Balanced scorecards (BSC) are designed to help managers assess operations and then guide their decision making about any corrective actions that are required.
Read "Using the Balanced Scorecard to Assess and Enhance Magna PC's Performance(Links to an external site.)
." Using the information in Table 1, create a BSC for Magna.You are free to use the provided information to generate additional metrics that you believe are important to include in the BSC.
After preparing your BSC, comment in the discussion board on the following:
- Describe Magna's strategy in terms of how it competes for customers.
- Why do you think Magna is having difficulty in implementing its strategy?
- Is there additional information you would like to have to confirm your conjecture?
- What actions do you suggest Magna take at this point?How will you know in the future if these actions have been successful?
IMA The Association of EDUCATIONAL Case Accountants and Case Journal Study ima Financial Professionals in Business ISSN 1940-204% Using the Balanced Scorecard to Assess and Enhance Magna PC's Performance Norman T. Sheehan* Glea P. Kobusses Professor of Accounting and CPA Scholar Assistant Professor of Accounting Edwards School of Business Edwards School of Business University of Saskatchewan University of Sastarchessan INTRODUCTION The customers for Magna's private-label PCs are large electronic retailers, such as Best Buy, who place their in- You have just been hired as the corporate controller at Magna store brands on the PCs and then sell them in their stores. PC to help investigate its performance issues. Magna PC Magna competes with DataMax and other private-label designs, manufactures, and sells private label PCs. In an PC manufacturers for orders from electronic retailers to sell attempt to gain scale advantages, Magna merged with its reliable PCs with middle-of the-road technology at low prices. main competitor two years ago. Since the merger, Magna is one of the largest private-label PC manufacturers with more EMERGENCY MEETING OF MAGNA'S EXECUTIVE then 6,400 employees at four PC factories of similar size. TEAM MAGNA'S PRODUCTION PROCESSES AND The CEO called an emergency meeting of Magna's executive CUSTOMERS team to review Magna's prior-year performance (see Table 1). Visibly stressed because of an upcoming meeting with Magna manufactures a high volume of PCs on its production investors planned for the next week, Magna's CEO angrily lines. The majority of the parts used in Magna's assembly asked the CFO to explain why the company was unable process, such as the chips, processors, memory drives, to effectively execute its strategy as evidenced by its poor screens, power supply components, and cases, are purchased performance relative to its budget: Was the budget poorly from foreign and domestic suppliers. Prior to being used, done, or does Magna have operational issues that need to be samples of the parts are tested by Magna's quality assurance addressed? The CFO confidently replied that the prior year's department. If Magna's quality assurance staff finds more budget was well done, noting it was reasonable and fully than one faulty part in every 20 tested, the batch is rejected reflected Magna's strategy The CFO added that Magna's and returned to the supplier. inability to execute its strategy must have been caused by Assembling PCs is a relatively labor-intensive process. operational issues. The CFO then quickly explained to the The factory employees are largely semiskilled and have been CEO that she had been so busy dealing with the auditors to trained by Magna to perform simple, repetitive steps. After finalize Magna's year-end financial statements that she had not the PCs are assembled, staff from Magna's quality assurance had time to investigate what may have caused the failure to department test each PC, and any that are found faulty are reach the budgeted numbers. returned to the production line and reworked. IMA EDUCATIONAL CASE JOURNAL 1 VOL. 13, NO. 2, ART. 2, JUNE 1910 OTOMI IMAAfter the CEO's angry outburst, the CFO calls you DATAMAX PC into her office and directs you, the newly hired corporate controller, to use a balanced scorecard (BSC) and the Data Max PC, one of Magna's largest and strongest performance data for Magna and DataMax to deduce the competitors, also manufactures and sells private label PCs cause of Magna's failure to successfully implement its to the same markets as Magna. It has one manufacturing strategy. Although you do not have enough information or plant in the same country as Magna's factories and uses time to confirm your deductions, your report to the CFO production techniques and processes similar to chose used should outline the information you would collect to verify by Magna. The information in Table 2 was obtained from your findings. Data Max's prior fiscal year financial statements and from a PC manufacturers' trade association of which Magna and Table 1. Select Financial and Operating Information from Data Max are members. Magna's Prior Fiscal Year Table 2. Select Financial and Operating Information from DataMax's Prior Fiscal Year Magna PC: Select Financial Information lim millions Actual Budget Net Sales $1.424 8 $1.534 9 DataMax Soloct Financial Information Cost of Goods Sold 5718 8 in millions Actual Net Operating Profit After Tax 1240 8 $2 98 9 Net Sales Average Invested Capital $4, 176 0 $4,080 0 Cost of Good Sold $268. B Net Operating Profit After Tax Magna PC: Select Operating Information Average Incated Capital Number of anplayeds 5.492 PCs Produced and Sold on milions! 2 59 Data Max: Select Operating Information Percentage of Total Working Days Lost to 2.2 2.1% Number of Employees 1.900 Employee Absentediam PC Produced and Sold 780.000 Number of Finished PCs Roworked Prior to Sale 32,000 25,000 Percentage of Warranty Claims for FCa Sold 25% Percentage of Supplier Parts Magna Rejects 1.5% Note: All monetary values are represented in U.S. dollars. Awerage Score from Annual Customer 34 40 Satisfaction Survey IS Excellent Percentage of Employee Tumorer 103 Number of PC Patents Granted to Magna During Fiscal Year Number of New PC Models Successfully Launched During Fiscal Year ABOUT IMA" (INSTITUTE OF MANAGEMENT ACCOUNTANTSI Parentage of Faulty PCs Ratemed by Consumers 2.8% 20% IMA", the association of accountants and financial professionals in Percentage of Returned PCs Created by Wananty 5.6% 10% business, is one of the largest and most respected associations Number of Working Days Last to Strikes 2,500 focused exclusively on advancing the management accounting 3 200 profession. Globally, IMA supports the profession through research, Note: All monetary values are represented in U.S. dollars. the CMA* [Certified Management Accountant) program, continuing education, networking and advocacy of the highest ethical business practices. IMA has a global network of more than 100.000 members in 140 countries and 300 professional and student chapters. Headquartered in Montvale. N.J., USA, IMA provides localized services through its four global regions: The Americas, Asia Pacific, Europe, and Middle East/India. For more Information about IMA, please visit www.imanet.org. IMA EDUCATIONAL CASE JOURNAL 2 VOL. 13, NO. 2, ART. 2, JUNE 1030
