The Performance Measurement of Morrison Supermarket Implementing Balanced Scorecard - Example

nаgеmеnt Ассоunting Соursеwоrk Student’s Name: Student ID- Submitted to: Submission Date 16/12/2013 Introduction This report is based on the analysis of the scorecard of Morrison supermarket. It is based on the examination of performance measurement which tends to be more elaborative than performance management system (Atkinson and Banker, 2001). The examination of performance measurement of Morrison Company is done on four key areas such as financial orientation, financial constrained but on improvement basis, balanced and rotational basis. The result of this analysis is gained by the use of financial statements which is able to provide performance indicators and strategies used (Bailey and McIntyre, 2005). The balanced scorecard which is currently being used is an integrated framework that is used to help the business organization achieve its visions. It uses both the financial information and the business operations to produce more accurate performance evaluation. It is therefore a strategic management system that evaluates company strategies, visions and general performance (Macintosh, 1998). In this performance measurement the business organization develop and create performance indices on the performance perspectives, the overall overview of the organization and its strategy and vision which must be matched together to meet the expected goals (Dyson, 2007). For the best result to be achieved, it is an effective way to balance the company perfortnace, enquire for the company goals, financial and non financial measurable then balance internal and external perspectives. 1.1 Company Profile Morrison is a company that was formed in Britain and is one of the largest retail businesses in UK offering varieties of food products (Otley & Fakiolas, 2000). It has number of stores in more than 12 countries and sells more than 4000 different food products in a single store. This company started as a simple grocery business but currently it sells stationeries, clothing, cosmetics and kitchen utensils. This company faces high competition from companies like Tesco, ASDA and Wall Matt and therefore it has to use different competitive strategies such as differentiation and low cost to remain relevant in the market for long. This company does its business by using various store formats such as extra, metro, superstores and hypermarkets which are located in large geographical region to catch large market (Dyson, 2007). The products which it produces and sells are in three forms such as high value goods, normal and finest so that a range of customer groups can afford its products. 1.2 Competition in Retail Market There is high competition in the market in which Morrison Operates. The main competitors include Tesco which has been in the top as the best grocery company. All of its competitors have different chains and almost distribute substitute commodities hence able to influence the market behavior (Atkinson and Banker, 2001). Morrison has been affected by current financial crisis and this made its customers to shift to companies that sell alternative commodities at a cheap price. This crisis made large companies like Morrison and Tesco to loose market shares in UK where they are influencing reduction in sales revenues (Bailey and McIntyre, 2005). For it to combat this problem, it was forced to introduce different low cost new products in the market to recover the lost customers to competitors. 1.3 Vision & Mission The primary purpose of Morrison’s is to provide quality products, develop a good brand name, increase competitive advantage and improve the market share of the company. The mission statement is ‘different and better than Ever’ meaning that the company uses differentiation strategy to gain competitive advantage. 2.0 Strategies 2.1 Morrison Strategies The company produced high quality products which are being sold at a very competitive price. This contributes significantly to high increase in the sales revenues of the company. There is also effective supply chain management and growth strategy which require the company to conduct a number of market research so that it can meet the needs of its customers (Dyson, 2007). This is achieved by selling a range of products to its customers, use of innovative ideas to produce new products, develop positive relationship with the suppliers, motivating employees, involve in the creation of industrial and environmental protection policies and produce quality products (Macintosh, 1998). These strategies enhance the competitive advantage thereby attracting more customers’ hence high sales revenues. The company also involves in electronic commerce by selling its products online (Otley & Fakiolas, 2000). The company established its online website so that customers can place an order at home. It also provides its customers with online services such as broadband internet connection and telecommunication services. Its website is considered the most efficient online service and it is able to provide online service to more than 84000 customers in UK and can get more that 15000 orders weekly. The advantage that this company gets from online sales is low product price, large range of products and day and night shopping (Bailey and McIntyre, 2005). This helps the company to attract the interest of customers to shop throughout the day. The company also increased its potential of serving new customer segments and reduces infrastructure investments and this helps it to earn high investment returns. The company also uses its brand image which is known for high quality goods that is able to satisfy customers. This noble grand image helps it in introducing a variety of food products and new product lines, to enter into new markets and increase its efficiency in other fields such as clothing and