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Running head: FINANCIAL ANALYSIS -BALANCED SCORECARD
Financial Analysis - Balanced Scorecard
Name of the Student:
Name of the Universi ...
Running head: FINANCIAL ANALYSIS -BALANCED SCORECARD
Financial Analysis - Balanced Scorecard
Name of the Student:
Name of the University:
1 FINANCIAL ANALYSIS -BALANCED SCORECARD
Balanced scorecard is necessary for companies which are looking for new measures to
propel the organisation forwards through ever changing market scenarios. The balanced
scorecard equips managers with information which are relevant in driving the organisation
forward. There are four main aspects that are taken under contemplation while proposing a
balanced scorecard namely the financial position and its targets, perspective of both consumer
and internal business structure and how to use this perspective to make innovations that will
consolidate the market’s pote ntial outreach. The sole objective of the study is to analyse the
current landscape of the company and propose a future plan based on the balanced scorecard
which is formulated in this report (Awadallah & Allam, 2015) .
Company Background :
In the United K ingdom there server significant insignias which can be contemplated as
landmarks; however there is an unofficial staple in the UK, that extends well beyond the country
and is renowned as Diageo. It is the largest whiskey producer in the world with its pres ence
across 180 nations in the map. The brand has been met with success abroad in Europe and Asia
with international operational profits of over two billion dollars in 2020 reports. Now this
amount is generated by Diageo despite the impediments that the co mpany has to face due to the
lockdown restrictions and less amount of consumers. The company acts as a flagship and patron
to many internationally recognized liquor brands. The headquarters of the organisation is situated
at London, with 27,500 employee wo rking day and night to serve their customers across the
globe. The company has now been considered as the employer of choice by many reputed
institutions (Diageo, 2021) .
2 FINANCIAL ANALYSIS -BALANCED SCORECARD
Financial strategies :
Since the company is one of the largest alcohol produc ing organisations amidst its peers;
allocating funds is a convenient and seamless task for this company. As a result of which,
purchasing raw materials required for making those delicacies are also very convenient because
they can buy in bulk quantities of raw material without any hassle.
Financial models :
The financial model that the Diageo utilizes inculcates the performance of the company from
various angles and also takes variables under consideration to build a forecast plan that will
assist the busi ness to financially excel with respect to previous years. However there is a
drawback in this approach, this measure does not include and anticipates risks that are associated
with individual steps that the organisation undertakes. Since the company is a m ultinational giant
there are several aspects of the business that are exposed to risks which are not properly taken
care of. If this risks spirals out of control then it will jeopardize the brand equity of the company
(Krylov, 2019) .
Financial trends :
Due to the Global pandemic and lock down the imposed by the government people across the
world are depressed since majority of them has lost their jobs in order to satiate the depression
the company has experienced a growing trend of consumers who are orderin g their products by
3 FINANCIAL ANALYSIS -BALANCED SCORECARD
using online platforms the company can utilise this trend to enhance its revenue generation there
were also broadening its market outreach to the remote corners of the world.
Economic theory to decision making :
The management of the co mpany needs to revitalise the overall stance of the organisation in this
pandemic time because the overall economy of every single nation is completely downtrodden.
At this juncture new strategies are required to make the company regain its original potent ial.
Since the company has already lost over 8.4 % sales with respect to previous year. In 2020,
Diageo received an aftershock of the pandemic when the bottom line of the firm was shocked
utterly by a negative spike of 47.1%. The overall sales also deterio rate by 8.4 % in Diageo
(Nørreklit et al. 2018) .
Diageo’s financial governance encompasses the company's track records of previous financial
transactions. In other words, it records every single information pertaining to finance and
manages it accordingly. The company also manages the performance of its employees through
rewards and recognition approaches and controls the flow of data under the spectrum of financial
Legal Requirements :
The company needs to verify its affiliation with the laws of the United Kingdom regarding liquor
production . According to Alcoholic Liquor Duties Act 1979 and Spirits Regulation Act 1991, the
company can opt for license after inspection by regulatory authority regarding the manufacturing
4 FINANCIAL ANALYSIS -BALANCED SCORECARD
process present in the plant. The firm can only get a distiller's license after the plant has b een
brand approved by HMRC. The license shows that the organisation is still trustworthy and the
quality of the beverages produced here are of top notch quality (Quesado et al. 2018) .
