Overview of Toyota Corporation
Discuss About The Management Consultancy Is Toyota Corporation.
The report is based on one of the modern management accounting methods that are Balanced Scorecard model. Balanced scorecard model is used by numerous companies for effective evaluation of the performance of the company. Being a newly appointed consultant in the management consultancy firm you need to evaluate the current budgeting system of the client’s firm. The client of the management consultancy is Toyota Corporation. CEO of the Toyota Company currently attended a seminar of private companies that were related to the concept of the balanced scorecard. The company is prepared to evaluate the suitability of the balanced scorecard model to the Toyota Corporation.
The suitability of the BSC model can only be understood by the CEO of the company when they know about the details related to the concept and its features. Along with this, the CEO should be aware of the fact that the BSC is different from traditional performance measurement systems. This report will help the CEO of the Toyota Company to understand the concept and the benefits of the model which will contribute to understand the suitability of the model to the Toyota Corporation.
Toyota Motor Corporation is well-known Japanese multination automotive manufacturer with the headquarters in Toyota, Aichi, Japan. The company has provided its contribution towards a prosperous society through the manufacture of automobiles, operating its business with the aim of the vehicle sales and production. The company believes in diversity due to which the company manufacture and sell different types of product across the globe (Toyota, 2018).
Toyota vision is to lead the way to the future of the mobility with the motive to enriching the lives of the people across the work with safety and responsibility. The company is committed towards the quality, constant innovation and all the respect for the plant (Toyota, 2018). The aim for which the company work is to exceed expectations with a smile. As of the year 2017, the company is known as the world’s 2nd largest automotive manufacturer (Toyota, 2018). The company was world’s leading automobile manufacturer who manufacturers more than 10 million vehicles every year. This was done by the company since 2012 and at that time only the company reported production of its 200-million vehicles (Toyota, 2018)
A balanced scorecard is a framework that is used to implement and manage a strategy that is associated with a mission and vision of the strategic priorities, objectives, measures, and initiatives. This method allows the managers of the company to incorporate the financial measures with the other objectives and the key performance indicators that are associated to the customers, business processes and the learning & growth (Balanced Scorecard Institute, 2017). Most of the companies make use of this method because through this method they can get the overall view of the organization’s overall performance. This method was presented by Dr. Robert Kaplan and Dr. David Norton as a paper in the year 1992 and then formally printed as a book in the year 1996 (IntraFocus, 2018). The paper and the book that was published by the company lead to the widespread achievement. Below given is the image of the balanced scorecard framework.
Vision of Toyota
The company doesn’t consider it as a scorecard but it is also identified as the methodology that is mainly used by the company to determine a small number of financial and non-financial objectives which are linked to the strategic priorities. This approach emphasizes the firm to think about the ways through which they can measure the objective and what initiatives can be put in place to meet the objective of the company (Paul, 2018). Balanced scorecard approach emphases on the financial and non-financial objectives of a company that is attributed to the four areas which are discussed below: –
Considering the opinion of the Kaplan and Norton the financial perspective is one of the important essential perspectives for the company that is required to be measured. The financial data or statistics is very important for every company to achieve the success and the competitive advantage in the current working environment. Managers of the company need to pay the attention towards the appropriate financial data on time. This financial perspective of the balanced scorecard model ensures an effective return on investment in a firm along with the effective management of the risk that is associated with the business (KPI Expert, 2018). Financial goals should be aligned with the strategic planning, revenue and the productivity variables that are presented as the performance indicators of the actions of the company.
Modern management believes in studies the client-oriented business activities which are essential for the business and for its strategy. Balanced scorecard model include this perspective with the motive to precisely monitor the ways through which the company is delivering the value to its customers with the use of the pointers of the outcomes and satisfaction like surveys and continuously taking into account the deadline, cost, performance and the quality of the product and services that are offered by the company. Low performance of the customer-oriented activities might cause a decline of business (Agarwal, 2018). This perspective is very important for the company because if the company is not able to satisfy the needs of the customers then they won’t be able to continue their business no matter what the other activities are working effectively or not.
