23/11/2021

Strategic
Managerial Accounting

International Luxury
Management

Charles
1 DAUSSY

Introduction

 Why a course on managerial accounting?

 Managerial (or management) accounting is a transversal
function of the organization

Introduction

 Why a course on managerial accounting?

 The type of industry may affect the job! The focus for the CFO
is …
• In Agribusiness: on changes of commodity prices or financial flexibility
(finance transformation plants and stocks)
• In distribution/clothing: on the management of short cycles ( stocks)
and contracts with franchise partners and affiliates
• In construction: on risk management in the long term and treasury
• In pharmacy/health: on R&D projects in the long term, costly and with
no guaranteed results
• In luxury?

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Introduction

 Managerial accounting will be approached through

luxury industry strategy, supply chain and marketing
issues

 Are there specific managerial accounting systems or

processes for the luxury industry?
 Financial controller, Louis Vuitton Supply Chain & Logistics:
“a box is a box, a flow is a flow, the difference is on the culture
and the way we are doing things”

Introduction

 Does luxury industry represent an economic

singularity for a financial controller?

 What is luxury according to Jean-Noël Kapferer (2010):

“well crafted, hedonistic and aesthetic objects (or services),
priced excessively above their functional utility, sold in
exclusive stores delivering personal service and unique
consumer experience, most often from a brand with history,
heritage, the whole delivering a rare feeling of exclusivity […]
[and a] social function. Luxury is tied to the social hierarchy.”

Introduction

 Does luxury industry represent an economic

singularity for a financial controller?
QUALITY

 What is luxury according to Jean-Noël Kapferer (2010):

“well crafted, hedonistic and aesthetic objects (or services),
priced excessively above their functional utility, sold in
exclusive stores delivering personal service and unique
consumer experience, most often from a brand with history,
heritage, the whole delivering a rare feeling of exclusivity […]
[and a] social function. Luxury is tied to the social hierarchy.”

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Introduction

 Does luxury industry represent an economic

singularity for a financial
HIGHcontroller?
VALUE
QUALITY CREATED &
HIGH MARGINS
 What is luxury according to Jean-Noël Kapferer (2010):
“well crafted, hedonistic and aesthetic objects (or services),
priced excessively above their functional utility, sold in
exclusive stores delivering personal service and unique
consumer experience, most often from a brand with history,
heritage, the whole delivering a rare feeling of exclusivity […]
[and a] social function. Luxury is tied to the social hierarchy.”

Introduction

 Does luxury industry represent an economic

singularity for a financial
HIGHcontroller?
VALUE
QUALITY CREATED &
HIGH MARGINS
 What is luxury according to Jean-Noël Kapferer (2010):
“well crafted, hedonistic and aesthetic objects (or services),
priced excessively above their functional utility, sold in
exclusive stores delivering personal service and unique
consumer experience, most often from a brand with history,
heritage, the whole delivering a rare feeling of exclusivity […]
[andRETAIL
a] social function. Luxury is tied to the social hierarchy.”
STRATEGY

Introduction
 Managerial accounting through 4 strategic issues :
 Keep the “object/brand identity (*)” relationship through the
value chain process (specialization, processes focused on excellence,
vertical integration)

 Develop business with new customers while addressing more

competitive markets (new middle class customers in emerging
countries, for instance)

 Choose the appropriate retail strategy to meet new customers

while preserving the brand identity (opening of new stores,
exclusive or selective distribution)

 Integrate CSR/sustainable development into strategy to stay

“top of the mind”
(*) brand identity = representation/image
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Introduction
 Managerial accounting tools:
 Keep the “object/brand identity (*)” relationship through the
value chain process (specialization, processes focused on excellence,
vertical integration)

 VALUE CHAIN & COSTING

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Introduction
 Managerial accounting through 4 strategic issues :
 Keep the “object/brand identity (*)” relationship through the
value chain process (specialization, processes focused on excellence,
vertical integration)

 Develop business with new customers while addressing more

competitive markets (new middle class customers in emerging
countries, for instance)

 Choose the appropriate retail strategy to meet new customers

while preserving the brand identity (opening of new stores,
exclusive or selective distribution)

 Integrate CSR/sustainable development into strategy to stay

“top of the mind”
(*) brand identity = representation/image
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Introduction
 Managerial accounting tools :
 Keep the “object/brand identity (*)” relationship through the
value chain process (specialization, processes focused on excellence,
vertical integration)

 Develop business with new customers while addressing more

competitive markets (new middle class customers in emerging
countries, for instance)

 TARGET COSTING & PRICE ELASTICITY OF

DEMAND

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Introduction
 Managerial accounting through 4 strategic issues :
 Keep the “object/brand identity (*)” relationship through the
value chain process (specialization, processes focused on excellence,
vertical integration)

 Develop business with new customers while addressing more

competitive markets (new middle class customers in emerging
countries, for instance)