Procurement strategies :
The procurement strategy of Diageo is to establish a strategy for benefiting the company in the
long run. The strategy should always be cost -effective in nature and the materials that are
essential for producing the alcohol should be allocated by various diverse sources through
releasing tenders (Terziev et al. 2017) . The quality of these materials supplied by those vendors
is required to be best because the brand value of the organisation depends on the quality of
alcohol produced. Furthermore, the time taken by the vendors to su pply these commodities
should be comparatively less so that the company can manufacture quality products swiftly and
effectively without much delay (Sharma & Sharma, 2020) .
Supply chain management
The primary menace that the company is facing regar ding management of supply chain, of late,
is that complex framework of supply chain. Since the company's network is vast the distribution
chain increased respectively. Now the company has to incur more expenses in maintaining a vast
distribution network. T hereby a lot of the working capital is drained out to manage and maintain
this complex framework of supply chain.
Financial data to allocate resources
5 FINANCIAL ANALYSIS -BALANCED SCORECARD
Resources are allocated by Diageo establishment towards those projects that will bring prosperity
to the organisation by enhancing its profit line. Since the pandemic the company bottom line has
plunged extensively which needs to be rectified as soon as possible. Therefore the firm cannot
allocate resources for just about every project. Management has to be sincere about this ongoing
scenario otherwise the company's future will be in shambles (Sen et al. 2017) .
Balanced Scorecard :
MEASURE TARGET INITIATIVE
8.4% Increase A&P Spend
14.4% Increase Mergers & Acquisitions
118.6p Share Buy Back
19% Increase Dividend Payment in
6 FINANCIAL ANALYSIS -BALANCED SCORECARD
Reaching out through
4.7 l/l Δ Water Recovery and
530 Δ Renewable Sources of
Less data collection
Automation of Product
Increased Agility Campaigns
Automation in Data &
EMPLOYEE Champion Health and 0.50 Δ Development of several
7 FINANCIAL ANALYSIS -BALANCED SCORECARD
82% Surveys & Feedback
Provision of Leadership
The primary financial objective of Diageo which also forms the part of its list of strategic
priorities is to achieve sustainable financial performance and an organic gro wth with respect to
its operational performance.
Measures and Targets
The four key performance financial indicators which help Diageo in measuring its
financial objectives are Organic Net Sales Growth, Organic Operating Profit Growth, Earnings
per Share a nd the Total Shareholder’s Return. Organic Net Sales Growth is the growth in
revenue after accounting for excise duty and is measured for reflecting its performance for
Diageo’s choices when it comes to market participation, market share growth and Brand E quity.
The organic net sales declined by 8.4% in the financial year 2020 in comparison to 2019 and
hence the proposed target is an increase of 8.4%. The net sales declined owing to an 11.2%
decrease in volume offset by a 2.8% in the positive price/mix. The reported net sales also
declined by 8.7% in the year 2020 (Sardjono et al. 2020) .
Diageo measures its operating profits on the basis of a constant currency and identifies
this metric to be crucial in measuring the operating effectiveness and efficiency of the business.
The organic operating profit declined ahead of the net sales at arou nd 14.4% owing to the impact
8 FINANCIAL ANALYSIS -BALANCED SCORECARD
of Covid -19 in the second half and also as a result of challenging trading circumstances. The
reported operating profit saw a huge decline worth 47.1% and was mainly driven by exceptional
operating items due to non -cash impairm ents in Korea, Nigeria, Ethiopia and India. The
proposed target is an upward increase of 14.4% based on 2020 figures (Martini & Suardana,
Diageo also considers Earnings per Share as an important financial metric which helps
the company to assess ho w effectively the company finances its balance sheet. The earnings per
share in 2020 declined by 21.4 pence owing to a decline in organic operating profit, a low
income collections from its associates & joint ventures, an increase in finance charges and
im pacts of acquisitions and disposals. The earnings per share for Diageo was 109.4 pence in the
year 2020 and the proposed earning per share for the forthcoming financial years is 118.6 pence
which was similar to that of 2018. Lastly, Diageo also considers t he Total Shareholder’s Return
as an important financial metric as this determines the percentage of growth in the company’s
share value which saw a decline of 19% in the year 2020 as a result of low year on year share
price. The proposed target in this reg ards is an upward trend of 19% (Marimin et al. 2017) .
