Business case and strategic fit

Accounting Ahead | Original study resource | accountingahead.com.au

Business case and strategic fit

MODULE 4 | PART C.1 | STUDENT COMPANION

Project selection - four tasks: strategic fit; stakeholder identification and assessment; risk assessment;

financial analysis. Together they form the business case: costs, benefits and risks, so decision-makers

can proceed, choose an alternative or stop. State key assumptions, pros and cons of each option, and

qualitative information.

What goes into a business case

1. Background

The problem or

opportunity behind the

project

2. Strategic fit

How the project

supports the strategy

3. Objectives

What success looks

like, in measurable

terms

4. Alternatives

Other ways to solve

the problem

5. Selected

option

Risk, finance, benefits,

cost-benefit, plan,

budget, monitoring,

completion

A good case leads to a clear decision, compares costs and benefits, and shows costs after completion

Clarifying the strategy before testing fit

The business strategy sets financial boundaries and direction; the project strategy feeds constraints and

opportunities back. Projects also have stakeholders of their own.

Question Why ask it

What do we offer? Defines the product or service

Who are our customers? Defines who must benefit

How do we deliver? Shows which capabilities matter

Why do customers choose us? Reveals the competitive advantage to protect

What if the environment changes? Tests resilience

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART C.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Testing strategic fit

Strategic fit question Temperature sensors on crates Drone delivery trial

Long-term effect on key success measures? Protects freshness ratings and repeat

orders

None identified

Consistent with the strategy document? Yes - competing on freshness No objective supports it

Addresses a risk or opportunity? Cuts the risk of spoiled food Novelty only

Verdict Strong fit Opportunistic - decide consciously

Imagined example: a grocery delivery business that competes on freshness

Who are the stakeholders?

Internal stakeholders

Top management: approve, resource, fund, can stop

Finance and accounting: budget, efficiency

Functional managers: supply staff; own priorities

Project management office: methods, templates

Team members: divided loyalties, own careers

External stakeholders

Clients and end users

Competitors and regulators

Suppliers

Community, society and the environment

Shareholders

Success depends largely on how well stakeholders are satisfied

Control or decision? Information for control steers behaviour (the cost, quality and time indicators used to

manage the team). Information for decisions supports choices without targeting behaviour (a client's technical

measures for deciding whether the project meets its needs). Design both from the stakeholder analysis.

Why ethics is harder in projects

Reason Response

Projects are unique - no precedents, no settled team

standards

Align project values with organisational values

Projects are temporary - consequences appear after the

team leaves

Weigh long-term effects, not just short-term results

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART C.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Ethical decisions in projects

Goals

Which goals does it support or work

against?

Values

Does it reflect our values?

Consequences

Benefit or harm for each stakeholder,

now and later?

Disclosure

Would you explain it to the board, your

family, the public?

Symbolism

What does it signal, understood or

misunderstood?

Juukan Gorge, 2020: a legal blast, a 46,000-year heritage loss, and three senior executives gone

Case note: Juukan Gorge

In May 2020 Rio Tinto destroyed two rock shelters at Juukan Gorge, Western Australia, to expand an iron ore

mine. They held evidence of about 46,000 years of occupation and were sacred to the Puutu Kunti Kurrama and

Pinikura peoples. The blast had legal approval, and earlier mine plans would have avoided the shelters. After

public and investor pressure, chief executive Jean-Sebastien Jacques and two senior executives left (announced

September 2020).

Sources: NPR, SBS News and Sharecast reporting, September 2020; Rio Tinto statements to the Australian parliamentary inquiry, 2020.

Practice questions

MODULE 4 | PART C.1 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - Strengthen the business case

A hotel's business case for a $400,000 rooftop bar contains a revenue forecast, a construction quote and the

sentence 'guests have asked for it'. Identify four things missing, using the contents of a good business case.

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART C.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Question 2 - Strategic fit

A budget airline is considering (a) software that cuts aircraft turnaround time by eight minutes, and (b) a premium

lounge at its main airport. Apply the three strategic fit questions to each.

Question 3 - Ethics under deadline

A project to open a new distribution centre could meet its deadline by skipping a community consultation that is

not legally required. Apply the five ethical questions and recommend what to do.

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART C.1 | STUDENT COMPANION

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Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 4 | PART C.1 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - Strengthen the business case

Missing: (1) a clear problem or opportunity statement backed by evidence, not anecdote; (2) strategic fit with the

hotel's positioning; (3) measurable objectives (e.g. revenue per guest, occupancy uplift); (4) alternatives

considered (e.g. upgrading the existing lounge bar); (5) risk assessment (approvals, weather, noise complaints),

costs after completion (staffing, maintenance), key assumptions, and how performance will be monitored.

Question 2 - Strategic fit

(a) Turnaround software: improves aircraft utilisation and unit cost - a key low-cost measure; consistent with a

cost leadership strategy; reduces the risk of delays. Strong fit. (b) Premium lounge: little effect on cost

measures; inconsistent with a no-frills strategy; may confuse the brand. Poor fit - only proceed as a conscious,

opportunistic choice with a strong case.

Question 3 - Ethics under deadline

Goals: speed versus community acceptance. Values: most organisations claim to respect neighbours.

Consequences: traffic, noise and trust effects for residents; future planning approvals at risk. Disclosure:

uncomfortable to explain publicly. Symbolism: signals that legal minimums are all that matter. Recommendation:

hold a shortened but genuine consultation and adjust the schedule, or phase the opening.

STRATEGIC MANAGEMENT ACCOUNTING | M4 PART C.1 | WORKED ANSWERS

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