Description of Bega Cheese Limited
You are required to prepare a report to comment on the suitability of BSC for a company of your group’s choice.
As an employee of Taura management I was part of a team which was assigned the task of evaluating the suitability of the Balance Scorecard (BSC) to the Bega Cheese Limited. As part of a group I was tasked with preparing the report to the client regarding the findings of the research. This was to be presented to the CEO of Bega Cheese Limited upon completion. Bega Cheese Limited is on the verge of reviewing its budgetary system with the CEO having an I interest in the BSC. The CEO recently attended a seminar regarding the BSC model and had thereby requested our services in evaluating the suitability of the model to the firm’s management performance.
The report is thereby designed to give an overview of Bega Cheese limited and the BSC model. Secondly, we evaluated the difference of the BSC model with other models for measuring performance. The report was then concluded with the analysis of the suitability of BSC to the Bega Cheese limited which was finalised by recommendations on the way forward to the CEO.
Bega Cheese Limited is a resident company of Australia. The firm is located in Bega town which is in New South Wales Australia. The first was initiated as an agricultural cooperative under the ownership of the Bega diary farmers. In 2011 the company was registered as a public limited company and went ahead to be listed on the Australian Securities Exchange. Most of the company shares are currently owned by the suppliers from Bega. The company majorly relies on the sale of cheese and processed cheese products to generate most of its operating revenue. These products are sold under the Bega brand. In addition, the firm also sells other brands such as Tatura, Royal Victoria, Melbourne and Dairy Mont. The retailing process also includes products such as Cheese, Cream cheese and powdered milk. This is responsible for around 40% of the firm’s total revenue. Currently Bega Cheese products are retailed within Australia as well as exported in around 50 other nations across the globe (Beitz, 2017).
The BSC is a strategic tool that the management can effectively apply in evaluating company performance. It’s a mini-standard report that is structured in away that the management can apply it to keep records of the firm’s employees and major activities under there control. With its application the management can monitor the actions of the staff and make decisions that may settle any arising issues in the curse of the business operations. BSC was a term which was initially used to refer to management performance reports that were used by managers of a firm in implementing the strategies of the organisation as well as the daily operations (Legace, 2008).
BSC and its Features
BAC can also be used by an individual to gauge their performance. This though is not a popular application of the model. The model can be used to inform personal objectives setting as well as calculation of incentives. The features listed below can be used to define the BSC.
- The model involves selecting a small data sample to monitor.
- The model’s weight is heavily put on the strategic agendas of the firm of concern.
- The balance scorecard evaluates a mixture of financial and non-financial data sets (Moulin, 2017).
The BSC is one of the closed loop controllers that management may apply when monitoring the implementation of the firm’s strategies. In this case once performance is estimated the obtained value is compared with a defined reference point. Should a difference arise its will be used to formulate the corrective measures that the managers need to pursue to optimise the firm’s performance. The control measure need to accommodate the below items for its to be successful (Kellermans, et al., 2013).
- Selecting the data to be measured
- Setting the reference value.
- Ability of the managers to take correction actions where necessary.
Analysis from the strategic management perspective indicate that the three features of a closed loop control system should be derived from the strategies of the organisation and should reflect the capacity of the observer to measure performance output and take corrective measures should a need arise. At the beginning the applications of the BSC was promoted as a general-purpose performance management system, later the applications were introduced as a way of evaluating unique strategies (Kaplan & Norton, 1992). Recently the system has been accepted by several organisations as they strive to efficiently, measure and control the implementation of strategies.
The balance scorecard is a tool of management that is suitable for evaluating the performance of firm. Instead of evaluating single features of the organization, the balance scorecard considers numerous aspects of the firm. The idea of the BSC first come to light in the closing stages of 1980s, from here the idea has undergone tremendous evolutions characterised with massive improvements. The system has improved in flexibility and is currently applicable to several firms from different sectors (Epstein & Manzoni, n.d.). The system design, effectiveness and ease of use have all been improved. Applying the balance score card allows for evaluation of numerous aspects of the firm with equal weight. This gives room for the management to evaluate the success of the organisation using the success of all the relevant features (Rigby & Bilodeau, 2013). Despite the ability of the model to accommodate several features based on the needs of the managers, an efficient balance scorecard model should be characterised by the aspects listed below;
Ability to measure finance performance, this aspect of management performance tool is one of the ancient features of the balance scorecard. Firms profitability is highly influenced by the performance of its finances for this reason managers will find a tool inefficient unless it is able to measure performance of the financial activities (Kaplan & Norton, 1996). The biggest expectation of the shareholders is to see the value of their shares grow. Managers are agents of the shareholders and are designed by corporate requirements to adhere to the expectations of the shareholders. A BSC model allows the firm to measure aspects like return to asset, profit margins as well as return to equity. The weight of profitability of the firm to the future viability makes the ability to measure financial aspects of the firm’s operations to be a weighty matter.
