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Student Name: Student Number: Course Name: Study Mode: Lecturer Name: Subject Title: Assignment Title: Number of Pages: Disk Included:
Emmanuel Emeonye k00122890 Accounting & Finance Full-Time: Michael Sheehan AF3 Management Accounting and Operations Research Balanced Scorecard Project AC CS:
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Plagiarism Disclaimer: I understand that plagiarism is a serious offence and I have read and understood the college policy on plagiarism. I also understand that I may receive a mark of zero if I have not identified and properly attributed sources that have been used, referred to or have in any way influenced the preparation of this assignment. Furthermore, I understand that I may receive a mark of zero if I have knowingly allowed others to plagiarise my work in any way. I hereby declare that this assignment is my work based on my personal study and /or research and that I have acknowledged all material and sources used in its preparation. I also declare that this assignment has not been previously submitted for assessment.
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Table of Content
Page 1 Plagiarism Disclaimer Page 2 Table of Contents Page 3 & 4 Introduction to Balanced Scorecard Page 5 Brief History of the organisation Page 6 & 7 Financial Perspective Page 8&9 Customer Perspective Page 9 & 10 Internal Business Process Perspective Page 11 Learning and Growth Perspective Page 12 Conclusion Page 13 Bibliography Page 14 Appendix
They propose a more systemic alternative. The companies fate is determined by the health of other firms that are in its business ecosystem. We have to consider whether the BSC in its current form has any value at all.
www.bing.com
Anglo American is one of the worlds largest mining companies and their head office has been in London since 1999 when Luxembourg-headquartered Minorco merged with Anglo American Corporation of South Africa to form Anglo American plc. They have a portfolio of high-quality mining assets and natural resources includes platinum group metals and diamonds, with significant interests in copper, iron ore, metallurgical coal, nickel and thermal coal, as well as a divestment portfolio of other mining and industrial businesses. Anglo American has operations in Africa, Europe, South and North America, Australia and Asia. www.angloamerican.com Anglo American started its operations in Johannesburg; South African in 1917.their thermal coal, iron ore and platinum businesses have operations in South Africa, with a corporate office in Johannesburg and have projects or operations in Namibia, Botswana and Zimbabwe.www.angloamerican.com Recently, Anglo American has been criticized by some shareholders and stakeholders for selling off some of its assets in Africa, South America, Australia and Europe by the group's chief executive Cynthia Carroll, as a part of her strategy to ditch businesses that do not contribute to growth. www.dailymail.co.uk. I would disagree with the notion of selling off parts of the business empire as it would create unemployment and thereby lead to high street crime and drugs. In the case of South Africa where there is high street crime and it contradicts their aim to make real and lasting contribution to the communities in which they operate.
Financial Perspective
The financial perspective is the viewpoint of the shareholder. Usually goals are set around cash flow (for survival), profitability (for success) and sales/market share (for growth). The balanced scorecard does not supplant such measures, but rather complements them with others, which tend to be longer term in their focus. www.irishtimes.com According to the researcher, In the for-profit domain the objectives in this perspective represent the end in mind of our strategic story, typically culminating in objectives such as increase shareholder value, revenue growth and lower cost. (Niven, 2008) however, According to the researcher) A balanced view of the various Non-financial, as well as financial perspective is necessary. However, it has become evident that the word balanced does not mean that the four perspectives are equally important. (Johanson et al., 2006, pp.844-845) I am of the opinion that the four perspectives should work together equally and dependently towards the overall corporate strategy. For instance, Anglo American declared force majeure on its coal mines in Queensland, Australia due to recent torrential rains. From a customer perspective, the customers might not be satisfied as their goods or services will not be delivered on time. The customers might consider looking elsewhere for prompt services which will reduce revenue and profit, thereby affecting the financial perspective.
