Management Accounting-Business Strategy: A Co-Examiner for Paper P6 Discusses the Relationship between Strategy and Management Accounting, and the Scope for Numerical Analysis in the Exam
It's easy to get carried away with all the models covered in the paper P6 syllabus and forget why it's there in the first place. The syllabus is at the top of the business management pillar, but its title is very dear. It isn't a business strategy exam; it's an exam in business strategy in the context of management accounting.
The point of having a business strategy exam in a management accounting qualification is to encourage students to see how an organisation's strategy affects its management accounting system--ie, all management accounting activity in an organisation, whether it's automated or not. In section A of the syllabus, for example, there are learning outcomes relating to stakeholders, regulatory regimes and the competitive environment. Models such as Pest, Swot, the Porter diamond and five forces are listed. Let's consider how the first and last of these can affect the management accounting system.
Many organisations analyse business environments under the headings of political, economic, social and technological factors (Pest analysis). It would, therefore, be fair to ask you to produce a Pest analysis based on a scenario in the exam. But, since this is a management accounting qualification, it would also be fair to ask why, and how, a management accounting system could be modified to incorporate Pest data. Most organisations have a management accounting reporting system (Mars) that provides internal data only. This is a major weakness, because it can lead managers to forget that the organisation needs to fit with the external environment. Simply adding a couple of pages relating to environmental factors to the monthly "briefing book" would vastly improve a firm's strategic decision-making.
Michael Porter's five forces model is widely used in business, so exam questions on it are quite common. But some of them may focus on the management accounting aspects of the model as well as, or instead of, the model itself. You may be asked to explain how the Mars could be modified to incorporate data on competitors. In the context of this model, of course, competitors include customers, suppliers, substitutes and new entrants, as well as direct rivals.
You might be asked about the relationship between the five forces model and some relevant management accounting technique. Consider how your knowledge of rivalry and the bargaining power of customers should affect the way your firm's goods and services are priced. Similarly, think about the relationship between the bargaining power of suppliers and the way raw materials are bought and costed. …