The list of initiatives that are currently being implemented by Diageo for achieving the
proposed targets and satisfying its financial objectives are as follows:
1. Diageo in the light of impr oving its sales believes that it needs to invest in the new world brands
which allows the company to gain access to fast growing categories which includes no or low
alcohol drinks. Diageo in the year 2020 acquired Seedlip which is the world’s first non -alc oholic
distilled spirit. Seedlip currently has a presence in above 25 countries and in excess of 250 top
9 FINANCIAL ANALYSIS -BALANCED SCORECARD
2. Diageo has always taken marketing of its brand seriously in order to support long term growth
and brand equity. Diageo’s smart inve stment in A&P ensures to obtain maximum impact out of
its marketing. The company’s investment in Marketing Catalyst which is a data analytics tool
helps in providing a insight into the short term and long term returns on its marketing
investments. Diageo i n the year 2020 increased its spend in North America, Brazil, Europe,
Kenya and Africa (Manica et al. 2017) .
3. Owing to lockdowns the demand for online shopping grew rapidly. Diageo capitalized on this
opportunity in Caribbean and Central America Market by partnering with e -commerce platforms,
distributors and delivery applications and saw a growth of its e -commerce channel by over 400%
in an attempt to maximize sales and operating margins.
4. The impacts of a decline in earnings per share were attempted to off set by tax, a share buyback
programme and non -controlling interests. Furthermore, Diageo expects to return more to its
shareholders in the form of dividend payments in the future operating years after a spike in
organic sales and organic operating profits (Kahla , 2017) .
Community Perspective :
Diageo recognizes the value of the community and stays committed to the welfare of its
community. It does so by prioritizing its efforts and contribution towards its corporate social
Measures and Targets
Diageo promotes positive drinking as one of the most primary non -financial indicator
which the company measures. The company is targeting a reach of 230 million people with
moderation messages of drinking through the aid of its dif ferent brands. The company is also
involved in pledges to never drink and drive. Lastly, the company is also educating young
10 FINANCIAL ANALYSIS -BALANCED SCORECARD
people, teachers and parents with respect to the adverse effects of underage drinking (Junior et
al. 2018) .
Diageo measures water efficiency as the ratio of the amount of water required to produce
one litre of the packaged final product as water is one of the most important ingredients in its
final products. Diageo saw an improvement in water efficiency by upto 2.1% Δ in comparison to
2019. The proposed target of water efficiency in the coming years is estimated at 4.62 l/l Δ.
Diageo measures its carbon emissions in terms of absolute volume in 1,000 tonnes. Although the
production volume did increase in the year of 2020, the company’s e missions of carbon reduced
by 8.7% Δ in the year 2020. The proposed target of Diageo in this context stands at 530 Δ in
comparison to 507 Δ in the year 2020 (Hristov et al. 2019) .
Following are the initiatives that have been taken by Diageo to achieve its objective
against the community perspective:
1. Diageo educated around 1 million youth, parents and teacher about the harmful effects of
underage drinking with the help of its ‘Smashed’ education programme, interactive workshops
and online version of Smashed in the United Kingdom. Diageo also continued its moderation
campaign ‘Guinness Clear’ in Ireland and UK through television which helped the company in
spreading moderation messages to 200 million people. Lastly, the company also collaborated wi th
UNITAR to launch online training resources for government officials who are in charge of road
and safety which helped the company to reach out to 25.3 million people through ‘JoinThePact’
pledge concerning drinking and driving.
2. The company has achieved an efficiency of 46% with respect to water improvement efficiency in
the year 2020. It managed to reuse and recycle water in its own production lines of upto
541,300m 3 which represented a total of 3.3% of the total water withdrawals. Moreover, owing to
11 FINANCIAL ANALYSIS -BALANCED SCORECARD
Cov id-19, there has been a delay in the commissioning of its water reuse and recycling facilities
in Nigeria and East Africa. The benefits of such project investments are anticipated to get reaped
in the near future (Dwivedi et al. 2021) .
