ACC20014: Management Decision Making
The Business is currently operating in Australia’s hardware and building supplies industry, that is, primarily engaged in the supply of hardware, timber, tools, paint, plumbing supplies and garden tools (Mullaly 2017). IBIS world report G423, predicts that the industry shows signs of contracting over the next five years, however, the report commissioned prior to this, reveals that Masters would be pulling out of the Australian market (Pash 2016). Masters operated 63 stores throughout Australia; their closure has presented great opportunities for the business to fill these gaps in the market. However, to take advantage, The Business will need to have a clear vision, mission and strategies to accomplish their goals.
Business Development Group (BDG), is a firm that believer in Helen Keller’s thought on teamwork; “alone we can do so little, together, we can do so much” (Keller 1920). Organizations such as The Business need effective teamwork if they wish to grow into the future. When employees fail to work together, tasks and goals become difficult to attain and the workplace environment becomes negative and disruptive (Long 2016). To this end, BDG will make recommendations not just to management but also with consideration to all stakeholders of the business.
BDG intends to use a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis in conjunction with a Balance Score Card (BSC) to give a clear vision that takes into account all stakeholders of The Business. Managers and employees all need to make informed decisions daily, whether that be for the long-term, or to satisfy a customer’s needs today (Eldenburg et al, 2017, p. 4). To make those decisions, there needs to be some form of guidance for management and employees which normally come in the form of business strategies. It is important that management and employees understand where the business wishes to be and the expectations that are required. BDG intends to formulate a strategy or combination of strategies that will set them apart from their competitors. Professor Michael Porter (2011) said, “The worst mistake in strategy is to compete with rivals on the same dimensions”. BDG will also consider the shortcomings and failures not only of the business, but also of their competitors, to formulate these strategies.
It would be wise for any business to consider why Masters failed in Australia, considering their partnership with Woolworths, which is Australia’s biggest grocery retailer. Retail analyst Rob Lake, interviewed with ABC journalist Emily Stewart and established five reasons why Woolworth’s board decided to scrap Masters after such a considerable investment (Stewart 2016). The report in its analysis, has placed emphasis on the following five areas of The Business to complete a SWOT analysis and create a BSC.
BDG believes that the Key Performance Indicators (KPIs) used to formulate the strategies and measurement used in this report will see The Business not only meet their visions and goals for profitability but create a sustainable business into the future.
Limitation: The report’s conclusions are of a preliminary nature due to the limited information supplied by The Business. Further research would be advisable to fine tune the below recommendations.
The Business has recently been purchased by a grocery and liquor retail chain, which trades on the Australian Stock Exchange (ASX). It currently owns 23 stores throughout Victoria, New South Wales and Queensland in the hardware and building supply retail sector. While its turnover exceeded 1 billion last year, its earnings before Interest and tax were nil, resulting in a return on investment (ROI) of zero. However, the balance sheet shows over one billion dollars in assets over liabilities. A commitment by the new parent company, of one billion dollars, will put The Business in a strong position to take advantage of Masters’ exit from the industry.
The purpose of this report is to provide preliminary information to the general manager of The Business, Mr John Clarkson, as to a new vision, mission and overall strategy for the future.
BDG will conduct an analysis of the overall industry and the products and services offered by The Business, then develop a strategy map based on the objectives developed using a SWOT and Balance Scorecard analysis.
It was also important to make recommendations not just to management but also with consideration to all stakeholders of the business to develop a sustainable business model.
BDG has used an industry report from IBIS, showing the financial results of The Business’ competitors, to then formulate KPIs. Additional information while limited was supplied from The Business regarding financial aspects, customers, internal business processes and organisational learning and growth.
