Apollo`s Corporate Wheel
Question [1]
A balanced scorecard is a system within an organization with four components that form part of the drivers of the future and are usually built from the organization`s vision and strategy. The four elements are customer, financial, internal business process and innovation (Kaplan, 2012). While assessing the current performance measures in Apollo`s Corporate Wheel, we find that it is divided into four components also; that is the financial spoke, staff spoke, a customer spoke, and innovation spoke. The founders of Apollo Ltd believe that the success factors that have contributed to its achievements are; brand position in the market, customer satisfaction, number of innovative products launched every year and staff satisfaction. However, its gross performance index is lower in 2017 if compared to 2015 and 2016. We evaluate Apollo`s Corporate Wheel in order to check if by adopting the balanced scorecard would benefit Apollo Ltd as follows;
Financial spoke
The financial spoke of Apollo`s Corporate Wheel entails the gross margin, net margin, and return on capital employed. The current financial system of Apollo that focuses mainly on gross margin is unfavourable in the current production environment, as stated by the production manager. Since it leads to the increased cost of liquid crystals, thus production team are unable to meet their target costs. The rate of return on product-specific costs is linked to the employee bonus.
Staff spoke
The staff spoke of Apollo`s Corporate Wheel mainly focuses on staff turnover per year and the number of training courses undertaken per year. First of all, in the current performance measures of Apollo Ltd, the production team are unable to meet their cost targets because of the increased cost of liquid crystals resulting by the focus put on gross margin. In addition, they have failed to receive their bonuses because of this issue. Therefore, the staff are unhappy about this. The staff turnover is equally low as it was in 2016 and the Human Resource Director thinks it is normal and that it means the staff are satisfied, however, the issue of not receiving bonus may lead to staff dissatisfaction. The staff are also making sacrifices on accuracy in order to ensure they are meeting the time deadlines, thus resulting in several mistakes hence the low quality. Don't use plagiarised sources.Get your custom essay just from $11/page
Innovation spoke
The innovation spoke focuses on the expenditure on research and development. The current measure of HKD spent on research and development is not appropriate according to the manager in charge at Apollo. There should be more planned expenditure portfolio.
Customer spoke
The customer complaints are low, yet the products are not more successful, and this may be attributed to the high competition in the market share. Maybe the Brand position may have been lowered by the increased competition.
According to the balanced scorecard, to realize the vision and strategy of an organization, the financial spoke, the staff spoke, and the innovation spoke must relate in order to satisfy and attract customers. Therefore, Apollo Ltd should adopt a balanced scorecard because it will help enhance the brand position of the company in the market, customer and staff satisfaction and more creative innovation. To justify this recommendation, if the proper financial portfolio is adopted; the staff would be satisfied, the research and development would have appropriate funding, and the customer perspective of the company will be equally be improved (Kaplan & Norton, 2008).
Question [2]
Using Beyond Budgeting approach allows an organization to set the company`s targets relatively to the competition it faces. Apollo Ltd is situated in a market where the competition is very high. The excerpt states that in its endeavour to develop itself in different markets, Apollo faces competitors who have a global brand presence, a significant advantage in terms of economies of scale and more efficient supply chain. Using the beyond budgeting approach would enable Apollo to set targets that are aimed at relative improvement hence stability in the market.
The application of Beyond Budgeting approach also enables the management systems to be more effective, anticipatory and include rolling forecasts. The internal reporting system of the management of Apollo, the Corporate Wheel, is facing problems due to financial problems arising courtesy of the focus on the gross margin. Beyond Budgeting would enable Apollo to have base controls on effective governance and on a range of relative performance indicators while forecasting the future deficiencies and Budgeting in advance.
Beyond Budgeting approach allows for strategy to be an ongoing process. Apollo is using a fixed budget plan, thus incase of overheads the staff are restricted to work with the existing budgeted amount; hence they end up committing mistakes in production. Especially as a result of the lack of bonuses, the staff behave sub-optimally. By adopting the beyond budgeting approach, Apollo will be able to make action planning a continuous and inclusive process, thus factoring in the fact of bonuses.
