Assume you are a newly appointed accountant in a local retail company – Mr tech. Originally, the business offered a wide selection of electronical devices, include computers, mobile phones, tablets, laptops. As the business was trying to expand its market and attract more customers, it expanded its product lines to include television, digital camera, and home appliances.
This is a private family business with 30 shareholders. Currently, the company has five different departments, include Accounting and Finance, Purchasing, Distribution and Logistics, Sales and Marketing, and Human Resources, with a total of 90 employees. Managers in each department are given the authority regarding operational decisions and their performance is measured based on the company’s profit, and all the other employees receive the fixed salary package. The company pays taxes to Australia Taxation Office (ATO) on a regular basis
The business has retail stores in the major city across Australia and online store. Since the company expanded its product line, managers from different departments found the number of complaints received from customers have tripled. Most complaints are related to the product quality (defective: broken or not working properly with warranty), items consistently out of stock, online shopping experience (delivery of wrong items and long response time to emails), and in-store experience (lack of attention from sales representatives), and some customers have posted complaints on Mr Tech. social media. In order to enhance the overall performance, the company is considering using a range of key performance indicators in managing its performance. This is to ensure that the company keeps track of its performance and to achieve the objectives they set for the identified issues.
A characteristic of this market is consumers are mainly attracted by new styles and designs with low prices, so the company always seeks to find the suppliers with low prices. Recently, a new supplier from China – SMART - contacted Purchasing department to seek collaboration. SMART demonstrated a series of electronic products released in recent few years, and the manager was impressed by its well-designed functions and low prices.
However, after a careful investigation into this company’s background, they found this supplier has a major issue with labor conditions throughout their supply chains, including the use of child labor, low wages, and health and safety hazards, and long working hours. In terms of the environmental aspect, SMART consumes large amount of water in their production process, and wastewater discharge into the local river, and it did not take any action to solve this issue. The polluted water is no longer fit for drinking or laundry, fishes no longer exist in this river, and local residences complain that their homes are flooded by dirty water.
1. In order to enhance company’s performance, the CEO thinks it might be insufficient to use profit as the only performance indicator, and is considering using a range of key performance indicators to manage the business. You believe the Balanced Scorecard is a useful performance measure framework that can be used, as it gives management an overall picture of company’s performance. You have been asked to develop a Balanced Scorecard to assist Mr Tech. in managing its overall company’s performance and demonstrate how it works to the management and staff in next company meeting. You need consider ONE or TWO metrics for Each perspective respectively and explain the reason why it has been selected and how it can be used to improve company’s performance.
2. The CEO of Mr Tech. believes the SMART is attractive to the company because of its low price strategy. However, the CEO also has noticed the unprecedented awareness from customers on the company’s social responsibilities. The CEO approaches you to discuss whether this supplier is better for company’s strategic development. Provide an explanation to the CEO with reference to the potential costs and benefits of working with SMART.
3. After your analysis above, the CEO starts realizing the importance of working with social and environmental friendly suppliers, however, still does not have a comprehensive understanding to the positive and negative impact his company’s products might have both socially and environmentally. You decide to use the Life 4 Cycle Analysis (LCA) for a product that the company offers to enhance their understanding. Draw the LCA, and select one or two stages of the LCA, identifying a total of four possible social and environment impacts. If the impact is detrimental either socially or environmentally, give suggestions to minimize the impact. If the impact is positive, give suggestions as to maximize the benefit. You are required to undertake some research to answer this question.
4. Finally, Mr Tech. would prefer not working with SMART. Some important shareholders attempted to block this proposal. Their belief, as the owners of this company, is that the company should aim to maximize the value of their shares, however, this business decision will have a detriment on the profit. Give ONE or TWO real life examples to discuss how business could be impacted if they are working with unethical suppliers.
5. Previously, Mr Tech. did not intend to report on their different aspects of performance to the public. However, the CEO of Mr Tech. found many competitors regularly report on their performances. CEO comes to seek your advices on why these competitors report on their performances. Also, briefly discuss what information could be reported and where the information can be reported.
Balance Scorecard for improving performance of a corporation
1.In a bid to augment performance of a corporation, the CEO believes that it might be insufficient to utilize profits as a performance indicator. Also, the CEO also believes considering utilization of a wide range of important performance indicators to handle the business.
Balance scorecard (BSC) was generated during the early 1990s by the proponents Robert S. Kaplan and David P. Norton from particularly Harvard Business School. Essentially, managers shall necessarily acquire a better idea regarding where the corporation is heading towards, particularly when competing with rivals (Dumay 2016). Indicating towards a research undertaken with nearly 66 Australian manufacturing corporations it can be hereby observed that large business enterprises have the need to apply BSC into the corporations since it is related to higher improvement of performance but unrelated to lasting period of product or position of market. Again, one of the most important decisions at the time when the company decided to execute BSC is that it helps the company to track performance using four different viewpoints (Dumay 2016). This mainly includes innovation and learning, business procedures as well as customers along with financial perspectives.
