问答题
1.Merkland Sportswear (MS) is the market leader in sportswear in Ceeland, selling a variety of sportswear products under its own well-known brand. It is primarily a product development and marketing business as it contracts out all of its manufacturing to third parties around the world and it mostly sells its products through third-party retailers. It has only one store which is located in the capital city of Ceeland. The purpose of this store is to act as a centre for its marketing activities and to be a tangible representation of the MS brand. However, the main marketing activity for MS is the recruitment and promotion of star sports men and women as MS brand ambassadors. MS tries to have the most well-known sports star in each of the 10 most popular sports in Ceeland as an ambassador.
You are a performance management advisor to MS, brought into the company by the chief executive officer (CEO) to help the board with a number of issues. The first area which the board of MS requires your input is in a review of the existing performance dashboard for MS (Appendix 1). The dashboard is deliberately kept focused as it is for board use and the CEO has indicated that the three performance headings of ‘financial, design and brand’ will be kept at
this time. The board has accepted that there may need to be up to two metrics for each of ‘brand’ and ‘design’ but they want to keep the number of financial metrics at three.
The mission statement of the business is designed to be broadly appealing. It is ‘to inspire Ceelanders to compete’.From a business perspective, the aims are more focused, MS aims to grow as a business and to maximise shareholder wealth. The CEO further clarified the broad strategy to achieve these aims saying, ‘We want to inspire competition not just in our customers but also within the company, to seek our greatest competitive advantage. We will achieve this by creating innovative products which provide reduced risk of injury and enhanced sporting performance supported by the best marketing operation in Ceeland.
In order to assist in providing more detailed strategies to achieve these aims, the board has instituted a review of the competitive position of MS by commissioning a SWOT analysis (Appendix 2).
The CEO has asked that your first task be a review of the current dashboard metrics (Appendix 1). You should then review the SWOT analysis to suggest changes to the dashboard metrics within the constraints which the CEO has outlined.
Also, you are given details on a recent new development in the market. Nush Sportswear, one of the major competitors of MS, has recently suffered a scandal which has been widely reported. An investigative reporter discovered that one
of the suppliers who manufactured sports shoes for Nush had been using child labour. The country in which the manufacturer worked had rules prohibiting child labour, but enforcement was very weak. This story has been widely
covered in the media and has led to consumer boycotts and a review by the Ceeland business regulator into Nush’s sourcing policies. It has been discovered that this is common practice in the sports footwear business where manufacturing is outsourced to such countries.
MS’ shareholders have reacted with alarm to the potential damage that this could do to MS’ brand. They have asked the board to consider changing their policy of outsourcing footwear manufacture. The board is considering two alternative responses:
1. Review and ensure that all outsourced footwear manufacture complies with appropriate employment terms and conditions (where necessary manufacturing would move to third-party companies in countries with appropriate regulation and enforcement); or
2. Create a manufacturing operation for MS in order to have full control of operations.
In response 1, the review of existing third-party manufacturers is being performed by a team from the procurement department. They have also considered the impact of moving all footwear sourcing to more strictly regulated environments. The results of this investigation are given in Appendix 3 and the board wants an evaluation of the qualitative and quantitative impact of this response.
In response 2, the board is considering setting up a factory for the manufacture of all MS footwear. They want to understand the impact of this on MS’ existing performance metrics. First, they need a forecast of the profit from the factory as there are three distinct economic scenarios under which it might operate (see Appendix 4 for details).
Second, the board wants to know how the new factory will impact on the existing performance dashboard. However,since the probabilities of these economic scenarios are under debate, the board has said that they want this work to be independent of the results of the profit calculation from Appendix 4. Therefore, the board wants you to use an estimate of $103m profit before interest and tax from the new factory to evaluate the impact of the new factory on the dashboard. (This estimate is before product development and marketing costs as it only represents the manufacturing operation at the factory.)
Finally, the consultant who did the SWOT analysis has mentioned to the board that if they are thinking of reviewing their existing strategies, then they should consider using the value chain to secure competitive advantage. The CEO thinks that you should assess the implications of using the value chain for the performance management of MS. (An outline of the value chain is given in Appendix 5.)
问答题
(i) Assess the existing five metrics (Appendix 1). Using the SWOT analysis in Appendix 2, make suggestions for improvements within the constraints outlined by the CEO.
Note: You should ignore the impact of the Nush scandal in this part of the question. (16 marks)
【正确答案】To: The Board of MS
From: A Accountant
Date: June 2015
Subject: Performance management at Merkland Sportswear (MS)
This report addresses a variety of performance management issues at MS. The existing choice of performance metrics in the dashboard is assessed in the light of the strategy and SWOT analysis. The impact of the child labour scandal for MS is addressed.Specifically, the impact the proposed new factory will have on the metrics is considered. Finally, suggestions are made for the use of the value chain analysis in management of this factory.
(i) Existing performance dashboard
In assessing the choice of metrics in the dashboard, it would be best to begin with a clear picture of the aims and broad strategy of MS. The main aims appear financial and this is appropriately reflected in the main heading of the dashboard and the fact that this heading has three metrics not just the two in the other areas. The first aim is growth, which is reflected in the change on previous year data given in the dashboard and most specifically in the revenue data given. The trend can be seen with three years of data reflecting the growing activities of MS. The second aim is to maximise shareholder wealth. This is measured indirectly through return on capital employed (ROCE). However, as ROCE does not take account of a number of issues (e.g. tax or financing costs), it does not directly measure shareholder wealth. It would be worth considering replacing ROCE with a value-based measure such as economic value-added which over the long term should more accurately reflect shareholder wealth.
