Q1.Assess how the Balanced Scorecard has developed since its conception by Kaplan and Norton in the 1990’s and discuss its’ key weaknesses as strategic performance management tool.

Framework Answer (20 marks)

Introduction (2 marks)

·         Explanation / definition of a BSC

·         Significant evolution - from performance measurement tool to strategic management system

First generation (4 marks)

·         Set of financial & non-financial performance measures

·         Arranged by perspective

·         Vaguely linked to strategy

Second generation (4 marks)

·         Strategic objectives included to help select measures

·         Strategy maps developed to show relationships between objectives

·         Strategic themes used to group similar objectives together on a strategy map

Third generation (4 marks)

·         Destinations statement included

·         A description of org. in the future (usually 3 – 5 years)

·         Builds consensus on objectives & easier to agree targets

Key Weaknesses (6 marks)

·         Cause & effect relationships are assumptions & require validation

·         Time lag between cause & effect – lacks time dimension

·         Can encourage managerial remoteness (‘management from the cockpit’)

·         Time,  cost & commitment ti implement

·         Ignores some stakeholders (employees, suppliers, partners, regulators) -  all key stakeholders need to be satisfied, not just the shareholders

Q2. “The budgeting process is broken and in order to achieve organizational agility, flexibility and adaptability we need to fundamentally change the way we manage businesses”.

Evaluate this statement, assessing how advocates of Beyond Budgeting propose this change is made (20 marks)

Framework answer (20 marks)

Criticisms of annual budgeting (6 marks) – 1 mark per point

·         Takes too long

·         Costs too much  

·         Quickly out of date

·         Creates rigid plan (less able to react)

·         Gaming behaviour 

·         Creates a fixed performance contract 

·         Creates annual competition for resource allocation

·         Alternative relevant reasons accepted

Beyond Budgeting approach (10 marks) – 1 mark per point

·         Modern environment need agility & flexibility for fast response to opps. &  threats

·         Traditional mgmt. approach (top down / command & control) outdated

·         Managers need authority act immediately and decisively

·         Not constrained by a fixed and outdated plan

·         Control relinquished in decentralised structure to front-line teams, with advantage of local knowledge & close customer relationships

·         Continuous and inclusive planning

·         Ambitious medium-term goals, not short-term fixed targets

·         Local management set own targets to beat competition (not on internal negotiations)

·         Rewards based on performance relative to competition & peers (not fixed annual targets(

·         Monitor performance using KPI ranges

·         Leaders using “a light touch” to manage the business - only interfere if performance is outside pre-determined range

·         Controls based on fast, frequent feedback; not budget variances

·         Teams trusted to regulate their performance; not micro-managed but help accountable

Evaluation (4 marks)

·         Summary of key benefits of BB vs benefits of budgeting

·         Reasonable conclusion

Q3.Assess the role of the Balanced Scorecard as tool for communicating strategy.

·         BSC intro (2 marks)

·         Objectives, measures, targets and initiatives by perspective (2 marks)

·         4 perspectives (1 mark each, max. 2 marks)

·         C&E relationship between perspectives (2 marks)

·         C&E relationship between objectives – strategy map (2 marks)

·         Destination and objectives statements (2 marks)

·         Assessment (4 marks)

·         presentation & structure (4 marks)

Q4.Advocates of the “Beyond Budgeting” philosophy claim that the twelve principles should be implemented as a whole, holistic framework rather than on a piecemeal basis. Describe the key features and characteristics of Beyond Budgeting and advise why this management system might be suitable for organisations operating in fast changing environments (20 marks)

·         Introduction (2)

·         Key Features (2 marks per developed point, max 10)

• Authority devolved to front-line teams close to customers
• Teams trusted but accountable for performance
• Targets set by team relative to competition / peers (not negotiated targets)
• Staff motivated by self-imposed, stretching targets & team ethos
• Teams regulate & improve own performance (not micro-managed)
• Leaders using “a light touch” to manage the business
• Control achieved by monitoring KPIs within performance ranges
• Top mgmt. only intervene if performance outside pre-determined range
• Rewards based on beating competition & continual improvement

(not fixed annual target) 

• Culture based on competitive success
• Performance potential unlocked

·         Why fast moving (2 marks per developed point, max 6)

• Planning is a continuous process (not annual event) 
• Continual assessment of opps. & threats - react quickly
• Activities continually coordinated (not once a year)
• Flexible access to resources (not annual budget allocations)
• Use rolling forecasts based on KPIs that drive value

·         Conclusion (2)

Q5  Competitor Analysis (20 marks)

The saying “ignore your competitors at your peril” has led to an upsurge in the search for competitor intelligence. Outline the purpose of competitor analysis, identify good sources of intelligence and discuss what should be done with the data once it has been gathered (20 marks)

Purpose (5 marks)

·         Competitive advantage is only achieved relative to other players

·         Competitor knowledge needed to create competitive advantage

·         A thorough & structured approach to identifying competitors, assessing their strengths & weaknesses and the threats they pose

·         Significant amount of info. needed e.g. sales, market share, costs structure, marketing strategy, new products, customer base & satisfaction, supplier terms, strategic partnerships and so on

·         Like jigsaw puzzle – need each piece to get an overall picture

Sources (9 marks) – 1 mark each, max 3 for each type;

Actions (6 marks) 2 marks each point

·         Develop / revise strategy – change direction etc

·         Play to your competitive strengths

·         Attack competitor weaknesses:

·         Seek favourable competitive position

·         Etc