Management decision making
The objective of this assessment is to display your group’s knowledge and understanding of the balanced scorecard as a strategic planning and management system and how to adopt it within a business environment.
Your group is asked by a consulting firm – ‘We will make your business great again’- to design a strategic management system for a business specialising in retailing home improvement and outdoor living products called – ‘The Business’.
‘The Business’ was recently acquired by a grocery and liquor retail chain, traded on the Australian Stock Exchange. You were told that though ‘The Business’ made A$1 billion in sales last year, its operating income was nil, and the new manager, John Clarkson, was given five years to improve the operation of ‘The Business’. The 5-year goals for ‘The Business’ are:
1. Increase sales every year to reach at least A$5 billion in five years or sooner
2. Achieve positive operating income with a Return on Sales of 15%
3. Increase market share to at least 11% in five years or sooner
Currently, the business owns 23 stores, mainly in Victoria, New South Wales and Queensland.
However, the parent company will make a financial commitment of $1 billion to improve existing stores and to open 5 more new stores in the next 2 years. Though part of the group, ‘The Business’ will operate as a separate company and its management will be responsible for all decisions in relation to the types of products being sold, the expansion and other activities of carrying on the business.
Background to ‘The Business’ and to the ‘Hardware and building supplies retailers’ industry
Like most of the hardware and home improvement companies, ‘The Business’ is exposed to a range of factors such as price, product range, consumer sentiment, discretionary income, and residential construction activity which all affect demand for hardware and building supplies.
‘The Business’ operates in a highly competitive market. National chain stores such as Bunnings, Mitre 10 and Home Timber & Hardware dominate the market. However, the industry is still fragmented. Most businesses are relatively small, privately operated, employ fewer than 20 staff, and have annual revenue of less than $2 million. The majority of hardware stores are located in New South Wales, Victoria and Queensland, accounting for an estimated 77.2% of industry enterprises. Tasmania, the Northern Territory and the Australian Capital Territory account for only 3.9% of the industry’s hardware stores.
It is forecast that over the next five years, the industry will be growing and that growth will be due to increased residential and commercial construction.
The hardware stores operations
After a quick visit to a number of stores owned by ‘The Business’ you concluded that stores are located rather inconveniently, or next to busy shopping centres, where customers need to compete for car parking with other shoppers.
The stores offered a poor range, old or out of season and often inappropriate products. You wondered why it is the stores have hundreds of light fittings, but none you would want to install in your own house.
You were disappointed to find out that the advertised 20% discounting applied to very few products, which were otherwise unsaleable, whilst the products you could have been interested in were offered at full price or discounted by 5%. You felt that it was misleading advertising. Furthermore, prices of many products were higher than those of competitors.
The stores themselves were rather dark and lacking an appropriate signage resulting in wasting a lot of time just to find a product. It was challenging to find a product but even more frustrating to learn was that the particular product had its price tag missing.
The floor staffs were very scarce so it was difficult to find a staff member to help and if there was someone available, they usually had very little knowledge about the products. You had to wait for half an hour for someone to mix your paint, and when finally an employee appeared, he did not know how to read the mixing instruction.
One of the staff members said to you that she never learned about the products they sell and neither of the staff had any training about customer service. She also was quite dismissive about her boss, stating that the floor managers or even top management did not know how to deal with their employees and with customers.
Though, there were not many people in the shop, you observed long queues at the checkouts. A number of people were complaining about being overcharged.
On the way to the car park you’ve noticed that there was no one to help an elderly lady to carry a plant to her car.
The balanced scorecard
After assessing the financial situation of ‘The Business’ and its operations, you realised that ‘The Business’ needs a total overhaul of its management system. You decided that the balance scorecard with its measures that drive performance will be a perfect strategic planning and management system for ‘The Business’.
1. Perform a SWOT analysis of ‘The Business’ –
· you need to list at least four issues for each element of SWOT analysis – Strengths, Weaknesses, Opportunities and Threats; and
· you also need to elaborate why you considered these particular issues in your analysis.
Tip: Strengths and Weaknesses relate to internal matters of a company, whereas Opportunities and Threats relate to external issues such as competitive advantage
2. Formulate a vision, mission and overall strategy/s for ‘The Business’.
3. Design a balanced scorecard for ‘The Business’.
In particular you need to:
a. draw a strategy map based on the objectives that you develop for ‘The Business’;
Tip: you should utilise your SWOT analysis in developing
the objectives for ‘The Business’
b. briefly define the objectives included in your strategy map and explain why these particular objectives are important for ‘The Business’
c. prepare a scorecard with measures, targets and initiatives (action plan) that you need to develop for “The Business’
d. explain how your balanced scorecard will help to achieve the overall strategy/s of ‘The Business’ (see requirement 2). You need to support your discussion with appropriate literature.
4. Evaluate how your balanced scorecard will promote goal congruence for ‘The Business’. Again, you need to support your discussion with appropriate literature.
