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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?

Answer

Strategic Management
Answer to question no- 2

In order to develop core competency in the business process, organization needs to strengthen its inbound and outbound activities program which should be integrated with the advance technologies and system process.  This helps company to increase the overall outcomes of the organization. Strategic Management has been called the continuous planning, analysis, monitoring and assessment that is necessary for an organization to achieve its goals and objectives (David, 2016)

Core Activities of Organization

The company is engaged in courier services in all over Australia and also provides service to their customers to the international market. The company is engaged in international courier business through strategic management. This has kept its business more customized and developed core competency by keeping the customized products in market.  Company has developed its core competency by keeping its business inbound and outbound activities different and distinguish from those of others in market. The core activities of the Company needs to be managed the courier services and timely delivery the products to clients. If company wants to sustain its business in long run then it will have to create core competency in cost leadership and product differentiation strategy in market (Cundy, et al.2013). 

Industry Value Chain

Industry value chain has been made for the customer perspective. It is analyzed that  want if company wants make its market strong and in terms of operations, products, logistics and all the function that support the work of the company.  The value chain functions and inbound activities of organization supports in dealing with the market place, customers, essentially industry and competition. On time deliveries of company is a national delivery services which align its inbound and outbound activities with the overall outcomes of organization (Chan, Ngai, & Moon, 2017).


Source:- (Chan, Ngai, & Moon, 2017).

Analysis

It has been analyzed that the expenses of company is very high on the transport system such as trucks, planes, vans and bikes. The company has kept high investment in its business process with a view to earn high return on capital employed. It is considered that due to the tough competition in the market company cannot change its price for the coming years. The company has analyzed that it is required to keep an effective performance measurement to set standards in its business process. It has to keep strong customer service as the company cannot provide 100% timely delivery to the customers. It is found that various accidents on roads and other incidents sometimes had been the hindrance in the timely delivery.  The company has set its objectives to strengthen its profitability therefore, the structure of the company must been improved by undertaking the re-engineering business strategy (Chan, Ngai, & Moon, 2017)

The industry value chain is goes through supplier value chain, firm value chain, channel or distributor value chain, buyer value chain and disposal or recycles value chain.  The company has to focus on all areas for the better customer satisfaction that will improve the profits for the company (Lawson, Potter, Pil, & Holweg, 2019)

The suppliers are an important factor for the business as they supplies the goods to the customers. The company is facing the high expenditure in the transportation that means supplier chain is required to be improved. The company is required to reduce its cost in the supplier chain is in the trucks, planes and bikes. The company has the highest investment in the supplies which resulted to reduction in the profit for the company. The company should use the methods which are cheapest among all in both international and national supplies (Chan, Ngai, & Moon, 2017)

The firm value chain is also an important factor to improve the number of customers for the company. The firm value chain includes operation of the company that is required to be the strongest in every aspect. The profit of the company depends on how their firm internal operations are strong. On time delivery Service Company should analyze their weakness by their firm value chain to strengthen its business outcomes (Kersten, Blecker, & Ri, 2015). .  

Channel or distributor value chain is the system through which the final buyer gets the product. It includes the wholesaler, retailer or through the other medium such as internet.  The company if have to provided 100% timely delivery to the customer than it is the method that can be improved. The company performance in the market will improve through this method and can earn more customers and also give tough competition to the competitors (Kersten, Blecker, & Ri, 2015). . 

Buyer value chain is an important factor where the company has to focus as the views of Yohan should been analyzed. The customer reviews matters a lot for the company for the improvement and the customer who not give feedback and do not use the service are more disastrous or dangerous for the company. It is required that customers demand should be analyzed by this supply chain for offering more customized services to clients (Hitt, & Duane Ireland, 2017)

Disposal or recycle value chain is the method through which company can regain its business value chain. In the courier services, there are various products that can be recycled and t can help the company to earn more benefits in its business process. (Kersten, Blecker, & Ri, 2015)

The most important value chain is highly beneficial for the company to improve more customers and make timely deliver to the customer. This needs to be strengthen by effectively managing the inbound and outbound activities program. The supply chain undertaken in company will reduce the concern of both Marcela and Yohan. On time deliveries limited has to consider this chain to improve the performance measurement of the company which will also allow to create value in the undertaken program (Kersten, Blecker, & Ri, 2015).

Conclusion

It can be analyzed that there are various factors of the company that should be strong to improve the customers. The timely delivery is an important factor to make more customers and to achieve the higher growth. The on time delivery company needs to re-engineer its inbound and outbound activities program to strengthen its business process. The decrease in the business costing of the process will be done by focusing on reducing the wastage and making timely delivery. The logistic and supply chain process of the company needs to be improved by installing the advance technologies and system process in its inbound activities program.

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