In addition, beyond Budgeting the controls are aimed at supporting the frontline managers, senior managers are informed by exception.
Beyond Budgeting, approach subject rewards to be based on relative performance. Staff satisfaction is one of the four components of the success factors of Apollo Ltd. The workers are awarded according to set gross margin. This leads to a low return on the productivity of the workforce. Therefore, by using the beyond budgeting approach, the firm will be able to base their evaluation and rewards on relative improvement contracts.
In this budgeting approach, the management aim at building flexibility and allowing for exit routes. Apollo Ltd is having a rigid budget that does not allow the staff to improvise, improve or change the routine. This subjects Apollo to be susceptible to competitors since as new innovation arises, the budget denies them a chance to improve on it since it is limited. By using the beyond budget, Apollo would be able to make resources available as required in case something that is beneficial to the company arises.
Beyond budgeting approach shifts the emphasis from the performance based on numbers to performance based on people. Apollo is strictly focused on the gross margin. Output volume is their main target. The beyond budgeting approach would enable Apollo to coordinate cross-company actions according to prevailing customer demand.
Question [5]
Customer profitability analysis is a method that allows a firm and lenders to asses the profitability of each client in management accounting and credit underwriting.
According to this excerpt, the market for cameras is influenced by technological developments that can heighten the range and the scope of what cameras do. Therefore, most customers would be willing and able to purchase the cameras if they have the best specifications. Apollo Ltd suffers high competition in the market share as there is a competitor who is almost launching a better camera than the existing ones. In order to counter the likelihood of losing customers and thus making a greater gross loss, Apollo should consider the following benefits of customer profitability analyses;
Customer profitability analysis would enable Apollo Ltd to have programs that identify the most profitable customers and thus, the management would invest in retaining these profitable clients.
Customer profitability would also help Apollo Ltd to identify and formulate different product pricing techniques that are favourable to most customers and preferred by different customer groups. Since Apollo is situated in Hong Kong, where there has been a trade war between the U.S. and China, most consumers will tend to spend less. To have a competing edge against the existing brands, Apollo should analyze the market and derive favourable pricing techniques that would attract more customers hence increase profitability in the number of consumers. This is because some rival companies have increasingly made attempts to buy the market share at the expense of profitability.
The analysis of customers` profitability would help Apollo Ltd to make decisions on whether to neglect or develop the loss-making customers. Since Apollo is still young in the market, I would recommend that it develop the existing loss-making customers so as to gain their loyalty. This will help Apollo have customers who are loyal to its brand, thus being able to sustain itself in the harsh competitive environment. Due to the development of media sites like Facebook and Instagram, more people want to take photos, so developing its own brand through these customers will enable Apollo to have a huge customer base hence future profitability.
Customer profitability analysis would also enable Apollo Ltd to be able to obtain the cost of getting new customers in the competitive market. Some of Apollo`s rivals have influenced the larger stockiest of their products to ensure their commodities get more displayed and to appear first in online generic search engines like google search engines because they are bigger. This should prompt Apollo to conduct the customer profitability analyses to determine the favourable amount they are willing to spend in marketing in order to acquire customers in this competitive market.
Moreover, customer profitability analysis would help Apollo Ltd to asses the customer value over the lifetime of its relationship with each customer. The existing rival brands have the advantage of having customers who are loyal to those specific brands over a lifetime. This is explained by the customers who tend to buy the cameras from specific television brands like Sony or any other that exist within Hong Kong. If Apollo conducts proper customer profitability analyses and invests more in building a lifetime relationship with the existing customers, it will be able to have a competing chance.
Lastly, customer profitability analysis would help Apollo Ltd to find innovative ways of handling customers, giving more creative designs and quality product, and offering the best after-sales services will ensure the customers get satisfied. This will enhance the customer interests and preferences towards Apollo`s products. An increase in sales will lead to an increase in profit; thus, customer profitability analyses will give Apollo a chance to compete favourably.
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