Numbers & Strategy

Customer or market segmentation is the process of dividing large markets into smaller groups based on shared characteristics. The demand function of these smaller groups differs, and businesses can gain a competitive advantage by identifying and serving specific segments. Factors such as lifestyles, attitudes, values, beliefs, and culture can all be explored as a basis for segmentation. Porter’s generic strategies include cost leadership, differentiation, and focus. According to Porter, pursuing more than one strategy leads to resource waste. Differentiation involves developing different products/services for multiple segments. Focus means targeting only one specific segment. Undifferentiated strategy refers to developing a product that meets the needs of the largest number of buyers, often leading to cost leadership. Hyper-segmentation is the practice of dividing a target market into highly granular segments. Digital communication, social media, and the internet have enabled busin...

Budgeting is an essential part of financial management, acting as a control system that helps businesses evaluate their financial performance. Different types of budgets serve different purposes, depending on the nature of the business. Fixed Budget (Static Budget) A fixed budget, also known as a static budget, is based on a predetermined level of sales or revenue. This type of budget remains constant regardless of changes in business activity. Advantages: Simple and easy to prepare. Useful for industries with stable and predictable revenues. Provides a clear financial roadmap. Limitations: Does not account for fluctuations in business activity. May become outdated quickly in dynamic industries. Flexed Budget (Flexible Budget) A flexed budget adjusts according to actual levels of business activity. It is created after a control period ends and is based on variable costs, contribution margins, and fixed costs. Comparing a flexed budget to a fixed budget helps businesses analyze variance...

Budgeting is an essential financial practice for individuals, businesses, and governments. Different methods of budgeting provide varying levels of control, flexibility, and efficiency. Two commonly used approaches are Incremental Budgeting and Zero-Based Budgeting. Incremental Budgeting Incremental budgeting is a straightforward approach where a new budget is developed by making marginal adjustments to the current budget. These adjustments often account for factors such as inflation and changes in operational activity. Advantages of Incremental Budgeting: Simplicity: The method is easy to understand and implement. Consistency: Ensures budget stability over time. Operational Stability: Reduces uncertainty and disruption in financial planning. Disadvantages of Incremental Budgeting: Discourages Innovation: Since changes are minor, there is little room for introducing new cost-saving ideas. Inefficiency: It does not encourage the search for alternative ways to reduce costs. Risk of Resou...

Different accounting software uses varying classifications, which businesses must adapt to for consistency and clarity. Xero categorizes expenses into three main types: Cost of Goods Sold (Direct Costs) Overheads Expenses MYOB, on the other hand, uses a simpler classification: Cost of Sales Expenses The classification of certain expenses, such as lease, energy, freight, and warehousing, often varies by business. These costs may sometimes be included in the Cost of Sales or classified differently depending on the company’s accounting policies. Consistency in classification is critical to ensure long-term comparability. Overheads Overheads refer to expenditures that cannot be directly traced to producing a specific product or service. Unlike operating expenses such as raw materials and labor, overheads include: Administrative Overheads: Office supplies, salaries for administrative staff, etc. Manufacturing Overheads: Factory utilities, maintenance, etc. Overheads can be further categoriz...