 Choose the appropriate retail strategy to meet new customers

while preserving the brand identity (opening of new stores,
exclusive or selective distribution)

 Integrate CSR/sustainable development into strategy to stay

“top of the mind”
(*) brand identity = representation/image
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Introduction
 Managerial accounting tools :
 Keep the “object/brand identity (*)” relationship through the
value chain process (specialization, processes focused on excellence,
vertical integration)

 Develop business with new customers while addressing more

competitive markets (new middle class customers in emerging
countries, for instance)

 Choose the appropriate retail strategy to meet new customers

while preserving the brand identity (opening of new stores,
exclusive or selective distribution)

 BEP & Cost-Volume-Profit relationship + Dashboards

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Introduction
 Managerial accounting through 4 strategic issues :
 Keep the “object/brand identity (*)” relationship through the
value chain process (specialization, processes focused on excellence,
vertical integration)

 Develop business with new customers while addressing more

competitive markets (new middle class customers in emerging
countries, for instance)

 Choose the appropriate retail strategy to meet new customers

while preserving the brand identity (opening of new stores,
exclusive or selective distribution)

 Integrate CSR/sustainable development into strategy to stay

“top of the mind”
(*) brand identity = representation/image
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Introduction

 How to improve financial performance of luxury

brands?
 Optimize predictability
 Analyze cost structure of products and optimize profits
 Develop a culture of performance management in cooperation
with managerial accounting teams
 Take into account the influence of indebtedness on the return
on equity
 See the cost of capital as a key issue

Phillipe-Henri Latimier (PhD, CBA)

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Introduction

 How to improve financial performance of luxury

brands?
 Optimize predictability
 Analyze cost structure of products and optimize profits
 Develop a culture of performance management in
cooperation with managerial accounting teams
 Take into account the influence of indebtedness on the return
on equity
 See the cost of capital as a key issue

Phillipe-Henri Latimier (PhD, CBA)

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Plan of the course

 Introduction to strategic managerial accounting
• Managerial accounting for decision making
• What is strategic managerial accounting?
 Value chain and costing
• Value chain: the process for creating value

 Luxury industry vs. consumer market: an impossible story?

• To grow, luxury industry enters the consumer market
• The rules of marketing mix apply: is price an issue?

 Retail as a strategic variable

• Exclusive or non-exclusive distribution?
• Using a dashboard to manage performance of a store
• How to manage profit of a store(the CVP relationship)

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Plan of the course

 Introduction to strategic managerial accounting
• Managerial accounting for decision making
• What is strategic managerial accounting?
 Value chain and costing
• Value chain: the process for creating value
Value chain: cost accumulation  Cost of Sales
 Luxury industry vs. consumer market: an impossible story?
• To grow, luxury industry enters the consumer market
• The rules of marketing mix apply: is price an issue?

 Retail as a strategic variable

• Exclusive or non-exclusive distribution?
• Using a dashboard to manage performance of a store
• How to manage profit of a store(the CVP relationship)

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Plan of the course

 Introduction to strategic managerial accounting
• Managerial accounting for decision making
• What is strategic managerial accounting?
 Value chain and costing
• Value chain: the process for creating value
Value chain: cost accumulation  Cost of Sales
 Luxury industry vs. consumer market: an impossible story?
• To grow, luxury industry enters the consumer market
• The rules of marketing mix apply: is price an issue?
Target costing: costs are targeted on the basis of
willingness to pay
 Retail as a strategic variable
• Exclusive or non-exclusive distribution?
• Using a dashboard to manage performance of a store
• How to manage profit of a store(the CVP relationship)

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Plan of the course

 Introduction to strategic managerial accounting
• Managerial accounting for decision making
• What is strategic managerial accounting?
 Value chain and costing
• Value chain: the process for creating value
Value chain: cost accumulation  Cost of Sales
 Luxury industry vs. consumer market: an impossible story?
• To grow, luxury industry enters the consumer market
• The rules of marketing mix apply: is price an issue?
Target costing: costs are targeted on the basis of
willingness to pay
 Retail as a strategic variable
• Exclusive or non-exclusive distribution?
• Using a dashboard to manage performance of a store
• How to manage profit of a store(the CVP relationship)
Using a dashboard to manage performance of a store

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Plan of the course

 Introduction to strategic managerial accounting
• Managerial accounting for decision making
• What is strategic managerial accounting?
 Value chain and costing
• Value chain: the process for creating value
Value chain: cost accumulation  Cost of Sales
 Luxury industry vs. consumer market: an impossible story?
• To grow, luxury industry enters the consumer market
• The rules of marketing mix apply: is price an issue?
Target costing: costs are targeted on the basis of
willingness to pay
 Retail as a strategic variable
• Exclusive or non-exclusive distribution?
• Using a dashboard to manage performance of a store
• How to manage profit of a store(the CVP relationship)
Using a dashboard to manage performance of a store
BEP & Cost-Volume-Profit (CVP) relationship: how to
manage profit of a store

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Strategic Managerial Accounting

Introduction to managerial
• Introduction to Managerial Accounting
accounting
• Value creation & Value analysis
• The luxury industry in accounting
a. Managerial the competitive world
for
• Costdecision making
management in the Supply Chain
b. What is strategic managerial
accounting?
Luxury Management

Luxury
Management 23

Managerial accounting for decision making

 Robert Anthony has given 2 definitions of

management control, being:
 In 1965: “the process by which managers assure that
resources are obtained and used, effectively and efficiently,
in the accomplishment of the organization’s objectives.”

