Practical Implications of the Balanced Scorecard on Apple Incorporation - Essay Example

Practical Implications of the Balanced Scorecard on Apple Inc Table of Contents Executive summary 2 0 Introduction 2 2.0 Apple Inc 3 2 Apple’s financial and non-financial performance measures 5 2.2 Performance measures in relation to Apple’s objective and strategy, and implications of implementing the suggested measures 6 2.2.1 Financial perspective 6 2.2.2 Consumer perspective 7 2.2.3 Internal business perspective 7 2.2.4 Innovation and learning perspective 7 2.3 Benefits of using the balanced scorecard 8 2.4 Difficulties in using the balanced scorecard 8 3.0 Conclusion 8 References 9 Bowhill, B. (2008) Business Planning and Control: Integrating Accounting, Strategy and People. Chichester: John Wiley & Sons Ltd. 9 OGrady, J. (2008). Apple Inc. Corporations That Changed the World. Connecticut, U.S: Greenwood Publishers. 10 Executive summary This present paper is a report that seeks to explore the implementation as well as the practical implications of the balanced scorecard on Apple Inc The findings of the report show that the implementation of the balanced scorecard in Apple Inc has various implications on the company that include increase in sales, the customers size, and the total revenue generated by the company. Other implications are a decrease in operational cost as well as improvement in the production process that leads to a decrease in faulty products and lastly, shortened duration of production and launch of new products. 1.0 Introduction This present report is based on the concept of balanced scorecard and the report seeks to critically analyse this concept in relation to its practical application and implication at Apple Inc. It is beneficial to first point out that the modern concept of balanced scorecard was first presented in the studies conducted by Kaplan and Norton (1992). In their studies, they described the balanced scorecard as a management system for strategic planning that enables both profit and non-profit-organisations to state clearly their visions and underlying strategies and then transform them into actions. Smith (2005) in his studies described the balanced scorecard as a performance management tool that is used by organisations to align their activities along with their strategy and vision, secondly, to improve external and internal communication of the organisations and thirdly to monitor performance against the sets goals/ objectives. The report will use the Apple Inc as the case study and it is of essence to note that Apple Inc is largely an information and technology company that mainly specializes in designing, manufacturing, and selling of computer hardware and software, and consumer electronics such as personal computers, phones and television pads, among others. The company presently, has its headquarters at the state of California in the United States of America but it has a wide branch network of over 300 stores located in 14 countries across the world. According to OGrady (2008), Steve Jobs, Steve Wozniak, and Ronald Wayne originally formed the company in 1976 and by 1980; the company marked a major milestone by being listed at the stock exchange. Mr. Arthur Levinson as the chairperson currently heads Apple Inc while Mr. Tim Cook is the chief executive officer of the company. The critical analysis of the critical implications of the balanced scorecard in Apple Inc will help to explain how the management system contributed to the company’s current success and how it intendeds to further propel the company into greater success. 2.0 Apple Inc Presently, the business operations of Apple Inc involve dealing with a wide range of products and services. Among Apples most revered products include iPhones, iPad, iPod, and Mac brand of computers. The charts below demonstrate how each of these products and others performs or sells in the market in terms of the revenue they generate, and the revenue generated by the company from different regions or markets where it has established its operations. Source: http://www.netmarketshare.com The charts above also offer a glimpse of Apple’s business strategy, which can be stated to involve product diversification and market diversification. With reference to the writings by OGrady (2008), it is correct to assert that Apple offers diversified products in order to cater for different consumers and it has established its operations in diversified markets in order to increase its overall revenue and as a risk mitigation measure incase one of its markets is faced with a harsh economic environment. Because the company largely specializes in information technology products and services it can be stated that the target customers of the company are mostly tech savvy people, of which majority are young people who have basic computer or IT skills and knowledge, and they have high preference for technologically advanced products and services. The company’s market segments include the market for computer hardware, computer software, consumer electronics, and digital products. Therefore, the company has numerous competitors in all the segments that it operates for example in computer hardware and software it faces a stiff competition from giants such as Microsoft Corporation, Hewleet-Packard Company, and Dell Company, among others. Under consumer electronics, especially under the mobile phone sector there is a stiff competition from other strong competitors such as Nokia Plc and Samsung Electronics. According to Moscartello (2013), Samsung Electronic leads in the IT industry in regards to the revenue earned per company and it if followed by Apple. In regards to size of mobile phone production, Samsung Electronics, and Nokia Plc lead while Apple Inc is in the third position. 