Anglo American were within the normal required limit 1:32:1 which is a big improvement from being below the required limit in 2008 by 0.70:1.however their competitors seems to be doing very well as they were within the required limit both in 2008 and 2009(Appendix 3) Acid Test Ratio In 2008 the acid test ratio for Anglo American was 0.50:1 and BhpBilliton a leading competitor 1.30:1. Also, in 2009 the acid test for Anglo American was 1.06:1 and BhpBilliton, 1.88:1.Anglo American improved in 2009 as they were within the required limit 1.06:1, as compares to 2008 when they were below the required limit by 0.50:1.their leading competitor is within the required limit both in 2008 and 2009 which is a good result.(Appendix 4) Earning per share In 2008, earnings per share for Anglo American was $4.34 and BhpBilliton $275.3. In 2009 earnings per share for Anglo American was $2.02 and BhpBilliton $105.6. In 2009 both companies dropped in their earnings per share which is no surprise as revenue has reduced. In comparison to their competitor, Anglo American is behind (Bibliography) Performance In 2009 as compares to 2008, Anglo Americans profit from platinum and diamonds dropped to 99%, industrial minerals fell to 83%, while coal fell to 2%. As a result of the performance which lead to the sharp declines in commodity prices against the prior year and anticipated reductions in volumes, partially offset by exchange rate benefits compared to 2008, they did not declare an interim or recommend a final dividend in 2009 and 2010 for the first time since the Second World War. It could make the prospective investors not to invest in the company as they have not paid dividend to shareholders in 2 years. The shareholders will be disappointed with the underperforming share price and non payment of dividend, especially the shareholders who rely on the dividend as their only source of income. www.dailymail.co.uk
Customer perspective
The customer perspective is designed solely to measure how well the company is meeting the demands of the customer and its market segment. By measuring customer satisfaction, loyalty, retention, acquisition, and profitability, a company can excel in their market segment and plan for the future. (Kaplan and Norton, 1996) The customer perspective describes the ways in which differentiated, sustainable value is to be created for targeted customer segments, how customer demand for this value is to be satisfied, and why the customer will be willing to pay for it (Gurd and Gao, 2008, pp. 12-13) in addition, According to Kaplan and Norton (2005, pp. 41-42) the customer perspective defines the drivers of revenue growth. It includes generic customer outcomes, such as satisfaction, acquisition, retention, and growth, as well as the differentiating value proposition the organization intends to offer to generate sales and Loyalty from targeted customers.
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Anglo was awarded the platinum band in the Corporate Responsibility Index in 2009 for its corporate and social responsibility activities (www.angloamerican.com). This puts the company in a better position for potential customers that favour suppliers with a commitment to ethics and sustainable development.
Health
Their goal is that no employee is harmed by working at their operations, and that the health of those who work for them is improved. It is a good internal control perspective as when employees are free from occupational disease it mitigates absenteeism, customer targets are met through consistent production, thereby achieving revenue and profit. Also, the failure to maintain the required high levels of safety management could result in fines and penalties, liability to employees and third parties for injury, impairment of the Groups reputation, temporary or permanent closure of mines by the government in authority, industrial inability to recruit and retain skilled employees. Noise-induced hearing loss rose from 62 in 2008 to 367 in 2009 and also the new cases of Hand-Arm Vibration Syndrome, occupational lung diseases and tuberculosis reported. The incidence rate of occupational disease per 200,000 hours worked has risen from 0.126 in 2008 to 0.483 in 2009. Bhpbilliton are progressing with their health performance as they had 215 new cases of occupational disease reported in 2009, 51 fewer cases compared with 2008.
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Conclusion
The notion of the Balanced Scorecard is simple but extremely powerful if implemented well. Anglo American had a huge drop from 2008 to 2009 in their net profit percentage, Return on Capital Employed and Earnings per share. They improved in their current and acid test ratio in 2009. In 2009, debtors days increased. In 2009, they had a high mortality rate and occupational disease increased. To achieve their aim to be the leading global mining company - through world class assets in the most attractive commodities, operational excellence and a resolute commitment to safe and sustainable mining. www.angloamerican.com Customer acquisition through expansion of marketing strategy and achieving a set target of $2 billion in annual cost savings and efficiency initiatives must be prioritized. This will be aimed at achieving profitability, cash flow and organizational growth. However, effectiveness of internal control and risk management is needed to for monitoring performance, Skills development, health, safety, customer satisfaction and customer retention. Overall, Anglo Americans performance is good, not as good as their competitor (Bhpbilliton).