This internal process activity purposes to arrange a tree for the business process so that monitoring and optimization of the performance can be done in an effective way from the company’s point of view. most of the CEO found that the activities linked with the internal process perspectives seem to be more sophisticated due to which they are not able to analyze the performance of the internal business process. This method provides the support to the companies to analyze the internal business processes (Erbasi and Parlakkaya, 2012). BSC model consists of determining and mapping the processes which are essential to be accomplishing the company objectives and applying those strategies for bringing the continuous improvement. BSC model will support in analyzing those activities which are essential for adding the value to the products and services of the company. The major motive behind measuring the performance is to satisfy the needs of the shareholders of the company by providing them maximum returns.
Balanced Scorecard
Learning and growth of the employees in an organization are very essential because without this the company is not able to perform its operations effectively. Employees of the company are considered as the assets due to which it becomes the priority of the company to retain the employees in the company. The growth of business and employees is only possible in the organization when they make use of the skills and abilities because this is the only way through which they can achieve the success (Valmohammadi and Ahmadi, 2015). Most of the companies invest the amount because this is the way through which they can bring the long-term growth in the operations of the business. BSC model helps the companies in evaluating the learning and growth perspective of the company so that they can identify the loopholes and work effectively to bring the improvement in proving training to the employees.
- BSC model provides the value added to the company so that they can map their strategies effectively.
- BSC contributes to improve the effective communication between the departments of the company.
- Balanced scorecard model measures the 4 perspectives which include financial, customer, learning & growth and the business internal processes which are considered as a most crucial perspective of the company.
- This model gets align with the daily working and strategy of the company which is essential for the accurate evaluation of the performance of firm (Lueg, 2015).
- Balanced scorecard model points out the company’s effective strategy by focusing on the cause and effect relationship of the firm.
- The companies get the feedback to bring the improvement in the performance of the organization which is only possible after effective analysis.
- Balanced scorecard model helps the company for the effective communication as the department of the companies interact because of the BSC model as this model provide the analysis of the entire organization and all the activities of the company are interrelated with each other (Kerai and Saleh, 2017).
- Balanced scorecard model can be used by the company to monitor and measure the progress of strategies that the company has implemented to support the working.
Balanced scorecard approach is different from the traditional performance system. Some of the difference between both the approaches of the accounting method is explained in this section of the report. Traditional performance system is totally different from the modern approach of the accounting method. A balanced scorecard method is a modern approach which is used by most of the companies in the current market because they know that the environment brings the change in businesses. The traditional method is not appropriate for the current business environment because this method doesn’t bring the change in the evaluation of the performance of the companies (Coe and Letza, 2014). The traditional method of accounting includes the financial analysis of the company which can be done effectively with the use of the different tools such as cash flow, ratios, financial statement and many others.
On the other hand, the balanced scorecard method provides the analysis of the performance of the company with the help of the financial, customers, business internal process and learning & growth perspective of the company. This is the modern approach to manage the accounting due to which they include all the aspects that are essential for the business to be considered while evaluating the performance of the company. Therefore, this can be said that it includes both the financial and non-financial analysis. The traditional method of the accounting provides the true picture to the company. On the other hand, the balanced scorecard method provides the analysis along with the feedback to the company (Biazzo and Garengo, 2012). Along with this, BSC model highlights the capabilities of the company that contributes to improve the performance of the company.
Financial Perspective
One of the major difference between both the method is that Balanced scorecard model gets align with the strategies and vision of the company. Considering the strategies, the BSC model conducts the evaluation and provides the feedback to the firm. On the other hand, the traditional accounting method doesn’t get linked with the strategies and vision of the company due to which they are not able to provide the accurate results that fit with the strategies of the company.
Apart from this, another major difference that takes place between both the methods of the accounting is the accuracy. The accuracy of the results is only possible in the BSC model as this model is more accurate than the traditional method of the accounting (Amado, Santos and Marques, 2012). Along with this, BSC model will help the company in achieving the success in the near future which is possible only if the company has performed the effective implementation of the balanced scorecard model.
