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Financial Management - Balanced Scorecard for Corus Group PLC

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Introduction

****** SHEFFIELD HALLAM UNIVERSITY****** FACULTY OF ACES School of Engineering B(Sc) BUSINESS NETWORK ENGINEERING (Year 3) ******************************************************************* Unit S302 -Financial Management Semester 1 Assignment 2 - Balanced Scorecard for Corus Group PLC Tutor : Mr. David Ridley Author : Petros Gerasimos Athanasatos Deadline Date : Thursday 02/11/2004 (16:00) &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&& Aim : Analyzing and identifying the limitations of the balanced scorecard performance measure. With the assistance of this assignment, the author will cover learning outcome 2, which is to produce an alternative set of measures for the same organization-Corus Group plc (chosen in assignment 1), which contains factors other than financial factors that contribute to company performance, and suggest how such factors might be measured. Introduction Corus Group plc was formed on 6th October 1999, through the merger of British Steel and Koninklijke Hoogovens. The Group's strategy is to focus on selected areas of carbon steel and to bridge the competitive gap between Corus and its European competitors. Post merger was identified as an issue that the Group needed to focus on, as this would provide to the company, some noticeable aspects: > Improvement of relationship with its customers. > Clear vision and strategy and translate them into action. > Develop feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. > Build a platform for future growth opportunities. The Group needs to adopt the balanced scorecard technique in order to achieve its objectives and become a world class company. According to Harvard Business School video viewed in a lecture during the semester (week 16-10/11/2004), the balanced scorecard views the organization from four perspectives: * The Learning and Growth Perspective * The Business Process Perspective * The Customer Perspective * The Financial Perspective Figure 1 Figure 1 represents a Balanced Scorecard system with its various strategies 1. ...read more.

Middle

According to Kaplan and Norton, these core measures include customer satisfaction, retention, new customer acquisition, customer profitability, and market and account share in each specific segment. Figure 3 + Figure 3 represents the Customer Perspective However, these measures present some of the disadvantages of the financial measures: they reflect past performance. Therefore, it is important for managers to also identify what are the attributes that the customers attach value to and choose the value proposition that they want to deliver to the targeted customers. Kaplan and Norton then suggest selecting objectives and measures from among three classes of attributes: product and service attributes (functionality, quality and price), customer relationship (quality of purchasing, experience and personal relationship), image and reputation. Figure 4 Figure 4 represents the Internal Business Process Value-Chain Perspective According to this perspective, the following measures are more important for Corus Group plc: Objectives Measures Targets Initiatives Customer Retention On-time delivery Maintaining the scheduled delivery time provided/given to the customer Constant checks on production and delivery time. Customer Satisfaction Number of complaints Reduce number of complaints to zero Provide products in expectation with the customers' needs Customer retention will be provided by dealing with the Just In Time mentioned in the previous perspective (Business Process Perspective-On time delivery). However, this technique could be beneficial not only for the organization, but also for its staff. Therefore, the staff should advantage in the following: > Improve its quality and morale and eventually staff turnover > Understand their own role in the process of developing a product > Recognize how they can work with training specialists to maximize the potential of an company's human resources Customer satisfaction is another issue the group must focus on. ...read more.

Conclusion

In the next lines, a quote which focuses on the whole meaning of the balanced scorecard is provided. "A core group of three employee-based measures--satisfaction, productivity and retention--provide outcome measures from investments in employees, systems and organizational alignment." The Balanced Scorecard, Kaplan and Norton (p. 146) Growth, Innovation and Learning Perspective Objectives: 1. Employee Satisfaction and Retention 2. Employee Productivity Measures: 1. Training hours per week for each employee 2. Revenue per employee Targets: 1. Provide two hours of training to each employee once a week 2. Optimize revenue per employee to the extent possible Initiatives 1. Training on new business processes and technology 2. Efforts to reduce downtime time and increase employee efficiency Internal Business Process Perspective Objectives: 1. Product Design and Development 2. On-Time Delivery Measures: 1. Market research on products requirements (time to market) 2. Process efficiency Targets: 1. Provide products in line with market needs 2. Reduce the throughput to the extent possible Initiatives: 1. Focus on market research and research and development 2. Focus on process efficiency and elimination of bottlenecks Customer Perspective Objectives: 1. Customer Retention 2. Customer Satisfaction Measures: 1. On-Time delivery 2. Number of complaints Targets: 1. Maintain the scheduled delivery time provided/given to the customer 2. Reduce the number of complaints to zero Initiatives: 1. Constant checks on production and delivery time 2. Provide products in expectation with the customers' needs Financial Perspective Objectives: 1. Revenue and Growth Mix 2. Asset Utilization Measures: 1. Sales and Market Share 2. Reduction in inventory Targets: 1. Sales growth targets of 15% every year and market share to be equal or more than the company's competitors 2. Maintain least inventory as possible and at the same time fulfill market demand Initiatives: 1. Focus on marketing and produce a new sales strategy 2. ...read more.

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