 In 1988: “the process by which managers influence other

members of the organization in the deployment of the
organization’s strategies.”

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Managerial accounting for decision making

 Robert Anthony has given 2 definitions of

management control, being:
 In 1965: “the process by which managers assure that
resources are obtained and used, effectively and efficiently,
in the accomplishment of the organization’s objectives.”
MANAGEMENT SYSTEM
 In 1988: “the process by which managers influence other
members of the organization in the deployment of the
organization’s strategies.”

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Managerial accounting for decision making

 Robert Anthony has given 2 definitions of

management control, being:
 In 1965: “the process by which managers assure that
resources are obtained and used, effectively and efficiently,
in the accomplishment of the organization’s objectives.”
MANAGEMENT SYSTEM
 In 1988: “the process by which managers influence other
members of the organization in the deployment of the
organization’s strategies.”
MANAGERIAL APPROACH

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Managerial accounting for decision making

 Managerial accounting vs. management control: are

we talking of the same function?

 Objective of the managerial accounting systems and

processes:
 help managers to make the right decisions to control
the management of their Company/Business Unit

 Three key elements:

 Objectives (related to strategy)
 Relevant resources to achieve goals
 Measure and review (effectiveness and efficiency)

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Managerial accounting for decision making

Objectives (expected outcomes)

Resources

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Managerial accounting for decision making

Information
System

Objectives (expected outcomes)

Resources Achievements

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Managerial accounting for decision making

Information
System

Objectives (expected outcomes)

Resources Efficiency Achievements

 Effective control of causal
processes
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Managerial accounting for decision making

 Managing performance means:

 Define expected outcomes;

 Identify a causal relationship between actions/programs and
expected outcomes;
 Define who is responsible for what in the organization;
 Identify and implement the appropriate indicators to
measure the actual performance compared to the objectives.

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Managerial accounting for decision making

 For which decisions?

 Developing long-term plans and strategies,
 Evaluating and controlling performance,
 Allocating resources,
 Determining costs and benefits.

 Optimize predictability
 Analyze cost structure of products and optimize profits
 Develop a culture of performance management in cooperation
with managerial accounting teams

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Managerial accounting for decision making

The double loop process

Monitoring &
planning action
analysing results

Regulating loop

Learning loop

Management control : a double loop

regulating loop : to carry out your action plans
Learning loop : to question the plan’s relevance

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Strategic Managerial Accounting

 Strategic managerial accounting

 Provides information that supports strategic plan and
decisions made within a business
• Facing outwards  give consideration to external factors
• Develop competitive advantages (can be on brand
identity)
• Strategy into action  long-term planning, develop
comprehensive range of performance measures, financial
and non-financial (Dashboards, BSC)
• Shareholder value

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Strategic Managerial Accounting

Value chain and costing
• Introduction to Managerial Accounting
• Value creationchain:
a. Value & Valuethe
analysis
process for
• The creating valuein the competitive world
luxury industry
• Cost management in the Supply Chain
b. Value chain costing: cost
accumulation

Luxury Management

Luxury
Management 35

The process of creating value

 What is the value for the customer?

 Customer Value = perceived value = functional
utility value + sign value
• In luxury industry: sign (social status) > functional utility
 Determines the maximum price the customer is
willing to pay, i.e. the economic value to the
customer
• In luxury industry, any price (“excessive”) in some cases

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The process of creating value

 Economic Value: understood in reference to the

market (prices, costs, profitability)
• If a customer is willing to pay any price  no
focus on costs + high margins

 Social Value: employee satisfaction and “great place

to work” (can be associated to “societal” value)

 Organizational Value: quality of management and

way the company is operated
• may eventually generate all other types of "value" and thus
ensure the sustainability of the company

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The process of creating value

 Organizational Value creation:

 Optimize the [value created vs. costs] relationship
 It refers to organizational competence
 It depends primarily on the ability to manage
intellectual capital (employees competences,
managerial processes, customers relationships,
culture and values, brand, etc.)
 It contributes to economic and social value
creation

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The process of creating value

 Customers are key stakeholders …
 Suppliers are key stakeholders also …
 Quality (excellence), reliability and exclusivity
 Integration: some luxury groups decide to take over
craftsmen to maintain the excellence of their Value
chain processes and their brand identity
 high VC
 So are employees …
 Competencies, loyalty
 Integration: no turnover (culture, training, compensation
& benefits)
 high VC

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