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- 16 Marks
Question
The chairman of Adama Group, which is large and diversified, has expressed concern about the inadequacies of the present voluminous monthly reports submitted to the Board. He acknowledges that it compares budget and actual results for all operations, and that it contains extensive reporting of non-financial indicators such as customer satisfaction and factory performance towards Total Quality Management (TQM). However, he regards much of this as operational detail, and considers that the report should place more emphasis on strategic issues.
A strategy consultant is currently assisting the Group to implement a Balanced Scorecard to effectively monitor the performance of managers.
Required:
i) Explain THREE strategic issues that should engage the attention of the Board of Directors of Adama Group. (6 marks)
ii) Explain how Balanced Scorecard can be used to monitor and measure performance in Adama Group. (10 marks)
Answer
i) Strategic Issues for the Board of Adama Group:
- Long-term Growth and Expansion: The Board should focus on the strategic issue of long-term growth and expansion. This involves setting objectives related to market expansion, diversification, and new product development. The Board must ensure that the company’s growth strategies are sustainable and aligned with its overall vision.
- Risk Management: Effective risk management is another strategic issue that should engage the Board’s attention. The Board must assess the potential risks associated with the company’s operations, such as financial risks, market risks, and operational risks. They should ensure that appropriate risk mitigation strategies are in place to protect the company from unforeseen challenges.
- Sustainability and Corporate Social Responsibility (CSR): The Board should also consider the strategic importance of sustainability and CSR initiatives. This includes integrating environmental, social, and governance (ESG) factors into the company’s business strategy to enhance long-term value creation and fulfill the company’s responsibilities to stakeholders.
(Total: 6 marks)
ii) Balanced Scorecard for Performance Monitoring and Measurement:
The Balanced Scorecard (BSC) is a strategic management tool that provides a framework for monitoring and measuring organizational performance from multiple perspectives. For Adama Group, the BSC can be used as follows:
- Financial Perspective: The BSC will allow Adama Group to monitor financial performance beyond traditional measures such as profit and revenue. Key performance indicators (KPIs) may include return on investment (ROI), economic value added (EVA), and cash flow. This perspective helps the Board assess whether the company is achieving its financial objectives and delivering value to shareholders.
- Customer Perspective: The BSC can measure customer satisfaction, retention rates, and market share. This perspective ensures that the company remains competitive and responsive to customer needs, which is critical for sustaining revenue and profitability.
- Internal Business Processes Perspective: This perspective focuses on the efficiency and effectiveness of internal operations. KPIs might include cycle time, quality control measures, and process improvement initiatives. By monitoring these metrics, the Board can ensure that the company’s internal processes are aligned with its strategic goals and contribute to overall performance.
- Learning and Growth Perspective: The BSC can also be used to track employee development, innovation, and organizational culture. KPIs may include employee satisfaction, training hours, and the number of new products or services launched. This perspective helps the Board assess the company’s ability to innovate, improve, and sustain its competitive advantage over time.
(Total: 10 marks)
- Tags: Benchmarking, Performance Improvement, Strategic Management
- Level: Level 2
- Topic: Strategy evaluation and control
- Series: MAY 2017
- Uploader: Theophilus