Shamrock organisation, 159 Share options, 263 Share price, 299 Shared personal goals, 231 Shareholder (benefits), 259 Short-run financial performance, 296 Short-term objectives, 244 Simultaneity (service organisation), 83 Single loop feedback, 252 Six Sigma, 418 Social audit, 238 Social capital, 239 Social responsibility, 237 Soft elements of business behaviour, 72 Software packages, 204 Stakeholder analysis, 12, 563 Stakeholder approach, 236 Stakeholder groups, 563 Stakeholder mapping, 101 Stakeholders, 98, 99, 236, 563 Standard costing, 128 Standards (Building Block model), 483 Steering committee, 422 Strategic analysis, 12 Strategic business unit (SBU), 232 Strategic choice, 12 Strategic control, 18 Strategic control systems, 19 Strategic decisions, Strategic failure, 547 Strategic long-range planning, 11 Strategic management accounting, in a multinational context, 22 Strategic performance measures, 21 Strategic planning, 6, 155 Strategic planning model, 11 Strategic planning vs short-term localised decision-making, 29 Strategy implementation, 14 Strategy selection, 12 Subcultures, 141 Sub-optimisation, 458 Subsidiary objectives, 233 Supply chain, 114, 530 Supply chain management, 530, 533 Support activities, 74 Supporting processes, 413, 415 Survival, 263 Sustainability, 239 Switching costs, 512 SWOT analysis, 12, 31 System goals, 231 Tactical planning, 5, Target cost, 390 Target costing, 82, 533 Target market segments, 563 Target return, 275 Target selection, 438 Teams and teamwork, 77 Technology, 172 Three Es (value for money), 354 Time to market, 364 Total quality management (TQM), 384 Transfer pricing, 312, 314, 315 adjusted market price, 315 and opportunity cost, 323 at marginal cost, 319 based on full cost, 317 fixed costs and, 319 negotiated, 327 shadow price, 326 Index 667 standard cost versus actual cost, 320 when intermediate products are in short supply, 323 with a range of limiting factors, 325 Tunnel vision, 458 Turnaround, 562, 563 Turnover periods, 294 Uncertainty, 129 Undesirable service outcomes, 352, 353 Unified corporate databases, 203, 207 Unit objectives, 232 Use of targets in the public sector, 579 Value analysis, 393 Value chain, 73, 75 Value driver, 501 Value engineering, 392 Value for money, 343, 354 668 Index Value mindset, 500 Value stream management, 533 Value system, 74 Value-added activities, 494 Value-based management, 499 Value-chain analysis, 126 Variability (service organisation), 83 Vertical vector (balanced scorecard), 477 Virtual organisations, 158 Virtual teams, 157 Vision, 12, 224, 225 WiFi, 205 Z ero based budgeting, 45 ZETA model, 554 Z-scores, 549 Notes Notes Notes Notes Review Form – Paper P5 Advanced Performance Management (6/14) 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