The purpose of this report is to assess the usefulness of the balanced scorecard (BSC) model within a business and strategic management accounting. To acquire such information, the model will be applied to a company and then critiqued giving both the benefits and any practical implications regarding the use of the BSC. The BSC was introduced by Kaplan and Norton (1992) as a new approach to strategic management accounting. ‘The purpose of the balanced scorecard is to guide, control and challenge an entire organisation towards realising a shared conception of the future’ (Chavan, 2009, p398). It involves measurement over four perspectives each defined by Kaplan and Norton (1992, p72) as:
‘Financial – How should we appear to our shareholder?
Customer – How should we appear to our customers?
Internal business Processes – What business processes must we excel at
Learning and growth – How will we sustain our ability to change and improve?’ The objectives of the BSC should link directly to the vision and strategy of the business.
The case study company is the BMW Group (BMWG). It is an automobile manufacturing company offering mobility products over three brands, BMW, MINI and Rolls Royce. It is a worldwide organization that currently has 23 production and assembly plants in 13 different countries (BMW Education Programme, 2012). They also have over 107,000 (in 2011) employees producing a total of 1,738,160 vehicles and had a revenue of £68,821 million for the financial year ending 2011 (BMW Group Annual Report, 2011). Their competitors are businesses in the premium automobile market, such as Mercedes-Benz and the Volkswagen Group, which owns premium brands Audi and Porsche. The target customer base for the BMWG is within the upper middle class sector – professional employees high in the corporate world. The Group’s ultimate objective is to be the world’s leading supplier of premium products and services through to 2020 (BMW Group Annual Report, 2010). This vision has been translated into strategic objectives within the BSC which all work towards the same goal of sustainability which has been outlined in Appendix A. The objectives will now be explained as to why the measures were chosen.
The balance scorecard applied to BMW (Appendix A)
Measuring market share is directly in line with the vision as it clearly shows if the business is leading the industry and indicates if quality is above their competitors. Another method to coincide with the profitability objective is using ROCE. This allows for the company to maximise shareholder value by maintaining a certain return expected on invested capital. In accordance with BMW’s sustainability report (2010) this target was set at 26%. A practical implication of this is if heavy investment is made which will receive future income, the results will be below target therefore it may deter managers to undergo expensive investments that may be highly profitable in the future. According to Dow Jones Sustainability Index Report (2012), BMW are leading the world with their sustainability model, and also have consolidated their position as market leaders within the luxury car segment. Therefore to further pursue this objective through 2020, the target is to continue to hold/improve upon its current market share.
Customer satisfaction would be measured via questionnaires given to customers to rate the service or product received. This would pursue the objective of providing quality products and services as the customers use the goods and ultimately judge whether the company are delivering on these objectives. This could then be compared against competitors to ensure they are performing ahead of the market. However there could be difficulty in attaining information that is free from bias. If the company choose a group of customers who have only ever owned their products, then the results would be skewed in the favour of...
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