2 Strengths, Weaknesses, Opportunities & Threats (SWOT)
2.1 SWOT Analysis
1. Reputation (there remain some loyal customers)
2. Number of locations and facilities
3. Footprint providing repeat business
4. Corporate Structure
1. Poor and disorganised management
2. Inexperienced staff & reliance on key personnel (potentially)
3. Lack of knowledge of products, product location and procedures – internal
4. Poor / unsalable product line
1. Reach out to the market with a new, strongly marketed appearance
2. Relocating stores
3. Review product line
4. Returns from sales of land – cash flow
1. Competitors – Oligopoly
2. Proportion of market share
3. Low competitor prices
4. Competitor buying power – economies of scale
2.6 Summary of the SWOT
Strong opportunity exists in critical assessment of the internal functions and processes of The Business, as well as product line and buying power, store location and marketing approach.
A Balanced Scorecard approach is advised to address several business functions that are currently poorly performing to increase sales to the projected A$5m in five years, increase market share and return on sales. This approach will offer Mr Clarkson, a focus on key performance indicators with a balanced view of subsequent strategy for measurement and management towards the vision and mission of The Business.
3 ‘The Business’
By 2023, we will become Australia’s most dynamic home improvement and outdoor living products and appliances provider. We will engage experienced and knowledgeable staff, striving to be the outlet of choice across Australia and New Zealand.
We will open an additional four stores across Australia and one in New Zealand. Here, ‘The Business’ makes the difficult, easy.
We work hard every day, so you don’t have to.
3.2 Mission Statement
The Business is committed to operating a sustainable company that grows by working closely with the community and environment in which they live, while remaining economically viable.
Our teams are committed to providing a shopping experience that rates, second to none. We will accomplish this by having staff that work as a team, with integrity, respect, innovation and a willingness to achieve the set goals.
We engage with the communities in which we operate and live, while actively contributing to causes and organisations that directly benefit these communities.
Great effort will be given to lessening our environmental footprint, which are both real and measurable as well as ensuring our suppliers operate both sustainably and ethically. This will result in a better and more efficient use of resources. We will encourage and educate our staff and customers about environmentally friendly alternatives, and utilise the principles of "reduce, re-use and recycle" waste management.
Our team is our greatest asset and we will train them to actively and consciously contribute to the business. We recognise these contributions by rewarding employees for their efforts and provide a fun, satisfying and safe workplace.
These values will guarantee sustainability as we grow and earn the right to serve our customers tomorrow and into the future.
3.3 Overall Business Strategy
BDG recommends The Business engage simple yet effective strategies to achieve the goals set by senior management. The primary focus, Mr Clarkson, is driving performance for the growth and development of the business (Kaplan & Norton 1993, pp.66) to lay down the essential framework for achieving the financial goals.
Research into new, and a review of existing product viability, leads to active cost leadership with its own problems (Hill & Gareth 2008, pp.114) to in turn produce the revenue growth needed to satisfy set targets. Price skimming, in the first instance will be used to shift redundant, ineffective and inappropriate stock, making way for new exclusive products. Price skimming here will ensure a fast return of incurred cost and in establishing a reputation as the supplier of choice for innovative products. Effective marketing is mandatory to tie these strategies together to catapult them into fruition.
Additionally, attention will be drawn to the introduction of new technologies to not only compete with industry rivals, but to become the leader in innovation and presentation of new products to the market. Product differentiation (Hill & Gareth 2008, pp.114-115) pertains to specific partnerships with selected suppliers with the aim of establishing sole supplier relationship. This is a powerful and effective tactic in becoming a market leader in expertise and supply to customers for selected products.
The Business will embark on research into the potential acquisition of viable, choice, smaller businesses to boost market share. Success of this strategy relies on small businesses owners themselves, identifying an opportunity in partnering with an organisation with potential high return. An ‘Earn-Out’ agreement with the principals would bring to The Business product, local market and relationships otherwise difficult to obtain. Furthermore, an earn-out agreement would tie the individuals, their skills and knowledge to The Company for an extended period where reward is applied only after the short-term success of The Business is realised. Along with these acquisitions, comes the bonus of industry specific talent, to be embraced and nurtured, supporting greater retention of valuable employees; a strategy critical to the success of The Business.