Features of the BSC Model
Ability to gauge the perception of the consumers, company’s strategic success heavily relies on how the consumers view the firm. Its is the consumers that consume sales and therefore trigger revenue generation by the organisation. For this reason, the form should seek and retain as many consumers as possible. The BSC model therefore need to be able to evaluate the perception of the clients regarding the company. This way the management may know the areas that need to be strengthened to improve the sales. Consumer contention is what lead to loyalty to the firm which is responsible for client’s retention. Measuring consumer perception is a more straight forward task than that of financial performance due to lack of similar static performance indicators (Loppolo, et al., 2012). The consumer perception can be evaluated by conducting surveys designed to seek the opinion of the consumers regarding the quality of the company’s products and services, their take on the company brands, and the willingness to associate with the firm.
Ability to measure internal business processes, an organisation can only thrive when it understands and is able to utilise its competitive advantages. This calls for effective understanding and a management of the firm’s internal processes (Northcott & Taulapapa, 2012). The BSC can be applied to analysis the internal operations that are crucial for the firm’s success. This involves manufacturing, marketing as well as the distribution sector. The model if applied effectively allows the management to estimate the efficiency of the organizations activities.
Ability to measure growth and innovation, technological development and innovation is necessary for a firm if it is to improve the quality of its product and efficiency of operation with time. The balance scorecard must therefore be able to cater for the evaluation of this area. Through analysis of the firm’s development the managers will be availed an angle to which they can promote the use of technology in advancing the firms’ industry share. As the firm becomes more dynamic its importance for it to attain high scores in the BSC evaluations (Moullin, et al., 2007).
In designing the balance scorecard, the aim is to identify a sample of a section of the firm’s financial and nonfinancial measures, afterwards targets are incorporated beside the measures. The managers through a review of their measures are thus able to determine if the firm’s current performance meets their expectations. The BSC brings the attention of the manager to areas of operations which have scored massive deviation from the expected outcome, this way the manger is able to take a corrective measure in time. This aspect of the BSC design is what makes it an effective tool in triggering positive performance of the managers as well as the entire firm (Moulin, 2017).
The BSC was in the preliminary stages designed to concentrate the focus on the data that relates to the implementation of the firm’s strategies. As the model improves this boundary has been crossed and at the moment the model is being applied to monitor both the control activities and the conventional strategy development planning (Kaplan and Norton, 1990). Based of Kaplan and Norton ideas the below listed steps illustrates the concept of BSC design.
- Translating vision into operation objectives
- Communication of vision and linking it to the individual performances
- Setting of indices (Business planning)
- Learning, feedback and proper strategic adjustments
The above steps need to give an illustration of the process design needs that will be applicable in fitting the BSC result to the overall business management procedures. For this purpose, the steps cover the identification of financial and non-financial samples. Even though the BSC assists the mangers by focusing their attention to strategic management implementations, it is necessary to note that the model does not play any role in formulation of strategies (Kong, 2010). It is even possible to apply the model concurrently with others strategic planning systems and tools.
Difference between BSC and the traditional performance measurement systems
The traditional performance evaluation models were designed to only cover the aspect of finance. It only considers the internal accounting reports pertaining to cashflows, revenue, profitability, earning per share, return of asset and economic valuations. These measures are termed as lead indicators as they only reflect the historical performance data. Even though the measures are significant in aiding decision making their reliability cannot guarantee a long-term success to the firm
The overreliance on only the financial metrics by the manager to make strategic decisions may be misleading and can lead to sacrifice of the firm’s long-term potential success for immediate benefits. The traditional measures were effective in the industrial age when the historical data was enough to effectively, make decisions. The evolution of the business environment due to technological advancement have made relying on such measures solely to be a risky affair. Its is necessary for organization to take extra steps and consider the importance of the intangible assets to the long-term viability of the company. Aspects like consumer relationship, intellectual and human capital are now plying bigger roles in firm’s success (Rompho, 2011). The competitive environments under which the current firms operate have rendered overreliance on the analysis of tangible asset’s performance to be insufficient. There is stronger necessity to measure the intangible assets to address business rivalry. These measures are not covered by the traditional performance evaluation models. The models rely on historical data that have no use in projecting the future.
