Profile of Volkswagen Company
Discuss About The Criticisms Social Humanities And Management.
Cost Accounting is also known as Managerial accounting as it is the procedure of recording, categorizing, evaluating, summarizing and assigning cost which is connected with the procedure and then creating a different practice of action for cost control (Inman, 2014). The goal of this method is to provide suggestions to the management of the company about how to increase the practices of the business and procedures depending on the cost capability and cost efficiency (Rajasekaran, 2010). This report is being presented in order to talk about one of the methods of managerial accounting or cost accounting i.e. Balanced Scorecard and with its features. An overview will be provided about the Volkswagen Company and how Balanced Scorecard will be suitable for the company. Further, the report will also explain the difference between traditional performance measurement system and Balanced Scorecard.
Volkswagen Company is an automotive manufacturing company in Germany with headquarter in Lower Saxony, and it is globally known as Volkswagen Group. It manufactures, designs and supply commercial and passenger vehicles, engines, turbomachinery, and motorcycles and provides connected services comprising leasing, fleet management, and financing (Volkswagen, 2018). The company was the biggest automaker in the world in 2016, overtaking Toyota. In Europe Company has successfully maintained the largest market share for around two decades. In 2017 it is placed at the sixth position in the list of Fortune Global 500 which comprises the names of largest companies of the world. Volkswagen Group deals in the selling of passenger cars under the brands Lamborghini, Audi, SEAT, Volkswagen marques, Bentley, Porsche, Skoda, and Bugatti; motorcycles under the brand Ducati; and commercial vehicles in the Volkswagen Commercial Vehicles, Scania and marques MAN. The group is separated into two parts i.e. the financial services and the Automotive Division, and till 2008 company has around 342 subsidiaries. In China, the company also have two key joint ventures i.e. SAIC Volkswagen and FAW-Volkswagen. Volkswagen operates its business operations in around 150 countries and possesses 100 facilities of production in 27 countries.
Volkswagen Group was established in 1937, in order to manufacture the Beetle car. The production of the company increased in the 1960s and in 1965 it took a step to acquire Auto Union, which consequently formed the first Audi’s post-war models. The company introduced a new generation vehicle of front-wheel drive in the 1970s, comprising the Polo, Golf, and Passat, it after some time converted into the bestseller product of Volkswagen. The company also acquired the directing position in 1986 in the SEAT, by making it first marque which is not German and in 1994 got control of Skoda, and in 1998 control of Lamborghini, Bentley, and Bugatti (Volkswagen, 2018). Besides this, in 2008 it got a stake of Scania and in 2012 of Porsche, Ducati and MAN. In China, the operations of the company have increased very frequently in last some years and country is now becoming the biggest market for the company.
Balanced Scorecard
Volkswagen is a public company and has is listed in the Frankfurt Stock exchange, it is comprised of the stock market index of Euro Stoxx 50, and ancillary listings in the Stock Exchange of Luxembourg, and SIX Swiss exchange. Since 1988, the company is operating its business in the United States through American depositary receipts, presently in the OTC Marketplace. In 2013, the company got removed from the Stock Exchange of London. 12.7% of the share of the company is held by the state of Lower Saxony, in which it has 20% rights of voting (Success Story, 2018).
The crash among the tempting forces to create long-term competitive competencies and the steady object of the past information of the model of financial accounting has made a new mixture i.e. Balanced Scorecard. Balanced Scorecard holds the traditional financial measures. However financial measures talk about the past events or activities, a suitable concept for manufacturing age businesses for which long-term investments competences and relationships with customers were not considered being important for the success. These financial measures are said to be insufficient, but for assisting and assessing the passage that data age businesses should make to build prospect value by investments in processes, innovation, customers, employees, technology, and suppliers (50MINUTES, 2015).
Balanced Scorecard complements with the past performance financial measures along with measures of the driver of future performance. The measures and objectives of the scorecard are raised from the strategy and vision of the company (Zizlavsky, 2014). The measures and objectives consider the performance of the company in four perspectives that is internal business process perspective, customer perspective, learning and growth perspective, and financial perspective. All the four perspectives are offering the outline for the Balanced Scorecard (Niven, 2011).
The Balanced Scorecard increases the set of objectives of the business unit. Corporate managers can measure how units of business can make value for future and present consumers and how they improve internal competencies and the investment in procedures, people, and systems essential to recover future presentation. The Balanced Scorecard covers the serious activities of the value-creation build by motivated and skilled participants of the company (Schmeisser and Clausen, 2011).
Balanced Scorecard focuses on the financial perspectives as well as non-financial perspectives and it ensures that both the perspectives are the part of an information system for the employees at every level of the organization (Pramudita, 2016). Moreover, the Balanced Scorecard approach should have the capability to translate the strategy and mission of the business unit into tangible measures and objectives. The explanation of the four perspectives or legs of the Balanced Scorecard is as follows:
Features of Balanced Scorecard
Financial perspective is the traditional aspect of the Balanced Scorecard approach. The management of the company does not show their interest in the BSC approach if it will not include this perspective because it comes across with the profit, which are integral goals of making shareholder value.