3. Diageo also managed to reduce its carbon emissions by 8.7% due to switching its operations to
the use of low carbon fuel, refinement in its operations and through purchase of renewable energy
attributes certificates. The company this year sourced 65.5% of the total electricit y consumed
through the use of renewable sources of energy such as solar and hydro sources. Diageo’s carbon
reporting protocols falls in line with the World Business Council for Sustainable Development
Greenhouse Gas Protocol.
Process Ob jective
Diageo’s process objectives comprise of embedding daily efficiency which everyone is
expected to bring in on a routine basis (Dinçer et al. 2017) .
Measures, Targets and Initiatives
Diageo measures its process objective through three different met hods. One way of
looking at things is through simplifying the business which enables employees in reducing the
collection time of data and investing more time on execution which allows for value creation.
Diageo in the year 2020 managed to achieve the same by automating its product development
process. With the help of leveraging intelligent automation, Diageo managed to automate its data
entry process which is required during the start of a project. Hence this results in spending less
time on collating dat a and more time towards analysis and review that allows for process
efficiency and accuracy (Benková et al. 2020) .
Diageo in 2020 managed to change the way in which they worked which helps in
promoting agility and focusing resources towards the delight of consumers better. Diageo
12 FINANCIAL ANALYSIS -BALANCED SCORECARD
introduced the ‘TipsFromHomeSpecial’ campaign which was a social media programme to help
in getting bar tenders back to work from home. This programme allowed bartenders to educate
consumers on how to make drinks using pantry stap les (Asiaei & Bontis, 2019) .
The company is of the opinion that using the data and analytics technology will help in
refining their process to drive insights and efficiency. Diageo managed to introduce a new debtor
reporting system which helped the compan y in managing their working capital requirements
effectively against the effects of Covid -19. The company has been working on Edge (Every Day
Great Execution) which with the help of in -store data helped in predictive analysis with respect
to offering the c orrect brands in the right outlets using the right way. This was aimed at
maintaining specific retail standards which could directly translate to better sales. Diageo
extended this technology in eight different markets in the year 2020 within Europe, Afric a and
Pacific Asia after introducing the same in the United States in the year 2019. Lastly in the
process of extending this technology, the company also developed further tools to meet the rapid
digitalization trends (Aly & Mansour, 2017) .
Perspective Objective Measure Target Initiative
Customers To satisfy the
the taste and
Customers To retain
needs to devise
ways to increase
Make them more
offers to those
13 FINANCIAL ANALYSIS -BALANCED SCORECARD
exp erience of the
cares a lot about
reminds them of
their special day
as one of its
Perspective Objective Measure Target Initiative
Employee To increase
Skills of an
be increased by
courses range to
14 FINANCIAL ANALYSIS -BALANCED SCORECARD
of an employee
Employee To improve
scope to improve
his or her
learning curve is
also an essential
part that the
make it more
suitable to the
Employee To Employee
of an employee
is a driving force
that brings them
of the firm will
workplace is the
first step that
Employee To enhance
be retained at all
prefer calling his
surely assist the
15 FINANCIAL ANALYSIS -BALANCED SCORECARD
Perspective Objective Measure Target Initiative
Quality control To improve the
quality of liquor
Quality test for
top the genuine
be employed to
optimum of the
To manage the
should be wasted
deployed to take
care of the
Strategic Road map :
of the raw
Quality of the
16 FINANCIAL ANALYSIS -BALANCED SCORECARD
The beverage alcohol is quite an attractive industry which provides a platform of
opportunity for its key players for sustainable growth. As per 2019 figures, the global alcohol
market saw a retail salve value worth £854 billion with 6 billion equivalent units of alcohol sold
every year. Diageo expects to be one of the most trusted and performing consumer products
brand worldwide as a part of this industry. Its strategic roadmap allows it to achieve its ambition
on a day to day basis. The future looks good for the company as it has already announced targets
with respect to both financial and nonfinancial perspectives whic h look promising. It’s ‘Diageo
for Society 2030’ policy allows the company to stay committed towards its corporate social
responsibility and with the industry growing at a compound annual growth rate of 3.5% through
the years 2021 -2026, the future seems to be bright for the company.
17 FINANCIAL ANALYSIS -BALANCED SCORECARD
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20 FINANCIAL ANALYSIS -BALANCED SCORECARD
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