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Calculation Appendix
1. Workings for return on capital employed
Is calculated as follows: Total profit from operations and associates*100/ Capital employed (total issued share capital+ reserve+ non-current liabilities)
Anglo American
2008 8972*100/ (21,756+14,778) = 25% 2009 4436*100/ (21303+28069) = 9%
BhpBilliton
2008 24,145*100/ (39,043+20,487) = 41% 2009 12,160*100/ (40,711+26,209) = 18%
Anglo American
2008 6,120*100/26311 = 23% 2009 2,912*100/20,858 = 14%
BhpBilliton
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3. Current ratio
Is calculated as follows: Current Assets/Current Liability
Anglo American
2008 9,305/ 13,124 = 0.71:1 2009 10,411/6,745 = 1.54:1
BhpBilliton
2008 21,680/ 16,478 =1.32:1 2009 22,486/11,850 = 1.89:1
Anglo American
2008
BhpBilliton
2008 (21,680 232)/ 16,478 = 1.30:1 2009 (22,486 200)/11,850 = 1.88:1
Anglo American
2008 (94+2,929)*365/26,311 = 42 days 2009 (206+3,348)*365/20,858 = 62 days
BhpBilliton
2008 (9,801+720)*365/59,473 = 65 days 2009 (5,153+762)*365/50,211= 43 days
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Bibliography
Bose Sanjoy and Thomas Keith. (2007) Applying the balanced scorecard for better performance of intellectual capital Journal of Intellectual Capital, Vol.8 issue 4, pp.661-662 Bigliardi Barbara and Bottani Eleonora. (2010) Performance measurement in the food supply chain: a balanced scorecard approach Facilities, vol. 28 issue 5/6, pp. 252-253 Bigliardi Barbara and Bottani Eleonora. (2010) Performance measurement in the food supply chain: a balanced scorecard approach Facilities, vol. 28 issue 5/6, pp. 252-253 Gurd Bruce and Gao Tian. (2008) Lives in the balance: an analysis of the balanced scorecard (BSC) in healthcare organizations International Journal of Productivity and Performance Management, Vol.57 issue 1, pp. 12-13 Johanson Ulf, Skoog Matti, Backlund Andreas, Almqvist Roland. (2006) Balancing dilemmas of the balanced scorecard accounting, auditing and accountability journal, Vol.19 Issue 6, pp.844- 845. Johanson Ulf, Skoog Matti, Backlund Andreas, Almqvist Roland. (2006) Balancing dilemmas of the balanced scorecard accounting, auditing and accountability journal, Vol.19 Issue 6, pp.849-850. Kaplan Robert S and Norton David P. (1996) the Balanced Scorecard: Translating Strategy into Action Boston: Harvard Business School PressKaplan Robert S and Norton David P. (1996) the Balanced Scorecard: Translating Strategy into Action Boston: Harvard Business School Press Kaplan Robert S and Norton David P. (2002) the Balanced Scorecard: Translating Strategy into Action. Harvard Business School Press Kaplan Robert S. (2005) How the balanced scorecard complements the McKinsey 7-S model Strategy & Leadership, Vol.33 issue 3, pp.41- 42. Niven Paul R. (2005) Balanced Scorecard Diagnostics: Maintaining Maximum Performance. John Wiley & Sons Niven Paul R. (2008) Balanced scorecard step-by-step for government and nonprofit agencies. John Wiley and Sons Meena Chavan. (2009) The balanced scorecard: a new challenge Journal of Management Development, Vol.28 issue 5, pp.398-399.
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Voelpel, Sven C, Leibold Marius, Eckhoff Robert A (2006) The tyranny of the Balanced Scorecard in the innovation Economy Journal of Intellectual Capital Vol.7 Issue 1, pp. 43-60. http://www.angloamerican.com/aal/about/ataglance/ http://www.angloamerican.com/aal/siteware/docs/scorecard_2009.pdf http://www.angloamerican.com/aal/about/guiding_values/ http://www.angloamerican.com/aal/development/safety-and-health/safety/performance/ http://www.angloamerican.com/aal/development/safety-and-health/safety/case-studies/ http://www.angloamerican.co.za/about-us/our-history.aspx http://www.angloamerican.com/aal/about/operate/ http://ar09.angloamerican.solutions.investis.com/downloads/Anglo_American_2009_Annual_Re port.pdf http://www.angloamerican.com/aal/development/emps/equality-and-diversity/ http://www.angloamerican.com/aal/development/emps/skills-development/ http://www.angloamerican.com/aal/business/thermal_coal/performance/
http://www.angloamerican.com/aal/development/our-performance/responsible-investment/businessin-the-community/
http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default. aspx http://www.bhpbilliton.com/bbContentRepository/docs/090812BhpBillitonPreliminaryResultsN ewsRelease.pdf http://www.bhpbilliton.com/bbContentRepository/docs/sustainabilitySummaryReport2009.pdf http://www.bhpbilliton.com/bb/peopleEmployment/employmentPrinciples.jsp http://www.bhpbilliton.com/bb/peopleEmployment/employmentPrinciples.jsp http://www.bhpbilliton.com/bbContentRepository/docs/annualReport2009.pdf http://www.bhpbilliton.com/bbContentRepository/docs/annualReport2009.pdf(2.8-2.10) http://www.bhpbilliton.com/bb/peopleEmployment/employmentPrinciples.jsp
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