MAC007A Strategic Management Accounting Assessment Answer

Strategic Management Accounting

Code: MAC007A

INSTRUCTIONS FOR STUDENTS:

ASSIGNMENT MAC007A TRIMESTER 1, 2019

Clearly write your name, your group member’s names and id when you submit your report.

• Only one submission per group is needed.
• There is a word limit of 3500 words including references.
• Submit your Turnitin report along with your submission
• This assignment is worth 25%

On Time Deliveries Ltd (OTD) is a leading express courier company offering a comprehensive, high quality service across the whole of Australia. OTD also offers customers an international service through its strategic relationship with a global courier business. OTD has grown rapidly in recent years, both organically and through the acquisition of several regional courier companies. It now needs to consolidate its position by securing company-wide ‘buy-in’ to its mission from all employees, to facilitate implementation of its ambitious strategy. OTD’s mission is ‘to be a world class, national courier company’, and the CEO, Marcela Hamblin, explains that the aspirations underlying this mission are to have:

Engaged and motivated staff, excellent customer service, engaged and loyal customers and world class profitability:

However, Marcela admits the target return on capital employed (ROCE) of 16 per cent, set by the board, currently seems out of reach and she therefore needs to improve performance measurement and management.

OTD is focused on providing time-sensitive, national express delivery services. OTD’s customers range from large national and international companies down to individuals, but they have a strong focus on small and medium-sized enterprises (SMEs), and this customer segment provides the majority of OTD’s profit.

Marcela explains that OTD is neither the biggest national courier company in Australia, nor the cheapest. Consequently, there is a heavy emphasis on providing ‘excellent customer service’. Marcela defends this high-quality strategy as follows:

We do not intend to compete on price, so we have to be different. Our difference is relatively simple and obvious to our loyal customers. We don’t just deliver parcels, we deliver reliability. Large customers are provided with a tailored service based on regular discussions about the level of customisation required. This leads to good relationships and creates strong customer loyalty. However, Marcela highlights that SME customers and individuals receive OTD’s standard service and hence it is challenging to convince them that they do receive a better service than offered by competitors.

Yohan Blade is OTD’s CFO. He discloses that OTD achieved a sales revenue of approximately $80 million last year and generated $14.4 million EBIT (earnings before interest and tax). He says:

An 18 per cent EBIT margin would be quite acceptable for many businesses. But we have heavy investment in our transport infrastructure, including planes, trucks, vans and even some bikes. We also have a massive information systems investment and a substantial number of hubs with automated sorting equipment.

Yohan explains that this heavy infrastructure investment means that OTD has a capital employed of around $111 million and hence an ROCE of only 13 per cent, three percentage points below the board’s target.

Usain Jolt, the sales and marketing director, focuses in particular on maintaining a profitable and balanced customer base. He argues that OTD faces fierce price competition and has been unable to increase prices for several years. Profitability improvements must therefore be achieved by volume increases from existing customers, by acquiring new customers and by cost savings through efficiency gains.

The management team have agreed that OTD needs a more effective performance measurement system, but there is little agreement about precisely what measures should be included. Usain argues: I don’t think we have any shortage of measures; in fact, we probably have too many. One of the staff quite seriously asked me the other day: ‘which are the key KPIs?’ Clearly, she could not tell which of our numerous measures are important. I reminded her that we are a courier company and said we should focus on achieving 100 per cent on-time delivery.

Marcela responds: Staff can’t control the weather, traffic congestion or road accidents, so they can’t be expected to achieve 100 per cent on-time delivery. There are other important factors relating to providing an ‘excellent customer experience’. Even efficient order processing and accurate invoicing are important. We have had problems with high staff turnover and absenteeism lately, particularly in relation to customer relationship management staff. New staff are unlikely to give excellent customer service until they are fully trained.

Marcela further explains that large customers frequently refer to ‘ease of doing business with OTD’ in customer surveys, and she translates this as customers saying: ‘we want everything to be on the plate in front of us, you do it all and make it as simple as possible for us’.

Yohan says: We need to work harder on complaint resolution. The costs associated with complaints are huge in terms of lost opportunities and lost customers:

He also highlights that, at least for the customers who complain, OTD is aware of the problem and they have a chance to do something about it and retain the customer. But he goes on to say:

The customers that don’t complain and just walk away are much more problematic.

Required:

The team of fresh graduates from UBSS joined OTD recently, Marcela calls for some fresh thoughts from a new team to help achieve the following:

1. Design a balanced scorecard (BSC) for OTD. Include suitable goals for each performance perspective, describe suitable measures to support those goals and where possible suggest appropriate targets. Identify key cause and effect linkages within the BSC and explain how these will help drive financial performance improvement at OTD.
2. Define and identify the core activities of organisation and industry value chain and apply the value chain analysis to the design and structure of value adding activities, value drivers and value chains
3. Discuss how SCSA’s balanced scorecard could be adapted to ensure that, in addition to economic success, stakeholder fulfilment and social and environmental change are taken into account?

