Developing ethical business strategies A CIMA case study
Page 2: Business strategy
A mission statement and business aims identify the core purpose of the business and the goals that it wants to achieve. Business strategy refers to the set of plans that a business adopts in order to achieve its aims. A mission statement outlines the core values of a business and can form the backbone for all strategic decisions. CIMA’s mission is ‘Helping people and businesses to succeed’. This mission is supported by CIMA’s aim ‘Our goal is to establish management accounting, represented by the CGMA designation, as the most valued profession in business’. These values shape the way CIMA does business and will affect the organisation's objectives and tactics.
Objectives and tactics
An objective is an outcome which allows a business to achieve its aim. For example, a company objective could be to cut carbon emissions by 5% over the next two years. Tactics are the short-term plans put in place to achieve stated objectives. For example, carbon emissions could be reduced through the increased use of video conferencing to reduce the need for employees to travel to meetings.
Management accountants have a central role to play to help a business achieve its objectives. In fact, management accountants use their business knowledge and financial expertise to guide business strategies. Their business insight aids strategic decision making which in turn helps a business to progress towards achieving its aims and objectives. Every business will have many different strategies. Strategies can be set at different levels throughout a business. These include:
Corporate strategies which aid the achievement of the main aims of the whole business.
Divisional strategies which aid the achievement of the objectives for a specific part of the business, for instance, the UK division of a global company.
Departmental strategies which aid the achievement of objectives for a specific department within a business, for instance, the marketing department.
Business strategies are a means of gaining competitive advantage in the market place. There are many ways that a business can try to achieve this. For example, a business with a growth strategy could look to sell new goods or services or enter new markets. Adding value is a key element in any successful business strategy. CIMA qualified management accountants guide the setting of business strategies by establishing where value can be added, for instance, through creating efficiencies. Such efficiencies include improving processes to reduce waste or shortening supply chains. Michael Tan is a CIMA member. His CIMA training has helped him add value to Agilent Technologies, Malaysia. Agilent provides high-tech measurement devices to companies such as Samsung and Nokia. As a supply chain manager, Tan developed a ‘war on waste’ (WoW) project that delivered big improvements to Agilent. Over a four-year period he cut the manufacturing cycle by 43% and reduced inventory – the amount of goods held in stock – by 36%, a reduction worth $44 million. Amongst the key strategies used was a ‘Lean Six Sigma’ approach. This
approach combined lean principles with Six Sigma. A successful lean approach involves reducing material waste and the time spent on nonessential activities which do not add value. Six Sigma is an approach that measures error rates to quantify how far any process is from being perfect. Changes are then made to reduce the level of errors and, most importantly, the level of re-working they cause. The diagram illustrates the stages of this approach.
Chartered Institute of Management Accountants | Developing ethical business strategies