finance. It also diversifies its operations through opening new market distribution including banking, insurance and communication. The above strategies help it to improve its market power as compared to competitors such as Tesco and ASDA. The company has been struggling to enter overseas markets by ensuring that it exploits global opportunities so that it can open new branches in other countries (Dyson, 2007). This is to improve long term development of the investor’s value. Currently there are more than 8 stores located outside UK where some of them are represented by Morrison. Com. Morrison is also on the need to expand its branch in India where it intends to use more than $114 million (www. Morrison. Com, 2013). There is also a global plan to centralize its international businesses so that their management becomes easier (Otley & Fakiolas, 2000). Centralization of all these global business operations will be able to standardize finance, HRM, marketing and data warehouse functions. The wireless network that the company will launch will connect more than 1500 Morrison sites and others in different countries. This will reduce production costs and hence makes the company to sell its products at a lower price. The business performance of Morrison is also influenced by the contribution of human resource management (Macintosh, 1998). The outsourcing of its store management helps it to enhance quality of its customer service where this aligns customer traffic which has been a great challenge to the company. This improved the company store productivity and also ensures that there is an increase in revenue growth (Atkinson and Banker, 2001). The company also has high innovation power as it can mold to the trend of the current market demands. It ensures that its supply chain management is separated according to the various functions where loaders are separated in relation to delivery like 1 chamber of frozen foods, ambient goods (Bailey and McIntyre, 2005). There also another innovation which this company has done is obtaining feedback from customers which they use to design new products and voucher mailing which helps the company to know the customer behaviors (Otley & Fakiolas, 2000). The frequent analysis of the customer feedbacks helps the company to know its inability to make reasonable profits from nappies and this forced them to introduce a new product club offering baby advice to pregnant women. The company also involves its stakeholders in decision making process. The stakeholders such as employees, customers, managers and potential investors are invited during capital investment decision making process (Macintosh, 1998). The company engages key stakeholders in delivering effective CR program. The company communicates frequently with different stakeholders in any action that they take. This helps the company to identify critical issues that may hinder future development. 3.0 Morrison’s Balanced Scorecard It is not appropriate for the management to select neither financial nor operation performance measures for the analysis but should have broad information about the company and the business in general. The balanced scorecard which they should produce must have financial measure that is able to shed light on the financial performance of the company (Bailey and McIntyre, 2005). The operational measures must be able to provide information such as financial perspectives, customer perspectives, internal business perspectives and innovation and learning perspectives. 3.1 Financial perspectives This perspective is obtained by the use of financial indicators of this company. It is used to determine other business perspectives. It is used to examine the manner in which the company performs financially in the industry (Dyson, 2007). The financial indicators which are identifiable based on financial and operational performance are as shown below. Turnover and profit This is chosen to measure whether the current operations are able to provide enough investment returns to the shareholders (Atkinson and Banker, 2001). In the financial period between 2012 and 2013 there has been an increase in turnover by 3% and the profit before interest and tax experienced a reduction of 7%. This resulted from abnormal increase in the finance costs which make the company revenues not to cover operation costs well (Otley & Fakiolas, 2000). The decrease in profit is also attributed by drastic increase in net debt which forces the company to invest more in capital expenditure and equity retirement programs. Earnings per share (EPS) Earning per share is used to determine future success of the company (Macintosh, 1998). There has been an increase in earning per share by 7% to higher level of 27.3% because the company has had a decline in corporation tax and the effect of the introduction of equity retirement plan which removed all the available earning reduction. 3.2 Customer perspectives The competition between different companies is based on customer’s service and relationship. The main reason for competition for an individual company is to have the right customers and ensure that they do not switch to other companies in the same industry. It is therefore mandatory duty of Morrison to improve the quality of its customer service for it to have high returns. For it to increase its financial performance and maintain its customer loyalty level it has to implement its three year program which is to ensure that it provide high quality customer service and keep good customer perception (Macintosh, 1998). The company uses several strategies to achieve customer satisfaction objectives. They used some important approaches to enhance customer buying behavior without increasing the operation costs (Dodge, 2007). They ensure that the food products which they sell are sold affair price so that even low level income group can find what to buy. They