Customer Perspective
Evaluating the perspective of customers permits company to know more about the company because it is observed by the customers, deprived of whom the company cannot survive in the market for the longer time period. It is not so straightforward aspects as compared to the financial perspective because it does not have the indicators of performance. The customer perspective is generally measured through surveys.
Internal Business process perspective
To thrive in the market, the company should know about its main capabilities. A Balanced Scorecard recognizes the internal business processes. It is comprised of understanding what procedures are significant for the company to succeed and measure how properly company operates them. The main aim behind this perspective is to know the efficiency of the operations of the company.
Learning and Growth Perspective
Businesses should frequently develop in the market because the risk is becoming outdated. Hence, learning and growth are comprised in a Balanced Scorecard. This is a perspective which helps in measuring the development of the company and what new procedures and knowledge are being translated into development and growth for the firm (Clark, 2017).
- Balanced Scorecard helps in making a picture of the story of the company in the eyes of the internal stakeholders by simply enunciating the order of the relationship between cause and effect. An effectively Balanced Scorecard must have the competence of making a clear image of the whole company’s objective, strategic map and its target that are related to each other in a way that clashes are condensed.
- Balanced Scorecard operates as a tool of communication that transfers the strategy of the company to every member of the organization. This is performed by smartly interpreting the strategy into logically established possible targets. The Balanced Scorecard must be the compass that displays directors and employees what course of action must be tracked when met with an unacquainted condition. In order to make it more organized, common Balanced Scorecard development must be encouraged.
- The finest feature of the Balanced Scorecard is its capability to focus on some possible suboptimal decisions that might be taken by the executives when both the non-financial and financial factors are not measured in scheming and executing techniques of the performance measure. An effective BSC must have an analytical aptitude to talk about the short-term decision that is likely to affect possible growth. Executives incline to be excessively short-term minded when there is the absence of tool in the position to checkmate their decision of investment.
- With the help of good Balanced Scorecard various measures that executives want to evaluate get reduced. This will reduce the burden of the responsible department or officer of the company and can concentrate on other functions of management such as risk management, planning, management of human resource, staffing, coordination, etc.
- A Balanced Scorecard should be operationally and functionally flexible. The objective of the BSC which is to professionally connect strategies of the company with its culture will be overpowered if the executives and employees see the strategy and application of the BSC as being too rigid (Investment and Buisness Accountants, 2016).
|
Perspectives |
Objectives |
Measures |
Targets |
Initiatives |
|
Customer Perspective |
Increasing brand image |
Evaluate branding by customer surveys |
Increasing branding of the company’s products by 20% in coming 2 years |
Design New advertisement |
|
Internal business perspective |
Enhancing the organization flow and mission statement. |
Customer surveys regards mission statement |
To make employees work towards mission of the company |
Appropriate training to increase the skills of the employees |
|
Learning and Growth |
Offer training of customer service |
Design metrics to evaluate the new practices of customer service improvements |
Improve services to the customers and growth of employees by 10% |
Provide rewards for customer service and goals to enhance the practices of customer service |
|
Financial Perspective |
Increase sales of the company in geographic target segments |
Measure sales in every sector of the company |
Increasing sales by 10% every year |
Identify the lowest income segment and evaluate the downfalls. |
In today’s environment management of performance has become a judicial obligation for the units of the business. Inappropriately, various tools are not present to measure and monitor delivery of service effectively. Executives need precise information in order to confirm that their decision is not dependent on the assumption and emotions however the data related to service delivery is relevant and accurate. In modern models of business, intangible assets like knowledge levels and skills and employees, suppliers and consumer relationships, and culture are important in offering required productivity to the company. The tool like Balanced Scorecard contains significance for the business. The method was introduced by David Norton and Robert Kaplan; it helps in translating the strategy of the organization into objectives of the performance, initiatives, targets, and measures. The Balanced Scorecard is dependent on the four perspectives and connects them together along with the notion of cause and effect. An appropriately Balanced Scorecard can forecast the efficiency of the strategy of the company by a range of linked measures of performance depending on perspectives i.e. customers, learning and growth, financial, and internal business processes.
The framework of Balanced Scorecard for Volkswagen Group
A Balanced Scorecard is a system of management that allows the company to interpret the strategy, and vision into action. This management system offers feedback on the process of internal business and external consequences to regularly enhance the performance of the organization and outcomes. Many traditional systems concentrate on the organization’s financial performance. As per the analysis, it has been identified that financial approaches are said to be unbalanced and possess limitations:
- Financial information only shows past performance of the company. Hence, they might not precisely reflect the present position of the company or what can happen in the future to the organization (Suvarna, 2012).