Firstly, from the perspective of innovation and learning, the most vital metric in this case would probably be the introduction of advanced machineries since they can perform more complicated routine as well as non-routine tasks (Watson 2015). For instance, the utilization of digital textile printing can be considered to be environmental friendly since it utilizes 30% less water and at the same time 45% less water in comparison to conventional printing mechanisms. Thus, the company can promote environmental openness, lessen time spending on carrying out training different new employee and saving from specific physical capital as well as energy consumption. Furthermore, financial scorecard navigates financial necessities of a business concern and achievements (Mouritsen and Kreiner 2016). Therefore, reduction of cost can be considered to be one of the most significant operations in the corporation.
Third perspective of the balance scorecard is necessarily business processes, essentially, this tracks various internal business procedures of a corporation such as number of orders completed in a single hour (Chenhall and Moers 2015). In actual fact, one of the important metrics required to be carried out is decreasing ratio of particularly rate of fault as when the rate of fault is decreased, the higher is the amount of sales, directing the way towards higher level of profit accepted by the corporation.
Potential costs and benefits of working with SMART
2.Potential costs and benefits of working with the SMART
Costs:
Analysis of the operations of the supplier SMART reveals the fact that there are major concerns with conditions of labour throughout the entire supply chain, counting the usage of child labour, lower amount of wages, various health as well as safety hazards (Gray et al. 2014). In addition to this, there is also issue associated to longer working hours. In terms of environmental facet, the SMART also consumes huge amount of water in processes of production, waste water discharge into Local River, and it did not take any action to solve the concern. The polluted water is necessarily no more fitting for drinking or else laundry. Again, fishes also do not exist any longer in this river, and regional residences also complain that their homes are necessarily flooded by filthy as well as dirty water.
Benefits:
However, there are certain benefits associated to collaboration of practices with the supplier SMART. Analytical evaluation of background of the company shows that consumers are primarily attracted lured by the novel and innovative styles along with designs with low level of prices (Booth 2018). Therefore, the company intends to find the supplier with low level prices. Currently, an entirely new supplier belonging to China established contact with purchasing department for collaboration. In addition to this, SMART also revealed an entire series of various electronic products introduced in the past few years. In essence, the manager of the corporation was also impressed by the properly developed functions and low level of prices.
3.In particular, management of the firm Mr. Tech can utilize the life cycle assessment evaluation process that has emerged as a valuable decision support mechanism for policy makers as well as industry (Bebbington and Larrinaga 2014). This helps in evaluating cradle to grave influences of a specific product/process. In essence, there are three different forces that drive the process of evolution. The government regulations are necessarily moving in the specific direction of life cycle accountability. There is a notion that a particular manufacturer is accountable for specifically direct production, but also for influences related to product inputs, use, and transport along with disposal. Different stages of the Life Cycle Analysis include definition of the goal and presentation of the scope, development of life cycle inventory, impact evaluation and improvement evaluation (Eldenburg et al. 2016). Management of the firm can consider implementation of two phases namely, goal definition as well as scoping and life cycle inventory.
Utilizing Life Cycle Assessment evaluation process for decision support
Goal Setting: Mr. Tech is a private family business with 30 different shareholders. Presently, the corporation has five diverse departments including accounting and finance, distribution and logistics, sales, marketing and purchasing. Therefore, management of the firm can consider goal definition of each and every department for attainment of organizational objectives. Managers operating in each and every department are provided the authority as regards operational decision and their performance is necessarily enumerated founded on profit of the company (Vandekerckhove 2016). Employers accept fixed salary package. In essence, the company disburses taxes Australian Taxation Office (ATO) on a recurrent basis.
The company Mr. Tech primarily has the need to establish the goals of attainment of sustainable and potential growth. Mr. Tech offers a wide variety of different electronic devices, counting computers, laptop, mobile phones as well as tablets. However, the management of the firm now intends to expand the market and increase the market base. This way the company intends to acquire larger share of the market pie and acquire more number of customers (Ball et al. 2014).
Life Cycle Inventory: Management of the firm Mr. Tech can take into consideration social as well as environmental influences of the businesses in this stage. As mentioned in the case study under consideration, management of Mr. Tech can analyse social as well as environmental influences of its products such as computers and other electronic devices in this phase. That is to say specifically, there are certain mineral resources that are non-renewable and cause damage to the environment on extraction (Atkins et al. 2015). Also, workers’ exploitation is also there in factories where the products are manufactured. In addition to this, the process of packing computers also has an adverse effect on environment as a considerable amount of particularly Styrofoam as well as cardboard are disposed. Furthermore, process of transportation of computers also exerts environmental influence in the way of huge amount of carbon emissions. Moreover, the usage of computers also has the need of electricity that might be produced from different materials such as coal, natural gas and many others. Therefore, management of the firm has the need to analyse the impacts of the same and devise ways to lessen their effects.
4.There are different examples of unethical behaviours and ill-regulated supply chain in the industry.
Case of Chinese Apple Contractor
The death cases at Chinese Apple contractors reflected various ethics questions. Two workers at Foxconn Technology that is the Chinese Plant responsible for manufacturing iPhones for the compant Apple died. Apple has claimed that it requires the suppliers of the firm to supports fair labour as well as standards of human rights. Foxconn violated the rights. An audit conducted during the year 2014 revealed that more than a dozen suicide cases were reported in the factory (Watson 2015). The suicide cases were mainly due to longer hours of working, low level of payments along with stringent restrictions of overtime.
