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Strategic Choice Formulation and Implementation


The Centr plc is an organisation, which gives quality computer service to the
number of countries. The organisation is now using a standard costing and
budgetary system. But the organisation needs difficult to manage with that
system due to the large employers and financial performance of the
organisation. So the company needs another cost and budgetary system which
helps the organisation to meet its organisational objectives and customer needs.
Some of the staffs in Centra plc are saying about the introduction of a balanced
score card to analyse the organisations financial performance. But the operation
manager is asking about the introduction of a total quality management (tqm) to
meet the customer needs and organisational goal. So let us discuss the two
systems, balanced scorecard and the standard budgetary system based on the
Centra electronics and we can compare the difference between these two

Balanced Scorecard via Standard Cost and Budgetary

System in Centra
Let us analyse the both standard budgetary system and balance scorecard
system on the basis of the centra electronics pc and can understand the
differences and advantages and disadvantages of both.

Standard cost and budgetary system

The standard cost and budgetary system planning and controlling the operations
of the organisation. It predicates the cost of the manufacturing products during
current and future manufacturing operations.

Advantages of Standard Costing System in Centra

There are many advantages of the standard costing system. They are:

➢ It analyses all cost function and disclosing the inefficiencies of the

manufacturing operations.
➢ It helps to make plan on efficient economical operations.
➢ It defines the cost responsibility and authority.
➢ It gives clear idea of the company’s performance.
➢ It gives the picture of the variances between the actual performances. So
it helps to further manufacturing decisions.
➢ The reporting data has no delay. We get the information quickly by using
the standard costing system. So the company can take actions very soon.

The uses of standard cost budgeting system are:

➢ It makes the budget
➢ It controls the costs and measuring efficiencies
➢ It will reduce the costs
➢ It sets the prices of sales
➢ It decides the costs of inventories

Let us look on the balanced scorecard and its implications in


A balanced score card is a management tool which balances the organisations

financial performance, internal operations, innovations etc...

The balanced score card is using in all government and other organisations, and
globally to coordinate business activities through internal and external
communications and evaluate and monitor the organisational objectives.

Adapted from Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management
System,” Harvard Business Review (January-February 1996): 76.

The balanced score card does not provide an accurate score and a clear
recommendations. It is only a list of matrices. This is one of the main
difficulty in applying the balanced score card. The balanced scorecard will
not answer the unanswered questions.

The four perspectives of the balanced score card are:

➢ Financial
➢ Customer
➢ Internal process
➢ Innovation and learning

From the two standard system for measuring manufacturing costs we can
understand that compared to the standard costing system in Centra Electronics
Plc ,the balanced score card is not efficient. Because we can see that in balance

score card it does not measure the accurate score. If the measurement is not
accurate it will affect the decision regarding the manufacturing operations. But
now a days we can see that there is wide applicability of balanced score card,
but from the study it can be noted that it is not suited for a company like Centra
Electronics Plc. Centra Electronics Plc is a largest company which provides
computer upgrading and other services globally. If we choose, the balanced
Scorecard system there will be many problems regarding the anticipated
production. In standard cost system it measures the costs and prepares budget.
So the balanced score card system is not appropriate for a company like Centr
electronics plc.

Let us look on the concept TQM policy regarding Centra

Electronics Plc.
The operation manager of the Centa Electronics suggested implementing the
Total Quality Management System (TQM) in the organisation and analysing the
possible costs and benefits associated with implementing TQM in the company.
Let us look on the concept of TQM.

Tqm is a management policy that helps to integrate all the functions of the
organisation. It includes production, marketing, design, customer needs etc.It
focuses on the need of customers and the objective of the organisation. It
organises the entire thing in an organisation. Previously it was applied only in the
manufacturing area but presently it is applying in all the areas of organisation.
We can see the public sector organisation where tqm is applying as their
organisation strategy.

The main functions of tqm include

➢ The contact between the management and employees

➢ It meets the needs of the customers
➢ It reduces the product cost and service cost
➢ It empowers the employee
➢ It brings involvement of employees
➢ It helps to improve the plans of the organisation
➢ Improves the leadership and team
➢ It helps to strategic planning

The principles of tqm are the following

➢ Commitment to the management
➢ It plans and directs the organisation
➢ It check the activities
➢ Employee empowerment
➢ Fact based

➢ Continuous improvement
➢ Customer focus

The implementation of TQM

TQM helps to continuous improvement in work. By using tqm the corrections can
be made very easily. The most important benefits regarding the tqm are that the
mistakes can be eliminated. Let us look on the prevention method of TQM.

➢ It prevents the mistakes occurring in an organisation

➢ Where mistakes can’t be cleared, then in the next process it detects to
prevent the mistakes to happen.
➢ When mistake happened, it prevents the production and starts production
after clearing

Let us look on the Implementation and likely costs and benefits of a organisation
while the introduction of TQM.

The TQM can implement on the basis of the condition of the organistion.If an
organisation in a state where employers are sufficient. If the organisation has a
good tie up with environment and ready to accept the change, the tqm can be
easily implemented. If an organisation is week, lack of employment facilities,
production department, etc...The tqm implementation will not bring any benefit
to the organisation. In short the tqm can implement only if the organisation is
healthy. Certain level of threat is there for initiating the tqm.The organisation
and employers should ready to a change.