- It is common for the present market value of a company to go beyond the market value of the assets. The financial ratios show the company’s assets value in relation to its market value. The variance between the organization’s market value and the present market value of the assets of the company is mostly called as intangible assets (Zairi, 2012).
Traditional financial measures do not involve the intangible assets (Jagdev and Brennan, 2013). Whereas, Balanced Scorecard was developed because it was believed that only financial measures do not reflect the complete picture of the organization’s performance. In fact, only depending on the financial measures can affect the capability to build value (Pourmoradi, Niknafs and Abdollahian, 2016).
The Balanced Scorecard is positioned as a tool for the companies to handle the demands of the related stakeholders and to interpret plans into actions. The potential stakeholders that are deliberately applicable can be employees, customers, or shareholders. The demands of the stakeholders are combined into the central management of the companies in a learning, customer, process, or financial perspective. Every perspective is comprised of pertinent strategic measures, indicators, and goals to attain them. It has been said by Norton and Kaplan that businesses lack in upholding the refined tools for managing the qualitative assets and intangible assets. Intangible is very important in order to remain competitive in the coming future. Therefore, the Balanced Scorecard offers ‘enablers’ that emphasis on the attainment of planned objectives in the coming time period along with the outcomes to show the efficiency and competence of the measures in the past (Išorait?, 2008).
The Balanced Scorecard is suitable for Volkswagen Company in various ways because it not only covers financial aspects of the company but also non-financial aspects which are said to be important to the success of the company.
The mission of Volkswagen Company is to provide safe, attractive and ecologically complete vehicles which can play in a progressively hard market and set standards in the whole world in their particular class (Jurevicius, 2013).
The Balanced Scorecard will consider the strategy and mission of the Volkswagen, and then it will interpret the strategy and mission of the business unit into tangible measures and objectives. The measurement emphasis of the Balanced Scorecard will be utilized to achieve the following process of management i.e. simplifying and interpreting the strategy and vision of Volkswagen, collaborating and connecting strategic measures and purposes, setting targets, planning, and supporting strategic creativities, and improving strategic learning and feedback (Hirschbichler, 2011).
Enhanced Strategy implementation and communication- By having single page image of the strategies permit companies to simply communicate policies externally and internally. The Balanced Scorecard offers the image of the strategies in one single page which provides the know-how of the strategies and supports to involve external stakeholders and employees in the review and delivery of the strategy (Sarkissian, 2018).
Improved Information of the Management- The Balanced Scorecard method supports company in designing key indicators of the performance for their numerous planned purposes. This confirmed that businesses are assessing what really matters to them. Research reflects that companies that implement Balanced Scorecard incline to show greater information of the quality management and improved decision-making (Jackson, 2017).
Improved Strategic Planning- The BSC will offer an influential framework to the company for creating and collaborating strategies. The model of business is pictured in a strategy map which assists executives to think of the cause and effect relationships among the diverse strategic objectives (Balanced Scorecard Kenya, 2018).
Better alignment of process- Well executed Balanced Scorecard also support to align processes of an organization like risk management, budgeting, and analytics with the planned priorities.
Enhanced Performance Reporting- The Balanced Scorecard can be utilized to assist in designing the reports and dashboards of the performance. This confirmed that the reporting of the management concentrates on the important planned issues and supports companies in monitoring the implementation of their plan.
Improved Organizational Alignment- The Balanced Scorecard allows companies to align their structure of the organization with the strategic purposes. To implement a strategy properly, companies have to confirm that all the support functions and units of the business are operating towards the similar objectives (Bernard Marr, 2018). Following the Balanced Scorecard approach in the Volkswagen will support it in attaining the strategies and related strategies with operations.
Better alignment of initiatives and projects- the Balanced Scorecard will help Volkswagen Company in mapping their initiatives and projects to the diverse planned objectives, which will confirm that the initiatives and projects are strongly focused on supplying the maximum number of strategic objectives.
Conclusion
In the conclusion, it can be said that Balanced Scorecard is a method that analyses the strategies and mission of the company and helps in attaining those objectives by planning the objectives and measures. The Balanced Scorecard is the technique that considers the financial and non-financial perspectives in order to plan the objectives and measures to attain those perspectives. The above report has highlighted the concept of the Balanced Scorecard and its important features. The explanation has involved the overview of Volkswagen Group and its progress to achieve this top position. Besides this, the report has discussed the difference between a Balanced Scorecard and traditional performance measurement systems that are used in the business to improve the performance. However, the discussion has provided the conclusion that Balanced Scorecard is better than traditional performance measurement systems because Balanced Scorecard considers both financial as well as non-financial perspectives of the business and whereas traditional performance systems only consider financial perspectives which are not enough for the survival of the business in the long-run. Further, the report is discussed how Balanced Scorecard is suitable for Volkswagen group which has highlighted some important improvements that will be made through the implementation of the Balanced Scorecard and how the mission and objectives of the company will be achieved through this approach.
References
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