2.1 Apple’s financial and non-financial performance measures The table below presents the performance measures of Apple Inc, that is the objectives/ goals of the company and their measures. With reference to the writings by Kaplan and Norton (1996), the performance measures will be based on four critical perspectives that include the financial, customer, internal business, and innovation and learning perspective. It is important to note that the measures stipulated also denote the implications of the balanced scorecard on Apple Inc. Financial perspective Customer perspective Objectives Measures Objectives Measures Longevity Steady cash flow Product offering New products and services Prosper Increase in market share Strong customer relationship The number of new customers The number of returning customers Success Annual sales revenue, and net profits Brand image Impact of brand communication Internal business perspective Innovation and learning perspective Objectives Measures Objectives Measures Increased application of technology in business process Decrease in operational cost Leading in innovation and technology Duration taken to develop new generation models Excellence of manufacturing Production duration Decrease in number of faulty products Product and service excellence 90 per cent sales for new products and services Design improvements Inclusion of more technology in gadgets with reduction in physical size New product launch Duration it takes to launch new product 2.2 Performance measures in relation to Apple’s objective and strategy, and implications of implementing the suggested measures The current objective and strategy of Apple Inc is to continue developing computer hardware and software, and consumer electronics that offer memorable experiences to students, educators, creative professionals, and consumers around the world (OGrady, 2008). Therefore, the stated performance measures are aligned in line with this objective and strategy, and their implementation is bound to have certain implications on the company. 2.2.1 Financial perspective The objectives stipulated under consumer perspective seek to ensure that the company continues to provide consumers across the world with products and services that gives them a memorable experience just as it has been stated in the company’s overall objectives. A steady or rise in cash flow, increase in market share, and increase in the net income of the company implies that the company will be in existence in the long-term. 2.2.2 Consumer perspective Continual development and launch of new products, increase in customer size, and a positive feedback on the brand image of the company would mean that the company has been able to achieve its performance objectives under consumer perspective. The achievement of the performance measures imply that Apple Inc is able to continue meeting customers’ needs and expectations as stipulated in the company’s mission statement. 2.2.3 Internal business perspective The measures stipulated under these objectives include decrease in operational cost and number of faulty products produced, duration of production, the duration it takes to launch a new product, and the inclusion of additional technology into the new gadget without increase in their physical size. These performance objectives imply that the company will continue to provide excellent products to customers across the world at a much faster rate and even at lower prices due to reduced cost of production. 2.2.4 Innovation and learning perspective The performance measures under this perspective include the duration it takes to develop new generation products, and 90% sales success. The attainment of these performance measures would imply that the company has been able to develop continually products and services that continue to give customers memorable experiences just as it has been stipulated in the company’s mission statement. 2.3 Benefits of using the balanced scorecard According to Norreklit (2000), the main advantage of using the balanced scorecard is that it gives a company a sense of direction and measures that gauges its performance along different perspectives. Additionally, Bowhill (2008) stated that the balanced scorecard offers control and monitoring tool through which one is able to diagnose the status of a company in the short-term, mid-term, and long term. 2.4 Difficulties in using the balanced scorecard Smith (2005) lamented that the balanced score card measures the organisational performance in four different perspectives and it would be difficult to give an overall performance of the organisation incase some of the performance measures in certain perspectives are not attained. This is to say that the balanced scorecard is based on the assumption that an organisation is only successful when all the performance measures in the objectives are achieved. 3.0 Conclusion This report has established that the balanced scorecard is a vital management system for strategic planning and successful organisations such as Apple Inc utilise the balanced scorecard to ensure their short-term, mid-term, and long-term success. Among the practical implications of the balanced scorecard on Apple Inc, include increase in sales, increase in the customer number, and the total revenue generated by the company. Other implications are a decrease in operational cost as well as improvement in the production process that leads to a decrease in faulty products and lastly, shortened duration of production and launch of new products. References Bowhill, B. (2008) Business Planning and Control: Integrating Accounting, Strategy and People. Chichester: John Wiley & Sons Ltd. Kaplan, S. and Norton, P. (1992) ‘The balanced scorecard measures that drive performance’, U.S. Harvard Business Review, 70: 71-9. Kaplan, S. and Norton, P. (1996) ‘Using the balanced scorecard as a strategic management system’, U.S. Harvard Business Review, 74: 75-85. Moscartello, A. (2013). "iPhone 5 is Worlds Best-Selling Smartphone." PC Magazine. Norreklit, H. (2000). ‘The balance on the balanced scorecard – a critical analysis of some of its assumptions’, Management Accounting Research, 11: 65-88. OGrady, J. (2008). Apple Inc. Corporations That Changed the World. Connecticut, U.S: Greenwood Publishers. Smith, M. (2005). Performance Measurement and Management: A Strategic Approach to Management Accounting. London: Sage Publications Ltd. Read More