For the successful implementation of TQM a firm needs to

follow the eight key factors, they are:
➢ Ethics
➢ Integrity
➢ Trust
➢ Training
➢ Teamwork
➢ Leadership
➢ Recognition
➢ Communication

These eight elements can be divided into four different

types on the basis of the functions.
1. Foundation…It includes ethics, integrity and trust

2. Building Bricks….It includes training teamwork and leadership

3. Binding mortar…Communication

4. Roof………….Recognition

Without these four elements, we cannot successfully implement TQM.So there

should be a key concern on these elements before implementing TQM.A model of
the TQM originated by a scholar called Oakland (1989) are the following. It is a 4
pillar model which brings the customers requirement into the model system.

The Four-Pillar Model Of TQM

The total quality management tool can Identify, analyse both qualitative and
quantitative data for business analysis.

The following tools are commonly using in understanding the

business problem. They are:
➢ Pie charts and Bar graphs
➢ Histograms
➢ Run chart
➢ Pareto Charts analysis
➢ Force field analysis
➢ Cause and effect, Fishbone diagram
➢ Focus group
➢ Brainstorming and affinity diagrams
➢ Tree diagram
➢ Flow charts and modelling diagram

The implementation of TQM will bring lots of benefits to the organisation because
by analysing all the functions of the organisation it helps the organisation to
make the decision regarding the production.

It will bring the accurate results regarding the manufacturing costs of the

The likely costs and benefits of implementing TQM in Centra Electronics Plc

The swot analyses of the company in a detailed manner are the following...

The Cost of TQM

Most of the countries are thinking that the costs of the introduction of TQM exceed the
benefits it produces. So there is lots of research had been taken place regarding the costs of
implementing TQM in an organisation. There were results that the direct and indirect costs of
quality problems exceed the costs of implementing TQM in an organisation.
There are prevention costs when implementing a TQM in an organisation. It is the costs
which occurred before the implementation. It includes

Prevention costs
➢ The requirements of the product: The setting up of materials, the processes, the
services, products, etc are come under the requirement of the product. It is a
prevention cost.
➢ Quality check: The plan for the quality maintenance, reliability, the stability, the
operational production and inspections comes under here.
➢ The assurance on quality: The proper evaluation about quality.
➢ Training: The proper development and preparation of training processes.

Appraisal costs
➢ Verifications
➢ The audits of quality
➢ Evaluation of vendor comes under the appraisal costs.

Failure costs.
The failure costs can be divided into three depending on the internal and external failure. The
internal failure is occurring when the organisation can’t meet the quality standards. These
➢ Waste: Holding of stocks because of errors, poor communication and poor
organisation comes under this category.
➢ Scrap-the defective material
➢ Rework: The clearance of the defective material
➢ Failure analysis

Let us look on the external failure costs

It means the costs, which happened when the product failed to meet the quality standards, but
it will detect only after the customer receives the item.
➢ Repair..servicing of the returned products
➢ Warranty...The costs for the items replaced for the warranty
➢ Complaints...The costs associated with the customer’s complaints
➢ Returns...Transportation, and handling of returned items.

With the introduction of TQM in Centra Electronics Plc, the organisation has some likely
costs and benefits. Let us go through in it.

Calculating costs
The money that invests for while implementing TQM is spending for the two different ways,
either in the form of initial costs in the form of training and development or the spending
required maintaining the program without significant changes.

Initial costs
It includes the costs for implementing the TQM in an organisation. It includes the costs of
training and development, most of them are comes under the category of opportunity cost. It
does not include the cash flow out of the economy.

Implementations of team skill and team development are one of the major factors for
company’s development. The training costs not considered the company’s staffs. The most
of them are already trained skilled staffs. So it is not included in the initial costs.

Calculating benefits
The benefits of the TQM are the following
➢ Reduction in manufacturing costs...The calculations of manufacturing was based on
the company’s management system. A reduction in cash flow and will reduce the use
of temporary employees.
➢ Reduction in scrap: Scrap reductions are the improvements of an organisation. This
will help the companies to make a direct relationship between the production team
and the operator. Reduction in material scrap will results an actual cash flow savings.
Floor scrap was categorized by type and can reduce the efforts of production line
teams, scrap teams, the company's manufacturing and engineering groups, and
suppliers. By certifying its suppliers, the company was able to reduce the number of
lots rejected and scrapped at receiving.

➢ Reduction in overhead costs


The TQM strategy helps to bring continuous improvement in the manufacturing sector .This
strategy helps to integrate the traditional quality control function to the production line.

Intangible benefits
The companies are always looking about the tangible benefits, but there are some intangible
benefits associated with the company. The one of the major benefit of implementing TQM is
that it will change the culture of the people’s thinking, attitude etc, to the organisation. Due to
the continuous skill development, the employees will be improved.
So such employees will solve the problem very effectively. If any time a problem will happen
to the economy the employers will take crucial decisions regarding the problem because the
employers are working on the basis of TQM philosophy.
Another intangible benefits associated with the organisation is that it will bring a customer
satisfaction with its products and services. The team spirit in the organisation will remove the
barriers of the organisation. So the employers will feel a good effect on themselves and also
to the company and they will show a higher level of sincerity.


In this case, the authors found that implementation of TQM were a wise and worthwhile
investment. If it is implemented properly and in true spirit, TQM can definitely keep an
organization at the leading edge in the marketplace.
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The tqm brings the problem solving techniques to the organisation. While
applying tqm in the company’s business operation it will bring maximum return
over the investment. The implementation will bring an effective foundation for
human capabilities and the fuller utilisation of all the resources. This will bring
the business organisation into the path of excellence.

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