also produced a range of products where different customers can choose from. 3.3 Internal business perspectives The company produces and sells quality products which the company perceives as a very important factor in increasing competitive advantage (Macintosh, 1998). The services of Morrison are assessed both internally and externally by internal auditors and environmental health developments to ensure that its products are of good quality. They include every aspect that contributes to quality products and also the distribution of the products to different stores is also done by following nutritional guidelines (Bailey and McIntyre, 2005). The business models that it uses is not the same as those used by the competitors, they collect local fresh British commodities and produce their own goods which are different from those sold by the competitors (Roslender & Hart, 2003). They also do not hire transport fleet to help them ferry their products to stores but they use their own and this supports them to reduce costs, spillage and make the production cycle shorter (Mick and John, 2003). This also concentrate more on food safety that the companies which buy them from external producers. 3.4 Learning and growth perspectives The company also has some education programs to its employees (Macintosh, 1998). These programs are meant to empower and motivate employees as they may perceive that the company values their personal development. The kind of training that the company provides majorly is based on customer service, product offerings and marketing methods which can make the company reach a wider customer base (Atkinson and Banker, 2001). The basic customer service that are obtained in Morrison Academy is meant to increase customer satisfaction, retention and customer loyalty so that the company can develop unique corporate culture based on core competence and due diligence (Otley & Fakiolas, 2000). It is also evident that the company pays considerable sums of money to motivate employees. They provide good work condition and flexible work environment where every employee feels safe to work in. They also provide other incentives to employees such as medical allowances, meals and safety insurance (Mick and John, 2003). These incentives helps it in employee retention hence the company does not lose talents to its competitors. The company also offers pension to shop workers when they retire and this impress all its employees. 3.5 Environment & communication The company has been in the forefront of taking actions to reduce and recycle waste (Dyson, 2007). It also encourages its customers to follow since improper disposal of waste pollute the environment. The company has adopted on the use of plastic bags and recyclable bags that are eco friendly materials (Roslender & Hart, 2003). The customers are also advised not to dispose off its wrappers anywhere as this action is very important for both the company and for the customers (Bailey and McIntyre, 2005). The company is also considering the climate change issue which affects the entire global community. Therefore they collaborate with dairy farmers to use renewable energy during production. This led to the decline in carbon intensity from 48.9 to 38.9. 3.6 Performance highlight-risk management The research about Importance rating associated with risk showed that the result of cash flow statement is a useful source of information in the examination of risk factor of the company (Atkinson and Banker, 2001). The main indicator of performance risk management is cash flow statement because net profit of the company can be easily be manipulated by stakeholders. The presence of great difference between cash flow and debt show that there is financial risk which the company is facing therefore Morrison does not have sufficient cash to pay its debts (Mick and John, 2003). It is evident that the company uses significant amount of its cash in capital expenditure and equity requirement and this is seen in the balance sheet (Rao, 2011). Conclusion This report is documented to highlight the performance measurement of Morrison implementing BSC. It is discovered that this kind of evaluation is more effective that the traditional method which only take advantage of financial statement only. This method is important in ensuring that both long and short term strategies are measured for effective decision making. In relation to the analysis it is discovered that this company has an outstanding performance but in comparison to Tesco and ASDA it still has to work extra harder to match them. These companies are doing better in online trade, diversification and global business than it hence it has to increase its efficiency in those areas. Bibliography Atkinson, A and Banker, R. 2001. Management Accounting, 3rd edition, Upper Saddle River, New Jersey. Bailey, C. and McIntyre, E.2005. Some Evidence on the Nature of Relearning Curves, in: The Accounting Review, Volume 67, 1992, pp. 368-378. Dyson J R. 2007. Accounting for Non-Accounting Students. Financial Times/Prentice Hall. ISBN: 9780273709220 Dodge, R. 2007. Foundations of Business Accounting, Cengage Learning EMEA, 2nd Edition, P. 357 Mick, B. and John, C. 2003. Managing Financial Resources .A Butterworth-Heinemann; 2003, 3rd edition ISBN: 0750657553. Macintosh, N. 1998. Management accounting in Europe: a view from Canada. Management Accounting Research, 9, 495-500. Morrison.com 2013. Financial report for the year ending 2013.Annual financial report Otley, D.& Fakiolas, A. 2000. Reliance on accounting performance measures: dead end or new beginning? Accounting, Organizations and Society, 25, 497-510. Roslender, R. & Hart, S.J. 2003. In search of strategic management accounting: theoretical and field study perspectives. Management Accounting Research, 14, 255-279. Rao, M. 2011. 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