BALANCE SCORECARD WINING MARGIN MBE B4; Kieran Nellist Alexey Trush Karthik Kuppuswamy Kalin Pipatanantakurn Panji Sukma Majid Zabihi Today's Agenda Balance Scorecard Alternative Advantages and Disadvantages Strategy and Vision Conclusion DEFINITION Balance Score card is the management tool that looks beyond short term financial position of an organisation as a measure of its performance. By incorporating a variety of perspectives into its organisational outlook its gives a more holistic view of performance. Balance Scorecard Institute (2011) DEFINITION The common perspective's used in a Balance Scorecard are: Financial Performance Customers Innovation and Growth Internal processes WMG web site (2011) DEFINITION “Management by Objectives is basically a process that starts with the setting of objectives for individuals, and finishes with a review of an individual’s performance, based on their own and the organization’s results”. “Hoshin Kanri is the Japanese strategic planning process designed to ensure that the mission, vision, goals, and annual objectives are communicated throughout an organization, and implemented by everyone from top management to the shop floor (frontline) level”. WMG web site (2011) COMPARISON Long term Flexibility Systemic Teamwork Systematic Balance Scorecard ✔ ✔ ✔ ✔ ✔ Hoshin Kanri ✔ ✔ ✔ ✔ ✔ ✔ ✔ Management by objectives ✔ WMG web site (2011) ADVANTAGES OF BSC Structured approach to analyse the perspectives Align organisation strategy with daily operation basis Work for the long term objectives through short term actions Integration of varied performance measures from all aspects of an organisation Balance Scorecard Institute (2011) DISADVANTAGES Time consuming Difficulties of measurement Disconnection of objectives and results Lack of benchmarking Measure selection Balance Scorecard Institute (2011) SOLUTIONS FOR DISADVANTAGES Time consuming: A project team to lead change Difficulties of measurement Selection of tangible performance indicators Disconnection of objectives and results Training Lack of benchmarking Market research Measure selection Measure testing Balance Scorecard Institute (2011) VISION “Create a long term sustainable business that operate considering the best interest of all stakeholders to create a marketing leading product” OUR STRATEGY Research market potential for a new product Invest in new equipment Invest in new technology. Reorganise production line Reorganize the Leisure sales team Increase marketing spend to £180k Reorganize Finance and HR departments Introduction of the Finance package BALANCED SCORECARD Balance Scorecard Institute (2011) FINANCIAL Financial Objectives Target Measures 1. Estimated cost of 25k Pounds of Finance Package spending How much the company spends ? 2. Estimated budget of marketing spending of 180k Pounds " 3. Estimated 150k Pounds on the new technologies expenditure " 4. Estimated 250k Pounds on the new equipment " Year1 Year2 Year3 5K 10K 10K 25K 75K 80K 20K 50K 50K Year4 Year5 30K 125K 125K 5. Increase operating profit Operating profit figures minimum rise 10% each year 6. Inventory reduction Inventory figures minimum 15% decrease each year Lascelles, D.M.(2008). CUSTOMER AND LEARNING & GROWTH Customer Objectives 1. Creating new consumer base 2. Maintain current customer Learning and Growth 1. Training new sales person 2. Development of new financial system 3. Identify successful new market promotional campaigns 4. Investing in new technologies Target Measures Sales outcome of new product Sales outcome Sales outcome growth Reduction of transactional inefficiency and errors Outcome of the promotion result from the marketing team Assets turnover ratio Year1 Year2 Year3 Year4 Year5 100 200 300 400 500 minimum 1000 per year until inventory ends minimum rise 7% each year Reduction of errors yearly 10% rise in sales each year 4% rise each year Kaplan, R. (1996) INTERNAL BUSINESS PROCESS Objectives Target Measures Year1 Year2 Year3 Year4 Year5 Internal Business Process 1. Reconstruct the business to suit new markets' need Market share minimum rise 1% yearly Capital intensity yearly increase for each product 3. Reorganize the leisure team Increase sales Sales increase 4. Investing in new technologies Business effieciency ROCE, ROI, ROE, Acid ratios 5. Reorganize Finance and HR departments Working performance of both departments Decrease in administration overhead costs 6. Reduce the number of HR clerical staff to 1 Number of clerical staff retired 2. Reorganize the production line 2 2 2 2 1 Kaplan, R. (1996). ASSUMPTIONS - We assume that Finance Package will reduce errors - We assume that restructuring of the business will lead to a market share growth each year - We assuming that company might can maintain the current product sales meeting the demand - We assume that marketing for a new product is successful and consumer base is created - We assume that training of staff will increase sales - We assume that investments in new technologies will increase efficiency - We assume that reorganisation of some of departments will reduce the administration costs - We assume that reorganisation of the production line will cover the needs of both products CONCLUSION While many approaches to strategy implementation exist, we saw the use of the balanced scorecard as the best suited to our strategy and future development of the Waveriders company. Through its implementation we created a 5 year strategy implementation focuses on 4 keys area of the firm to implement year by year actions to achieve long term business objectives outlined in our strategy. REFERENCES 1) Balance Scorecard Institute. Retrieved February 11, 2011, from: http://www.balancedscorecard.org/BSCResources/AbouttheBala ncedScorecard/tabid/55/Default.aspx 2) WMG web site (2011). Balance Scorecard. Retrieved February 10, 2011, from: http://www2.warwick.ac.uk/fac/sci/wmg/ftmsc/modules/modul elist/le/sessions/strategy/bsc/scorecard/ 3) Lascelles, D.M.(2008). Self-Assessment for Business Excellence. McGraw-Hill Book Company Europe. 4) Kaplan, R. (1996). The Balanced Scorecard: Translating Strategy into Action. Harvard Business Press.
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