INSTRUCTIONS FOR STUDENTS:

ASSIGNMENT MAC007A TRIMESTER 1, 2019

• Clearly write your name, your group member’s names and id when you submit your report.
• Only one submission per group is needed.
• There is a word limit of 3500 words including references.
• Submit your Turnitin report along with your submission
• This assignment is worth 25%

On Time Deliveries Ltd (OTD) is a leading express courier company offering a comprehensive, high quality service across the whole of Australia. OTD also offers customers an international service through its strategic relationship with a global courier business. OTD has grown rapidly in recent years, both organically and through the acquisition of several regional courier companies. It now needs to consolidate its position by securing company-wide ‘buy-in’ to its mission from all employees, to facilitate implementation of its ambitious strategy. OTD’s mission is ‘to be a world class, national courier company’, and the CEO, Marcela Hamblin, explains that the aspirations underlying this mission are to have:

Engaged and motivated staff, excellent customer service, engaged and loyal customers and world class profitability:

However, Marcela admits the target return on capital employed (ROCE) of 16 per cent, set by the board, currently seems out of reach and she therefore needs to improve performance measurement and management.

OTD is focused on providing time-sensitive, national express delivery services. OTD’s customers range from large national and international companies down to individuals, but they have a strong focus on small and medium-sized enterprises (SMEs), and this customer segment provides the majority of OTD’s profit.

Marcela explains that OTD is neither the biggest national courier company in Australia, nor the cheapest. Consequently, there is a heavy emphasis on providing ‘excellent customer service’. Marcela defends this high-quality strategy as follows:

We do not intend to compete on price, so we have to be different. Our difference is relatively simple and obvious to our loyal customers. We don’t just deliver parcels, we deliver reliability. Large customers are provided with a tailored service based on regular discussions about the level of customisation required. This leads to good relationships and creates strong customer loyalty. However, Marcela highlights that SME customers and individuals receive OTD’s standard service and hence it is challenging to convince them that they do receive a better service than offered by competitors.

Yohan Blade is OTD’s CFO. He discloses that OTD achieved a sales revenue of approximately $80 million last year and generated $14.4 million EBIT (earnings before interest and tax). He says:

An 18 per cent EBIT margin would be quite acceptable for many businesses. But we have heavy investment in our transport infrastructure, including planes, trucks, vans and even some bikes. We also have a massive information systems investment and a substantial number of hubs with automated sorting equipment.

Yohan explains that this heavy infrastructure investment means that OTD has a capital employed of around $111 million and hence an ROCE of only 13 per cent, three percentage points below the board’s target.

Usain Jolt, the sales and marketing director, focuses in particular on maintaining a profitable and balanced customer base. He argues that OTD faces fierce price competition and has been unable to increase prices for several years. Profitability improvements must therefore be achieved by volume increases from existing customers, by acquiring new customers and by cost savings through efficiency gains.

The management team have agreed that OTD needs a more effective performance measurement system, but there is little agreement about precisely what measures should be included. Usain argues:

I don’t think we have any shortage of measures; in fact, we probably have too many. One of the staff quite seriously asked me the other day: ‘which are the key KPIs?’ Clearly, she could not tell which of our numerous measures are important. I reminded her that we are a courier company and said we should focus on achieving 100 per cent on-time delivery.

Marcela responds: Staff can’t control the weather, traffic congestion or road accidents, so they can’t be expected to achieve 100 per cent on-time delivery. There are other important factors relating to providing an ‘excellent customer experience’. Even efficient order processing and accurate invoicing are important. We have had problems with high staff turnover and absenteeism lately, particularly in relation to customer relationship management staff. New staff are unlikely to give excellent customer service until they are fully trained.

Marcela further explains that large customers frequently refer to ‘ease of doing business with OTD’ in customer surveys, and she translates this as customers saying: ‘we want everything to be on the plate in front of us, you do it all and make it as simple as possible for us’.

Yohan says: We need to work harder on complaint resolution. The costs associated with complaints are huge in terms of lost opportunities and lost customers:

He also highlights that, at least for the customers who complain, OTD is aware of the problem and they have a chance to do something about it and retain the customer. But he goes on to say:

The customers that don’t complain and just walk away are much more problematic.

Required:

The team of fresh graduates from UBSS joined OTD recently, Marcela calls for some fresh thoughts from a new team to help achieve the following:

1. Design a balanced scorecard (BSC) for OTD. Include suitable goals for each performance perspective, describe suitable measures to support those goals and where possible suggest appropriate targets. Identify key cause and effect linkages within the BSC and explain how these will help drive financial performance improvement at OTD.
2. Define and identify the core activities of organisation and industry value chain and apply the value chain analysis to the design and structure of value adding activities, value drivers and value chains
3. Discuss how SCSA’s balanced scorecard could be adapted to ensure that, in addition to economic success, stakeholder fulfilment and social and environmental change are taken into account?