Tip: an appropriate incentive and compensation system will be useful in promoting goal congruence
5. Instead of an executive summary and introduction, write a memo to John Clarkson summarising your report and outlining what you believe to be the strengths of your balanced scorecard
Some key financial data:
|Operating revenue (A $m)||1,000|
|Earnings before Interest and tax (A $m)||0|
|Current Assets (A $m)||540|
|Total Assets (A $m)||1,700|
|Current Liabilities (A $m)||364|
|Total Liabilities (A $m)||372|
|Return on Investment||0|
|Required Rate of Return||12%|
This assignment must be written in the form of a report. However, instead of an executive summary and introduction, please write a memorandum to John Clarkson.
The assignment should contain appropriate referencing Harvard System (the guidelines are available in the library). References to online sources should provide direct links to the source in the bibliography.
The body of the assignment should be 4000 words (plus/minus 10 percent) including tables and graphs and diagrams. Please provide a word count on the cover sheet or on the first page of the report. Assignments in excess of the allowable word limit will be returned for correction.
Only one group member needs to submit a soft copy.
Please ensure that you do not submit the final copy of your assignment via Draft Checking Facility. If you have any problems with submitting your draft or final assignment via Turnitin, please let me know as soon as is possible.
Although I do not envisage that there will be any issues with plagiarism, to ensure that the whole group is not penalised just because one member decided to use someone else’s material, either on the cover sheet or on the first page, please identify if possible which sections of the assignment were assigned to each member.
Students are reminded to review University policy on plagiarism.
The hard copy should only be stapled. If necessary, please use size A4 paper envelopes. Plastic binders, plastic envelopes, plastic covers of any sort are not permitted.
|Unacceptable||Acceptable||Exemplary||Mark out of|
|Memorandum||Very little background information is provided. Knowledge and understanding of related concepts is not apparent.||A summary and key background details are provided. Knowledge and understanding of related concepts is apparent.||A coherent summary of the report and comprehensive background information is provided. Extensive knowledge and understanding of related concepts is apparent.||2|
|SWOT (strengths, weaknesses, opportunities and threats) analysis||Little understanding of components and application. The reasoning for the selection of issues is not provided.||Strengths, weaknesses, opportunities and threats are identified and discussed but the reasoning for the selection of issues either is not provided or is not clear.||Shows a logical and cohesive identification of the most important strengths, weaknesses, opportunities and threats, providing a solid foundation for the design of the balanced scorecard. Provides a clear discussion about the reasoning for the selection of issues.||5|
|Vision, mission and overall strategy||A vision, mission and overall strategy/s for ‘The Business’ are missing.||A vision, mission and overall strategy/s for ‘The Business’ are formulated but rather vaguely, with no link between them and/or the balanced scorecard.||A clear and inspiring vision, mission and overall strategy/s are enunciated that underpin the design of the balanced scorecard.||2|
|The balanced scorecard|
|Strategy map||The strategy map is not planned well. There is no link between the SWOT analysis and strategy map and/or no cause-and-effect relationships are identified. The objectives are not defined or defined inappropriately. No explanation is given why these particular objectives are important for ‘The Business’.||The strategy map is constructed in a cohesive way but does not align some of the strategic objectives to the vison, mission and overall strategy of ‘The Business’. The strategy map is not based on the SWOT analysis. The objectives are defined but the explanation as to why these particular objectives are important for ‘The Business’ is not given or is not clear.||Shows a skilfully planned strategy map based on the issues identified in the SWOT analysis that accurately depicts the cause-and-effect relationships. Accurately and in an original way translates the mission, vision and overall strategy/s of ‘The Business’. Definitions and why these particular objectives are important for ‘The Business’ are thoroughly discussed.||4|
|Scorecard||The scorecard identifies some elements that are accurate along with some that are not accurate. It omits the most significant measures and targets. An action plan is not developed.||The scorecard identifies the most important elements but lacks cohesiveness with the strategic objectives, mission, vision and overall strategy/s of ‘The Business’. An action plan is developed but it is unclear how the initiatives will help achieve the strategic objectives.||The scorecard depicts a well-devised set of measures, targets and initiatives aligned with the strategic objectives, vision, mission and overall strategy/s of ‘The Business’. The flow between measures, targets and initiatives is clear.||5|
|Evaluating the effectiveness of your balanced scorecard in achieving the overall strategy of ‘The Business’.||Unclear, ambiguous evaluation of the measures, targets and initiatives in relation to the strategy of ‘The Business’. Knowledge and understanding of the related concepts is not apparent.||Describes the process that led to the selection of the measures, targets and initiatives. The description does not provide a clear rationale for the selection, and/or not all the measures, targets and initiatives are discussed. Discussions are supported by appropriate literature.||Provides a clear and comprehensive reasoning that led to the selection of the measures in order to achieve the overall strategy outcomes of ‘The Business’ extensively supported by appropriate literature.||3|
|Evaluating the effectiveness of your Balanced Scorecard in promoting the goal congruence in ‘The Business’||Narrow focus, ambiguous and lacks specificity.
Knowledge and understanding of the concepts is not apparent.
|Clearly presents arguments but some issues are not discussed.
Discussions are supported by appropriate literature.
|Identifies creative and plausible solutions supported extensively by appropriate literature. The solutions address key difficulties in achieving goal congruence in ‘The Business’, or an organisation in general.||4|