■ Traditional management accounting has been criticized for its obsessively internal focus, especially regarding efforts to add value, thereby maximizing the difference between purchases and sales. ■ When organizational values and strategies shift to an external view, the focus of the accounting function needs to align itself by becoming more strategically oriented. The challenge is to move management accounting beyond the traditional managerial cost analysis to a forward-thinking, participatory system of strategic cost analysis and strategic management accounting. ■ Managing costs and monitoring effectiveness require a broad focus, which Michael Porter calls the value chain. Value-chain analysis is a method for breaking up the firm into strategically important activities and understanding their impact on cost behavior and differentiation.