The other elements contained in the broad strategy are seeking competitive advantage in two ways:
1. to create innovative products which reduce injuries and improve performance.
2. to be the leading marketing operation in Ceeland.
The current dashboard reflects these strategies in the design and brand headings. However, the metrics used in each seem to lack important aspects of the stated strategies.
The number of design awards won indirectly measures the quality of the products but it does not measure innovation. The number of new products or features on our products would more accurately do this. The design heading does not specifically
address the key advantages mentioned of injury reduction and sporting performance. It will be difficult to provide two metrics which will cover all of these areas. However, if the criteria of the awards are injury reduction and performance and if a metric of number of new products launched is added, then the strategy is broadly covered by two measures.
The strategy of being a leading marketer is partially covered by the existing metrics of brand awareness, although without a comparator it is difficult to gauge whether this is a market leading figure. A more appropriate measure in the context of competitive advantage would be market share and in fact, looking at the data on footwear, we have 32% (= 2m/6·25m) of this important market which is 55% of our revenues (= $150m/$273m). Also, brand awareness is only measuring the
recognition of the brand, not whether there are positive sentiments towards the brand. Market share, however, gives a clearer picture of this as it reflects the purchasing choices of consumers.
The SWOT analysis suggests further possible areas for measurement such as supply chain management, but the board has ruled out new headings on the dashboard. This would have to be indirectly measured through the financial heading by using
a metric such as gross or operating margin. Indeed, it may be worth replacing the absolute operating profit figure with the margin figure for this purpose.
The SWOT analysis also identifies two issues in marketing:
1. There is a linked pair of points – weak IT expertise and the threat of change in marketing channels. This would affect MS’ marketing operations as they may lack the skill to exploit these new marketing opportunities. This issue falls under the brand heading and if it is felt that market share covers brand awareness, as previously mentioned, then the second measure under this heading should address MS’ management of the changes in marketing channels by looking at the number of followers of MS on social media who either read or more actively respond to our social media messages.
2. The loss of a brand ambassador which, as the business has only got 10 of these, may be significant. In addition, the fact that the loss is tied to an injury which should not happen with MS’ products is particularly problematic. This suggests measures under the brand heading of ‘number of ambassadors’ or else requires an injury reduction metric under the design heading – although we already have two metrics proposed under this heading (awards won and new products).
The board will need to prioritise between these issues to decide on a second metric within the brand heading.
【答案解析】
问答题
(ii) Using the data in Appendix 3, assess the qualitative and quantitative impact on performance management at MS of response 1. (8 marks)
【正确答案】Impact of response 1
Change in operating profit due to response 1
【答案解析】
问答题
(iii) Calculate the expected operating profit of the new factory and evaluate the use of this method of decision-making under risk. (6 marks)
【正确答案】Expected profit from new factory
【答案解析】
问答题
(iv) Using 2015 figures as a base, evaluate the impact of the new factory on the values and choice of metrics in the existing dashboard. (10 marks)
【正确答案】Impact of new factory on performance dashboard
MS performance dashboard
Report for the year to March 2015
【答案解析】
问答题
(v) Explain the implications of using the value chain for performance management at MS. (6 marks)
Professional marks will be awarded for the format, style and structure of the discussion of your answer.
(4 marks)
【正确答案】Value chain
Generally, the value chain is a model of business integration showing the way that business activities are organised. This model is based around activities rather than traditional functional departments (such as finance). A key idea is that it is activities which create value and incur costs. The activities are split into two groups: primary ones which the customer interacts with directly and can ‘see’ the value being created and secondary ones which are necessary to support the primary activities. By identifying how value is created, the organisation can then focus on improving those activities through its performance measurement system (the dashboard at MS).
Another feature of the value chain is the idea of a chain. This is the thought that value is built by linking activities and so there must be a flow of information between the different activities and across departmental boundaries. In performance management terms, this will affect:
– information systems which will have to ensure good communication across functional boundaries and
– job descriptions and reporting hierarchies as these will have to reflect activities.
The chain does not stop at the organisation’s boundaries. This is likely to be obvious to MS given the importance of supply chain management but the value chain will allow the organisation to focus on those relationships on which value most
depends.
Specifically for MS, the value chain would emphasise the importance of supplier management and lead times for new product development within inbound logistics, showing how this fed through to the launch of new products and relationships with
distributors in outbound logistics.
The sales and marketing activity of MS is clearly one of its primary areas of value enhancement and its relationship with outbound logistics and the distributors of the products should be notable.
Although the chain shows procurement and technology development as secondary activities, they will be vital for MS. As MS does not currently manufacture their own goods, control of the price/quality balance of supplier relationships will be important and linked to the importance of management of the supply chain noted for inbound logistics. As for sales and marketing,product (technology) development is one of the strategic areas of profit generation for MS and so should be treated as a key area for management activity and thus for performance measurement.
[Tutor note: This answer is lengthy as it tries to cover a large number of acceptable points which can be made in answering this part of the question.]
【答案解析】