Success Factors Enabling Managers Create Comprehensive Strategic Plans

Success Factors Enabling Managers Create Comprehensive Strategic Plans

Instructions/Descriptions

Discussion # 1

The balanced scorecard is comprised of four principles, the learning and growth perspective, the internal processes perspective, the customer’s perspective and the financial perspective. The potential benefits from using the balanced scorecard is that a framework is created to identify and organize the direction of change for the company.

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The balanced scorecard clearly defines critical success factors, which managers can focus on achieving success in these areas. These critical success factors enable managers to create comprehensive strategic plans. (Malagueno, Lopez-Valeiras, Gomez-Conde, 2018) Another benefit is that managers can view the overall activity of the company and how their efforts contribute to the company’s success.

For effectiveness the balanced scorecard should have the information easily accessible, but also only to those who are authorized. The balanced scorecard should include a process that provides for the reliability and accuracy of the information.

It represents at each level the responsibilities that are involved with the overall strategy and communicates the priorities of the company’s strategy. (Aureli, Cardoni, Del Baldo & Lombardi, 2018)

The company’s plan should be communicated clearly to all of the employees and managers. The balanced scorecard should be connected to the incentive plans of the managers and employees as well. The balanced scorecard should be illustrated as a strategy map, showing how each perspective is connected, this structure insures additional effectiveness and reliability. (Blocher, Juras, Stout & Smith, 2016)

The balanced scorecard is important to identifying the goals, strategy and implementation of success for the company. The balanced scorecard has necessary information and knowledge for the company that helps to communicate actions with strategy. (Quesado, Aibar & Lima Rodrigues, 2018)

The strategy map uses information from the balanced scorecard to reflect and implement strategy to increase financial performance for the company. The financial perspective is the main goal in the strategy map.

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The learning and growth perspective is the foundation for most companies and the internal process perspective is what implements successful performance for the customer perspective, happy customers increase the financial performance of the company.

When creating a strategy map it is important to expand it by adding in sustainability, this helps companies further their impact in three areas of social, economic and the environment. (Blocher, Juras, Stout & Smith, 2016)

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Discussion # 2

A business organization’s success is influenced by managed and controlled factors of a competitive advantage, such as price, quality, cost optimization, and technological innovation (Stončiuvienė et al., 2020).

In today’s global marketplace, companies strive to improve their economic indicators using the best technologies and increasing productivity, which can lead to changes in the cost structures (Pawlyszyn, 2017).  While many techniques are available, this forum will examine activity-based costing and quality management.

Success Factors Enabling Managers Create Comprehensive Strategic Plans

Activity-Based Costing

Activity-based costing (ABC) assigns resource costs to products, services, or customers based on the activities used to consume resources (resource consumption drivers) and costs of activities performed for the cost objects (activity consumption drivers) (Blocher et al., 2019).

In other words, both direct and indirect costs are assigned to products or services. Activity-based costing is the first accounting practice to allocate indirect costs to products or services based on activities.  Determining these costs and the cause of the costs makes it possible to assign the actual costs of the process to the finished product (Pawlyszyn, 2017).

Success Factors Enabling Managers Create Comprehensive Strategic Plans

Activity-based costing provides a more realistic cost of producing a product, thereby helping the organization determine what products to produce, how to produce them, and how to market.  For example, a company may manufacture two products.  Based on direct costs to make the products, Product A is more profitable than Product B.

However, ABC takes into account the indirect costs of manufacturing (equipment, facilities, utilities, etc.), along with the marketing costs of getting products to the customers.  The indirect costs of Product A may significantly decrease the overall profit of the product.

Success Factors Enabling Managers Create Comprehensive Strategic Plans

Product B may have lower indirect costs resulting in increased profit. At this point, the company can decide if it continues with both products, improves manufacturing processes, or looks for other ways to reduce costs.

Activity-based costing benefits companies as it provides better information.  The information results in better profitability measures, better decision making, process improvement, improved planning, and cost identification of unused capacity (Blocher et al., 2019).

Pietrzak et al. (2020) report that the disadvantages of activity-based costing include the time-consuming and costly collection of information. Also, managers may not understand the information, the ABC reports cannot be used for external reporting as they do not conform to generally accepted accounting principles, and organizations change constantly requiring costly and time-consuming ABC modifications.

Therefore, companies with little indirect costs may not benefit from this costing method. Companies considering this method should be aware of problems and assess whether or not they should implement the activity-based costing method (Pietrzak et al., 2020).

Success Factors Enabling Managers Create Comprehensive Strategic Plans

What Does Quality Have to Do with It?

No matter the price of a product, customers desire quality in their purchases. Modern quality management requires customer satisfaction, prevention to inspection, and recognizes that management is responsible for quality (Schwalbe, 2018). Blocher et al. (2019) provide the role of accounting in quality management and control, showing that accountants can provide managers with relevant and timely information supporting quality initiatives.

It must be recognized that there is a cost associated with quality control. There are the costs of prevention, appraisal, planning, training, auditing, testing, and controlling for conformance to quality standards.  If processes or products do not conform to quality standards, there is a cost associated with scrap, rework, expediting, warranty, recalls, and failures, along with customers’ negative perceptions.

Success Factors Enabling Managers Create Comprehensive Strategic Plans

Cermakova and Bris (2017) stress the importance of quality in products, along with service and delivery, in a global marketplace. While exceeding expectations, companies must find a balance between the right quality and cost.  The authors studied the application of the cost of quality management in one company in Czechoslovakia.

They determined that it is essential to manage the cost of quality and not just the cost of the products, suggesting implementing the PAF model (prevention and cost of appraisal and failure). Employing the model identifies areas where investments can improve quality (Cermakova & Bris, 2017).

Conclusion

To determine the right mix of products or services to offer, companies must manage costs and expenses, along with revenue growth.  By understanding real costs and using techniques such as activity-based costing, the organization can decide which offerings result in the company’s best financial outcome. By offering quality products and managing the costs associated with quality, the firm can increase revenue.

Success Factors Enabling Managers Create Comprehensive Strategic Plans

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