Sample Business Studies Paper on Balanced Score Card

Introduction

The balanced scorecard is a top management and planning tool that combines the four business perspectives, to assist organizations in understanding and achieving their goals and objectives. It is used to communicate the company’s objectives, strategically allocate work, prioritize resources and projects, and measure progress based on the set objectives (Kaplan & Norton, 2001). This paper seeks to give a view of the BMW Balanced Scorecard while looking at the performance measures of the four perspectives, finance, customers, internal business processes, and innovation.

Determine and discuss two performance measures that should be tracked for each of the balanced scorecard areas of:

 finance

The first point of perspective in the Balanced Scorecard is Finance. This perspective focuses on how its stakeholders perceive the company (Kaplan & Norton, 2001). The performance measures used to evaluate the successful accomplishment of the financial perspective are the return on the capital employed and the operating expenses of BMW.

The return on the capital employed is calculated by giving the ratio between the organization’s profitability and the efficient use of money. The higher the return, the higher the profit assigned to the stakeholders, and the better the efficient use of the company’s capital. BMW posted an 8.34% rate, which is a relatively weak return on capital (Trading Economics). This translates to lower profits offered to the stakeholders of the company.

The second performance measure in the financial perspective is the operating expenses ratio. The operating expenses refer to the expenditure incurred in the day to day running of the organization that is not directly linked to the production. These include commissions, rent, taxes, travel, employee benefits, and pension contributions. It is the ratio between the operating expenses and the revenues for the organization, expressed as a percentage. A standard operating cost ranges between 60% to 80%, but the lower it is, the better for the stakeholders. BMW’s operating expenses ratio is 96.85% in the last year, which is exceptionally high (Trading Economics).

 Customers

The second perspective on the balanced scorecard is the customers (Kaplan & Norton, 2001). This perspective focuses on how to achieve the set goal by appealing to their customer base. The performance measures are customer satisfaction and customer retention.

Customer satisfaction is measured by how much the clients like the product and the service given by the staff. BMW uses Qualtrics to assess its customer’s levels of comfort to their cars. After each service visit and vehicle purchase, the client is asked to complete a four-question survey. This allows the organization to understand its customers and offer improved after-sale services, enhancing customer satisfaction.

The retention of customers is another performance measure for the second perspective. The ability of an organization to retain its current client base is vital to its success (Figge et. al, 2002). BMW has managed to keep most of its clientele by providing a variety of vehicles for the customers to choose from at each stage of their lives. The staff values the views and input of their customers, making the clients feel like part of the family.

 Internal Business Processes

The third perspective is the Internal Business process, which focusses on the procedures the company need to excel at to achieve the set goals (Kaplan & Norton, 2001). The performance measures for this perspective are reworking and the process cycle efficiency.

Reworking refers to the costs and efforts required to disassemble, repair, replace, and reassemble the defective item, which in BMW’s case are the cars. Hence, BMW has adopted the use of robots in different stages of its production process to reduce possible human error, thereby reducing any reworking instances.

Process cycle efficiency focuses on the output based on a unit of input. Since processes are repeated aspects of an organization, it is possible to optimize for better results. The process is more efficient when the ratio is higher (Figge, et.al, 2002). BMW applies the principles of lean production, which aims to cut costs and make the business processes efficient. Lean production can be employed in all aspects of the business, form the production of the cars to the selling and handling of customers.

Innovation/learning.

The final perspective is innovation and learning, which focuses on the company’s ability to change and improve as needed (Kaplan & Norton, 2001). This is measured by the employees’ morale and their willingness to give suggestions.

An organization’s success and efficiency are based on the employee’s morale, which is the attitude, confidence, and satisfaction they have towards their work. BMW boosts its employees’ morale by letting them know that their company cares for them and hiring people who work well together (Figge, et.al, 2002). This creates a family-like environment where employees are motivated to give their best to their jobs.

Besides, listening to employee suggestions has made the Innovation perspective successful for BMW. The managers and dealers consider interacting and learning from their staff an integral part of the success of the company (Figge et.al, 2002). It encourages their staff to voice their views, concerns, and suggestions on how to better the company and their service delivery

Conclusion

The balanced scorecard provides a holistic view of how an organization can accomplish its objectives. It enables the leaders to realize that for the financial aspect to flourish, the other three perspectives have to be taken care of as well.

 

 

References

Figge, F., Hahn, T., Schaltegger, S., & Wagner, M. (2002). The sustainability balanced scorecard–linking sustainability management to business strategy. Business strategy and the Environment11(5), 269-284.

Kaplan, R. S., & Norton, D. P. (2001). Transforming the balanced scorecard from performance measurement to strategic management: Part I. Accounting horizons15(1), 87-104.

TRADING ECONOMICS. “BMW | Operating Expenses.” TRADING ECONOMICS | 20 Million INDICATORS FROM 196 COUNTRIES, Oct. 2019, tradingeconomics.com/bmw:gr:operating-expenses. Accessed 30 Oct. 2019.