Also, the traditional performance measurements have no correlation with the organization’s strategies. A strategy is what is responsible for the long-term success of a company, its operations scope as well as matching the current activities with the available resources. The traditional systems put more weight on the short-term performance of the firm and does not connect the firm’s short-term aspirations with the long-term goals. A firm’s profitability depends on the ability of the managers to make decisions that not only appreciate the past robust performance but also ensure positive future performance. The environment under which firms operate currently is very competitive, for a firm to survive there is need to for adaptability and flexibility before the firms can gain from competitive advantage.
Organizations must strive to perform efficiently in key areas like customer relationship, technical know-how, product and service quality, employee’s relationship as well as supplier relationship. With this investing in the intangible assets must be part and parcel of the firm’s future strategies (Kellermans, et al., 2013).
Intangible assets can create value and define the long-term success of the firm. This makes them a tool for competitive advantage. Firms need to measure the performance of the intangible assets to give indication to the managers on the way forward. Traditional performance measurements models do not cover these aspects since they are non-financial.
From here we can now see clearly why the use of the traditional performance measurement tools are no longer effective ways to evaluate performance. The fast changing and dynamic business environments have grown less tolerant to applications of just one type of performance measurement metric to generalise the firm’s performance. There is need to bring out the relationship between the organization strategies and the performance measurement metrics. This way the financial and nonfinancial aspects must be accounted for. The capacity of the firm to balance its short-term decisions with the long-term aspirations is what defines its success.
The evolution of the business environment triggered the need for a more reliable performance measurement model. For this purpose, the BSC was developed to asset managers address some of the limitations of the traditional performance measurement models. This model accommodates both the financial as well as the non-financial aspects of the firm hence availing the managers away of measuring the performance of the intangible assets. This feature has allowed the model to give a balanced view which covers all the vital areas that the firm need to measure performance to develop and implement its future strategies effectively.
The BSC system is integrated in a way that it allows the managers to link the business activities with the organizations long term goals. With this the managers can efficiently translate the organization’s strategic goals to a quantifiable performance targets which can be measurable thereafter. The BSC model evaluated the performance under four distinguished perspectives: Financial, consumer, growth and learning as well as internal business processes perspectives
The suitability of the BSC model to the Bega Cheese Limited was analysed based on how the model can be applied in improving the firm’s operations as well monitoring strategic performance. Bega Cheese company have managed to survive the competitive market and establish itself as a household name within the Australian population. The company’s aspiration is to work in collaboration with all its stake holders to develop a brand that will be accepted as the choice of the consumers (Bega Cheese Limited, 2018). This means the company have to up its internal operations, invest in research and innovations, take advantage of its financial position as well as analyse and utilise the intangible assets to improve the clients loyalty and build a strong supply chain network.
Considering the company’s desire to improve the consumer perspective with a target of optimising future sales its evident that the traditional management performance measurement models can no longer be effective to the firm. To achieve its objectives there is a need for the company to link its performance measurement to the long-term goals and strategies of the organization. Strategic decisions occur at various stages of the organization. Hence there is need to ensure the performance measurement system is in line with the company mission, vision and strategies. The traditional performance measurements are only concerned with the financial measurements hence cannot relate to the future strategies of the Bega Cheese Limited. The food sector is dynamic and is constantly evolving due to the mixture of cultures brought about by the advancement in telecommunication. This give rise to new preferences. These new developments demand that the firm innovate new and advanced storage as well as transport equipment so as to assure their clients of freshness. Also, the company needs to constantly launch new recipes that are in line with the trending tastes and preferences. All this is impossible to achieve by simply putting in place a performance measurement which only valuates one aspect of the firm. The performance measurements’ models need to align to the organisation’ goals while at the same time encouraging growth and positive future results. This way the firm will be in a better position to replicate the historical positive performance while at the same time encouraging future developments.
The use of BSC as an integrated strategic performance evaluation system has been useful in various organisations in addressing the limitations of the traditional performance measurement criteria. By applying the use of the BSC model the managers of Bega Cheese are accorded a balanced view regarding the firm’s performance, this way they are able to make a more informed decision that are in accordance with the corporate long-term strategies. The BSC is future oriented making it a perfect tool for measuring strategic implementation of the firm’s objectives which are also future oriented. Application of BSC provides the managers with an avenue to taste the success of the firm in its pursuit of long-term targets of delivering quality food stuffs to the Australian as well as the international market. BSC will allow the managers of Bega Cheese too take proactive rather than reactive measures. This way the firm is able to predict the future and prepare in the best way possible to tackle the challenges ahead.
References
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