4 Balanced Scorecard Drivers and Objectives
The Business’ main goals are profitability through product differentiation and cost reduction which have three main drivers;
Revenue Growth by increasing new products and through product differentiation (Product development and range) as well as increasing markets with new store locations and customers via the internet and loyalty programs. Changing to a more profitable product and service mix will aid revenue growth.
Cost Reduction by reducing product, services and administration costs plus increased buying power through implementing economies of scale.
Asset Utilisation as we consider location of old and new stores. Liaising with supplier as to account and availability of stock, increased orders from new location and discounts for economies of scale.
Customers are The Business’ main consideration – no customer equals no ‘The Business’.
Retaining loyal existing customers by offering diversification in product line lines with special deals. These will increase returned earnings through higher customer satisfaction and loyalty programs.
New markets consideration in both with Australia and New Zealand to expand market share through acquisition of smaller players in the market.
Reputation is important to The Business and making the public aware of environmental efforts and community involvement will be key initiatives.
4.3 Internal Processes
The Business wants to improve in every aspect of it operations and give consideration to all stakeholders; from suppliers & staff to operations and its customers.
Enhanced consumer relations by increasing service efficiency and quality through technology and development of new customer resolution services.
Enhanced supplier relations expansion will allow economies of scale in fostering better relationships with long term suppliers and leading to better supply and quality with diversification in The Business’ product line.
Enhanced operations for inbound and outbound logistics will also be improved with technology upgrades. Increasing efficiency and reporting with allowing for faster response times for all stakeholders assists in this objective.
4.4 Learning and Growth
The Business is focused in the advancement and opportunities given to their employees. To this end, The Business hopes to have the best possible staff and be an employer of choice within the industry.
Enhanced Employee Capabilities with training and information programs that increase employee skills and knowledge allowing employees to reach their goals. By attracting new employees with greater skills and qualities, The Business’ current staff will benefit.
Employee Motivation results in better employee performance and therefore customer satisfaction. The Business intends to maintain this through the use of bonuses and career advancement opportunities.
Alignment with Objectives as it is of great importance that the goals of all employees are aligned with those of The Business, so the organisational strategies are common objectives. This will be enhanced through staff bonuses and stock options.
5 Balanced Scorecard Measures
Attract new customers and expansion of locations and markets;
Change to more profitable product line and mix;
Increase sense of community;
Increase customer profitability;
Increase market share;
Create customer loyalty;
5.3 Internal Processes
Enhanced Consumer Relations
Increased service efficiency and quality;
Improve complaint resolution service;
Enhanced Supplier Relationships
Increase long term relationships;
Decrease process cost and time;
Increase process efficiency and quality;
5.4 Learning and Growth
Enhanced Employee Capabilities
Improved quality of training;
Attract and retain quality employees;
Enhanced Employee Motivation
Increase then maintain level of motivation;
Alignment of Objectives
Alignment of employee’s objectives with overall strategy;
6 Effectiveness of the Balanced Scorecard in achieving the overall strategy
Traditionally, management’s role within business is focused on goals and objectives set by senior management or owners, and normally revolved around increased sales and profits. Arguably, businesses held this position because of the views of such people as Friedman (1982), who considered, the only role of business was to optimise profits for shareholders (Common Sense Capitalism 2012). Simplifying management role as Key Performance Indicators (KPI) relied on financial measurements and could easily measure lag indicators (past financial position), lead indicators (future direction), and where something had gone wrong financially from studying profit and loss or balance sheets (Deegan 2014, pp. 167-203). However, society’s expectations on business have gone beyond just economic success to include legal, ethical and discretionary expectations placed on them. Society now scrutinises the approach businesses take in generating profits and the impact those activities have in the long-term, on interest groups (stakeholders) and the environment (Carroll 1999, pp. 268-295). Because, society’s expectations have changed, so too, have the parameters that a business uses to formulate visions and strategies.