The overall analysis between both the traditional and the balanced scorecard management accounting reflect that the BSC model fulfills all the drawbacks of the traditional management accounting model due to which it will be effective for the company if they will implement the BSC model of the accounting management. Though, this is the fact that this model is difficult to implement in the organization because the company needs to appoint an accounting expert who can offer all the services to implement the balanced scorecard model. This will cost high for the company as they have to pay high amount to the expert who will implement the balanced scorecard model in the organization. After considering the whole analysis, it can be said that the balanced scorecard method or approach is effective for the business in the dynamic world.
The suitability of the balanced scorecard model for the Toyota Corporation is discussed in this section of the report. The below given is the analysis of every perspective that helps the company in achieving the desired goals and objective which is essential for the business success.
- Financial perspective: – Toyota Company has numerous numbers of strategic objectives that the company is looking to measure the effective implementation of balanced scorecard model. These strategic goals are a rise in the profitability of the company, increasing the sales of the products and services of the company in the emerging markets and the sustainable financial growth of the business in the current market. Moreover, the strategic measures of the company include the lag indicators. The company can measure these all objective with the help of the BSC as it includes all the ways through which the company can measure the perspective (Keyes, 2016). Some of the measures that can be used by the company include profit margin growth of Toyota, the rise in the cash flow of the company and the participation in the emerging markets.
- Customer perspective: – The major objective of the company from the customer perspective is to regain the trust of the customers, enhance the effective communication, maintaining an ethical approach towards the customers and becoming the worldwide leader. The balanced scorecard model provides the support to the company through which they can improve the working of the business. The company can measure the objectives with the help of the balanced scorecard model. The BSC model will also provide the effective way through which the company can improve the customer satisfaction and retention (Agarwal, 2018). Toyota can measure the objectives with the help of BSC and the ways through which the company can measure the strategic goals are an improvement in the brand recognition of the company, brand trustworthiness and the feedback that is received by the company after selling any of the cars.
- Internal business process: – The internal business process is very important for the company to evaluate which can be done with the help of the balanced scorecard model. The company can make the strategy such as strengthen the establishment of the internal system which is essential for the improvement in the quality, improvement in the product development processes, innovative products and the rise in the research and development of the sustainable products. These strategies are effective strategies for the Toyota Company with the fulfillment of which the company will be able to achieve the success and these strategies will add value. The BSC model will help the company in measuring the objectives of strategic goals (Hoque, 2014). The effective measures that can be used by the companyare increase in revenue from the new product and the rise in the customer satisfaction.
- Learning and growth: – This is the fact that the Toyota Company needs to bring the training programs and effective strategies for the company because the skills of the employees contribute in improving the operations which is essential for the success of the company. The company can form the strategies that they are willing to achieve with the help of the learning and growth of the employees. The objective of the company related to the learning and growth include improvement in the abilities of the employees to respond quickly to the customers, empowerment, employee recognition, and the training programs to enhance the employee’s abilities (Sainaghi, Phillips and Corti, 2013). Balanced scorecard tool helps the company in accomplishing the objective of the company. Along with this, this tool provides the opportunity through which the company can measure the effectiveness of the strategies that are implemented by the company. The measure provides the support to the company through which a company can measure that objectives are achieved or not. The measurement of the learning and growth objectives can be done with the help of the employee’s satisfaction and the employee’s improvement.
The above overall analysis reflects that the balanced scorecard model is suitable for the Toyota company as all the objectives of the company can be fulfilled with the help of the balanced scorecard model. Balanced scorecard model is essential for the company to implement as with the help of this the company can bring the improvement of the future strategies. BSC model provides the feedback to the company.
Customer Perspective
Conclusion
In the end, it can be concluded that the balanced scorecard model is suitable for the company. The company should implement this model of management accounting in their organization because this is the effective way through which they can improve their operations. The report includes the brief details related to the balanced scorecard model along with this it states the features of the BSC. It also includes the difference between the BSC model and the traditional performance measurement systems. The four perspective of the balanced scorecard include financial, customer, business internal process, and learning & growth are very important for the company. Therefore, the Toyota Company can take the benefit of this accounting method for achieving the growth and success in the coming years.
References
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