Examples of unethical behaviors and ill-regulated supply chain in the industry
Pharmaceutical Industry facing unethical behaviour of suppliers
The drug manufacturing industry also faces the blows of unethical supplier behaviour. The head of the sustainable finance of Nordea Wealth Management faced difficulty in the way of revealing the environmental influences that were stonewalled in the bureaucracy of the nation India (Dumay 2016). The pharma giants are pushed to take up responsibility for breaches of rights of suppliers as majority of the drug or else ingredients of the drugs were manufactured in the nation.
4.A corporation already has several metrics along with dashboards. Therefore, there is need to have a report that can present a complete picture of company’s progress on the way of designing and executing various initiatives, company goals as well as projects. Therefore, there is need for a report that can help in answering all the business related questions anytime and anywhere (Mouritsen and Kreiner 2016).
Financials
The chief executive officers of firms examine the reports for getting information on financials. The report therefore needs to contain information on financials as the management might have the need to understand whether they are over or under budget (Chenhall and Moers 2015). Also, financials also help in understanding the amount of money that is expended in a specific department/project in comparison to others and the amount of profits that can be earned from that particular segment.
Planned versus actual scenario
Reports also need to reflect the situation that can present the planned as against the actual situation. This can be used as a metric for analysing the gap and strategies can be devised for bridging the gap (Cho et al. 2015). This segment can reflect whether the company is ahead or behind a particular schedule established beforehand.
Objectives
The reports also need to mention the extent to which the company has succeeded in attaining the gaols.
Analysis of headcount
The reports presented to the management of the company also need to present analysis of headcount that in turn can help in understanding whether the company can adequate resources to satisfy the objectives. In addition to this, this section can help in understanding whether company can appropriate resources in place to satisfy the organizational objectives (Hoque 2018).
Comparative figures and illustration’
Management of the firm might be in need to know the area or section that is performing better than the other ones. Also, management might perhaps want to understand what a specific segment has done differently from the other ones. Furthermore, the reports also need to present whether this is a conventional trend or there is something carried out in the firm that is out of the standard (Gray et al. 2014).
Reports need to contain necessary information regarding the corporation, its goals, objectives as well as performances as CEO might be in need to know how the organization is performing. The reports might help the management to understand the areas that is replicating negative figures and the management then investigate the reason behind the negative performance of a segment (Otley 2015). The management will also be able to see the areas where changes are necessary before a specific issue occurs.
References
Atkins, J., Atkins, B.C., Thomson, I. and Maroun, W., 2015. “Good” news from nowhere: imagining utopian sustainable accounting. Accounting, Auditing & Accountability Journal, 28(5), pp.651-670.
Ball, A., Grubnic, S. and Birchall, J., 2014. 11 Sustainability accounting and accountability in the public sector. Sustainability accounting and accountability, p.176.
Bebbington, J. and Larrinaga, C., 2014. Accounting and sustainable development: An exploration. Accounting, Organizations and Society, 39(6), pp.395-413.
Booth, P., 2018. Management control in a voluntary organization: accounting and accountants in organizational context. Routledge.
Chenhall, R.H. and Moers, F., 2015. The role of innovation in the evolution of management accounting and its integration into management control. Accounting, Organizations and Society, 47, pp.1-13.
Cho, C.H., Laine, M., Roberts, R.W. and Rodrigue, M., 2015. Organized hypocrisy, organizational façades, and sustainability reporting. Accounting, Organizations and Society, 40, pp.78-94.
Dumay, J., 2016. A critical reflection on the future of intellectual capital: from reporting to disclosure. Journal of Intellectual capital, 17(1), pp.168-184.
Eldenburg, L.G., Wolcott, S.K., Chen, L.H. and Cook, G., 2016. Cost management: Measuring, monitoring, and motivating performance. Wiley Global Education.
Gray, R., Adams, C. and Owen, D., 2014. Accountability, social responsibility and sustainability: accounting for society and the environment. Pearson Higher Ed.
Hoque, Z., 2018. Methodological issues in accounting research. Spiramus Press Ltd.
Mouritsen, J. and Kreiner, K., 2016. Accounting, decisions and promises. Accounting, Organizations and Society, 49, pp.21-31.
Otley, D., 2015. in Management Control. Critical Perspectives in Management Control, p.27.
Senftlechner, D. and Hiebl, M.R., 2015. Management accounting and management control in family businesses: past accomplishments and future opportunities. Journal of Accounting & Organizational Change, 11(4), pp.573-606.
Spence, L.J. and Rinaldi, L., 2014. Governmentality in accounting and accountability: A case study of embedding sustainability in a supply chain. Accounting, Organizations and Society, 39(6), pp.433-452.
Vandekerckhove, W., 2016. Whistleblowing and organizational social responsibility: A global assessment. Routledge.
Watson, L., 2015. Corporate social responsibility research in accounting. Journal of Accounting Literature, 34, pp.1-1