The modern manager uses many tools to gauge their businesses performance and the performance of groups and individuals within the business. BDG has used the BSC in this report in conjunction with the tools listed below;
Budgeting – Financial reports will be reviewed for past performance and will be the impetus for developing improved short-term and long-term financial plans & objectives that can be monitored.
Key Performance Indicators – Specific KPIs will be established and communicated for senior management, department heads and individuals, to make complex strategic goals more meaningful and understandable to everyone within the business.
Benchmark – Use best practice performance measures typically developed by industry associations or research companies like IBIS and government agencies.
Customer Relationship Management (CRM) – Companies want satisfied customers who return regularly. CRM measures track the interactions and relationships with existing and potential customers.
Personal Performance Appraisals – Progressive PPA’s will be conducted by managers, peers & stakeholders to assess individual, team and organisational performance.
BDG uses the balanced score card because it is a top down management tool designed to cater for various levels within an organisation. Starting with the overall corporation, then divisions, next the segments within the divisions and finally, to individuals within those segments (Eldenburg et al 2017, p. 636).
BDG has endeavoured to ensure there are common threads across all levels, while reinforcing strategic goals. As corporate, divisional and individual strategies and measures are implemented, they should become increasingly specific to the end user (Eldenburg et al 2017, p. 636).
According to McShane et al. (2016, p. 144) one-fifth of employees in Australia and in New Zealand are disengaged or have low engagement leading to poor Organisational Behaviour (OB). OB is an attempt to understand how people within the organisation think, feel and perform their duties (McShane et al. 2016, p. 3). The above methods will give all members of The Business, autonomy as to decisions affecting them, creating an environment that keeps employees engaged. This not only motivates employees but also gives them an opportunity to voice their opinion reducing disharmony and increasing mutual collaboration (Aguinis 2013, p. 7).
Effective communication and collaboration leads to coordinated actives within organisations (McShane et al. 2016, p.4). It is for these reasons and the flexibility in the BSC that have made it a popular tool among business, not for profit and government organisations (Murby Gould 2005, p. 3).
Organisations traditionally used the four functions of management: planning, organizing, leading, and controlling (POLC), giving individuals and teams a logical pattern to follow in accomplishing goals (Schermerhorn et al, 2014, p. 181). Without this, organisations can become chaotic, lacking direction and function, which can threaten their existence. This type of management focuses on a diagnostic approach to pre-set targets linked to organisational strategies. The results measured around the key performance metrics give a measured outcome against the pre-set targets, management then provide feedback to achieve goals (Eldenburg et al 2017, p. 641).
BDG believes there are two problems here. Firstly, management can assume they wield the only power within an organisation, secondly, it assumes that the intended strategy is correct. Both assumptions are fraught with danger; firstly, because power is the capacity of a person, team or organisation to influence others, and lies within anyone that controls something of value (McShane et al. 2016, p. 324). Secondly, because strategies are assumed correct, alternative strategies are not explored (Eldenburg et al 2017, p. 641).
For these reasons, BDG uses Simons’ second lever of control (interactive) where feedback on the performance metrics, result in a review of the intended strategy (Eldenburg et al 2017, p. 642). This encourages teamwork, communication and collaboration because organisation without teamwork, find tasks and goals difficult to attain and workplace environments become negative and disruptive (Long 2016). A BSC is only as efficient as the measures used and gathered. BDG’s BSC has attempted to involve everyone within The Business.
7 Effectiveness of the Balanced Scorecard in promoting goal congruence
As a competitor in today’s business environment, management of The Business are aiming to improve staff productivity and retain quality, high-performing employees.
The objective of the BSC and associated reward system is to attract and retain these high performers. Self-motivated high achievers are looking for positions that offer high reward and self-satisfaction. The Business wants to attract and retain these high achievers, reducing staff turnover. Retaining skills and knowledge also improves workplace culture, reinforces organisational structure and ultimately results in reducing costs and increasing organisational and stakeholder returns.
Careful design of remuneration packages will encourage management and staff to make decisions in line with the organisational strategic objectives and assist in overcoming ‘Agency Theory’, which sees employees making decisions targeting their own objectives (Etinosa 2016). As individuals and groups realise their own goals are being achieved by accomplishing organisational aims, goal congruence is achieved.
In discussing the effectiveness of the BSC in promoting goal congruence, we discuss The Business’ structure in terms of its managers and subordinates.
Where the goals of managers align with those of the organisation but where the goals of the subordinates do not and are at odds with organisational goals, performance is compromised. In the event managers and subordinates are not aligned with the organisational objectives then BSC losses will occur as will pressure on other resources (Etinosa 2016). The objective therefore, is to align the goals of managers and subordinates with the strategic goals of the organisation or at least be in a position such that they perceive their goals as achieved as a direct result of achieving The Business’ goals. Logically the closer managers and subordinates are aligned with our strategic goals, the better chance there is of optimising performance and profit.
Realising goal congruence, defeats Agency Theory and provides managers with psychological and monetary incentives to achieve the KPI’s identified in the BSC.
The reward system to be developed will distribute both monetary and non-monetary incentives. Reward will not be tied directly to normal remuneration and will be distinctly separated. Detailed within the employment package, reward will be clearly identified as pay-at-risk Inc. (2009). A failure to do so may cause a situation where staff expect to be rewarded even when targets are not achieved, undermining the intent and compromising future organisational objectives.
Critical for managers in attaining organisational strategic goals, is in maintaining goal congruence, Yamoah (2014, p. 82) which, ensures sound coordination and motivation of employees. Identified in studies of organisational performance is a lack of this goal congruence within organisations at the lower levels where, at the higher levels much greater goal congruence exists (Butterfield 1997, Witts 1998). A united and focused organisation has significantly higher probabilities for success and for delivering to the stakeholders the expected returns.
The Business has established clearly defined goals, within the BSC and reward system. Agreements with staff will be established signifying their understanding and support of organisations goals, and their understanding of how they are linked to BSC KPIs.
Verifiable and acknowledged evidence of achievement and a communications process with regularly scheduled reviews of goals, KPI’s and degrees of achievement, will be used to keep employees aligned and committed.
To determine which reward system, how it links back to the BSC and how personnel are involved, we draw distinction between performance appraisal and a systematic review of an employee’s strengths and weaknesses. Clear delineation between the two must be established. Performance management is continuous and ongoing, measuring and developing staff and team performance and aligning this performance with organisational goals (Aguinis 2013, pp. 2-19).
Many factors contribute to performance management, many or which directly link to the rewards system and The Business’ BSC. Of primary importance, performance management and the reward system establishes a clearer understanding of organisational goals, result in improved employee competence, reduces the frequency and likelihood of misconduct and encourages employees to voice opinion (Aguinis 2013, p. 7).
Using the BSC, The Business seeks measurable improvement in individual motivation, commitment and their intent to remain in the employ of The Business.
Problems occur where there is a failure in communicating the strategic direction of The Business or in poor implementation of the BSC. This leads to lower self-motivation & productivity and increased staff turnover. Furthermore, potentially, increases in negative customer reviews, negative impact on reputation and wasted time, reworks, and financial losses further exacerbate the problem (Aguinis 2013, p. 8).
Linking strategic goals to performance and reward optimises the opportunity for success. Even when strategic goals aren’t reached it affords an opportunity to review and reinforce the organisation’s strategic objectives.
Regardless of the reward system under which employees fall, the system should be congruent with the culture and goals of the organisation.
Mr. Clarkson, The Business’ BSC has clearly indicated problem areas within the business. The owners and shareholders have raised concerns regarding the economic result. However, The Business has a very strong balance sheet and turnover figures. What the BSC has shown is the most pressing area of concern for The Business, should be in the areas of Learning and Growth in conjunction with Organisational Behaviour (OB) and its theories.
The BSC is a top down management tool and by starting at the bottom, result will be seen at the top. By increasing staff training and the implementation of new technology, customer’s satisfaction will increase and so will sales and profit margins.
The Business will require your strong leadership and management to implement changes needed as training and technology upgrades are not inexpensive and can be time consuming. However, a well-trained team of employees will result in a sustainable future for The Business. BDG is a firm believer in Helen Keller’s thought on team work “alone we can do so little together we can do so much.” We pledge our expertise and assistance in achieving the best results.
Aguinis, H 2013, Performance Management, Pearson, viewed 22 January 2018 < https://books.google.com.au/books?id=TMaHngEACAAJ&dq=Aguinis+2013&hl=en&sa=X&ved=0ahUKEwiOyquXrOvYAhUTObwKHUtwDBoQ6AEIKTAA>
Carroll, A 1999, Corporate social responsibility; Business and Society, pp. 268-295, viewed 29 Dec 2017 <https://search-proquest-com.ezproxy.lib.swin.edu.au/docview/199339277?accountid=14205>
Deegan, C 2014, Financial Accounting Theory, McGraw Hill Education, Australia, viewed 28 December 2018 https://books.google.com.au/books?id=BYfjBgAAQBAJ&q=Deegan+2014&dq=Deegan+2014&hl=en&sa=X&ved=0ahUKEwiTju2LpevYAhUGyLwKHfh2BxEQ6AEIKTAA
Eldenburg, L, Brooks, A, Oliver, J, Vesty, G & Wolcott, S 2017, Management Accounting, 3rd edn, John Wiley & Sons Australia Ltd, Milton, Queensland.
Etinosa, E 2016, Concept of Goal Congruence, LinkedIn, viewed 17 January 2018
Farris, G & Butterfield, D 1997, Retrieved from
Friedman, M 2012, Common Sense Capitalism, viewed 18 December 2017, https://youtube.com/user/CommonSenseCap
Hill, C & Jones, G 2008, Essentials of Strategic Management, Cengage Learning, viewed 22 January 2018
IBIS World Market report 2015, media release, hardware industry, viewed 18 Dec. 17. https://www.ibisworld.com.au/media/wp-content/uploads/2015/11/Hardware.pdf
Kelly, A 2016, IBISWorld Industry Report G4232, Garden Supplies Retailing in Australia, Viewed 18 December 2017 http://clients1.ibisworld.com.au.ezproxy.lib.swin.edu.au/reports/au/industry/default.aspx?entid=425
Long, N 2016, Examples of Poor Teamwork, Demand Media, viewed, January 24 2016, <http://smallbusiness.chron.com/examples-poor-teamwork-11788.html>
McShane, SL, Olekalns, M, Newman, A & Travaglione T 2016, Organisational behaviour: Emerging Knowledge: Global Insights, 5th edn, McGraw-Hill, North Ryde
Mullaly, J 2017, IBISWorld Industry Report G4231, Hardware and Building Supplies Retailing in Australia, viewed 18 Dec. 17
Murby, L & Gould, S 2005, Effective Performance Management with the Balanced Scorecard, viewed 18 December 20 17
Schermerhorn, J, Davidson, P, Poole, D, Woods, P, Simon, A & McBarron, E 2014, Management, John Wiley & Sons, Australia
Witt, L 1998, Enhancing Organizational Goal Congruence, Journal of Applied Psychology, Vol. 83, No. 4, pp.666-674.
Yamoah, E 2014, Relevance of Goal Congruence and its Implications to Managers, European Journal or Business and Management, vol. 6, no. 12, pp. 82-84.
Assignment Writing Help
Engineering Assignment Services
Do My Assignment Help
Write My Essay Services