ACCA P5真题答案.docx

ACCA P5真题答案.docx

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ACCAP5真题答案

AdvancedPerformanceManagementAnswer

Thursday4December2014

1

To:

TheboardofBoltzman

From:

AAccountant

Date:

December2014

Subject:

AcoherentapproachtoperformancemanagementatBoltzman

Thisreportbringsthedifferentinitiativestogetherusingtheperformanceprismframework.Thesuggestedperformancemeasures

areevaluatedandthenusedinabenchmarkingexerciseofBoltzmancomparedtoGeneralMachines.Finally,thequality

improvementinitiativeiscommentedupon.

（i）

Performanceprism

Theperformanceprismhasfivefacetswhichattempttounifyvariousmethodsofperformancemanagementintoacoherent

whole.Thefacetsarestakeholdersatisfactionwhichthendependsupontheotherfourfacetsofstakeholdercontribution,

strategies,processesandcapabilities.Thefailuretolistentoshareholderconcernsmayleadtoperformancemeasurement

whichisdrivenbyinternally-derivedstrategies.Bytakingthewiderviewofferedbytheprismandbyfocusingonstakeholders,

themodelmighthelptoavoidthisproblem.

Theanalysisofstakeholderpowerwillassistinansweringquestionsassociatedwithtwofacets:

thoseofstakeholder

satisfaction（whatdotheydesire?

）anditmayalsoprovideideasonhowthestakeholderscancontributetothesuccessof

Boltzman.Forexample,therelativelyweakpositionofsuppliersmayleadBoltzmantobeabletopushthemtomake

improvementstothequalityoftheircomponentswhilemaintainingthesamesellingprices.

Thebenchmarkingexercisewillhelpinsettingstrategieswithwhichthebusinessaimstoachievestakeholdersatisfaction.It

mayidentifystrategiesforimprovementalthoughherethedatausedwillonlygiveastrategicviewasitisnotoperationally

detailedandsoisunlikelytosupplymuchinformationonprocesses.Itmaybeastartingpointoncapabilitiesasitdoes

supplysomeinformationonemployeepayandsoindirectlytheirsatisfactionandmotivation.

Thequalityinitiativewillimpactonprocessesandcapabilities.Therewillbeaneedtoredesignprocessesinordertomeet

stricterqualitystandards.Therewillbeaneedtoincreasethecapabilitiesoftheorganisationtomanufacturewithlowerfault

ratesandatfinertolerancesandthismaycomethroughgreateremphasisonstafftrainingtoimprovetheircapabilitiesor

alternatively,throughinvestmentintheautomationofprocessestoimprovespeedandaccuracyofproduction.

（ii）

Stakeholderanalysis

Thematrixsuggestsdifferentmanagementapproachesareappropriateforeachgroupofstakeholders,dependingontheir

likelihoodofengagementindecision-makingandtheirabilitytoinfluencethatdecision-making.

Shareholdershaveconsiderablepowerbutdonotwishactiveinvolvementindecision-making（thisiswhattheypaythe

managementtohandle）.Therefore,theymustbekeptsatisfiedbyensuringtheirfinancialtargetsaremet.

Employeeshavelittlepowergenerallyandsoneedtobekeptinformed.However,thereisasub-groupofkeyemployeeswith

skillswhothecompanymustretainandthissub-groupshouldbekeptsatisfiedbytheprovisionofopportunitytodevelop

theirskillsthroughtrainingandworkonnewtechnologies.

Customersarekeyplayersgiventheimportanceofourcomponentstotheirbusinessandthelostrevenueifoneweretodrop

usasasupplier.Therefore,theyshouldbemanagedcloselybyhavingstaffdedicatedtoliaisingwiththemandinvolving

theminproductdevelopment.Thistypeofclosecooperationislikelytobenecessaryinhigh-technologyindustriessuchas

ours.

SuppliershavelittlepowerandBoltzmanshouldbeinapositionofstrengthinnegotiationoverthepriceandqualityoftheir

goods.Theyshouldrequireminimaleffortandtheywouldbeexpectedtobedoingtheworktomeetourneedsasamajor

customer.However,suppliersareacommonsourceofinnovation,sokeepingtheminformedofdevelopmentswouldbe

sensible.Inparticular,goodsupplierrelationswillbeimportantforamovetoJITmanufacturing.

Evaluationofsuggestedperformanceindicators

Performancemeasuresshouldbefocusedontheinfluentialstakeholdersidentifiedabove.

Itisappropriatethatmostoftheindicatorsaredirectedtowardsthekeyplayersidentifiedabove.Returnoncapitalemployed,

economicvalueadded,revenuegrowthandnetprofitmarginareallsuitablemeasuresfortheshareholdersasthesemeasure

financialreturnsacrosstheorganisation–itsefficiencyindeployingcapital,itsabilitytogrowsalesanditsefficiencyinturning

salesintoreturnsforshareholders.

Therearenoindicatorsdirectedatcustomerswhoarekeyplayers.Thisisamajoromissioninthelistofindicatorssuggested.

Itwouldbehelpfultohaveindicatorscoveringtheprice/qualitymixofBoltzman’sproductsandtheirinnovativenatureinsuch

high-technologyindustrysectors.Also,therearenoexternalmeasuresofcompetitiveadvantagegiveninthelistofindicators.

Averagepayperemployeeisapoorindicatorasthisdoesnotfocusonthesub-groupofkeyemployees.Itisappropriateto

haveanindicatorforthisgroupanditwouldbetheiraveragepay（possiblyasapercentageofanindustrybenchmark）which

wouldbevaluable.

15

SuppliersdonothavesignificantpowerorimportancetoBoltzman,beingeasilyinterchangeable.Therefore,itisappropriate

thatthereisnoindicatordirectedatthem,althoughthiswillhavetochangeasJITisintroduced.

（iii）BenchmarkingagainstGeneralMachines

Benchmarkingmethod

Thebenchmarkingexerciseisanexternalonewherecomparisonisdrawnwithamajorcompetitor.Thisisvaluablein

identifyingareasofthecompetitor’scompetitiveadvantageandalsoareasforimprovementwithasimilarbusiness.However,

althoughthismethodcansuggestareaswhereBoltzmancancatchupwithitsmajorcompetitor,itwillnotidentifyhowto

gainadvantageoverGeneralMachines.

Anotherfaultinthismethodofbenchmarkingisthatitwillonlyindicatestrategicimprovementsnotoperationalones,assuch

detailedinformationisunlikelytobeinthepublicdomain.Itmaybesensibletoconsiderfunctionalbenchmarkingwitha

world-classcompanyfromanotherbusinesssector.Boltzmancouldsharedetailedoperationaldatawithouttheworryofloss

ofconfidentialinformationdirectlytoacompetitor.Thisiscommonlydonewherequalityinitiatives,suchasatBoltzman,are

beingintroduced.Boltzmanmayfindthatitscustomersarealreadycollectingprocessqualitydataandwouldbewillingto

sharewithatoptiersupplier.

Benchmarkingresults

Boltzman

GeneralMachines

Returnoncapitalemployed

Economicvalueadded（$m）

Operatingprofit

15•5%

9•2%

2,907

（663）

1,882

（718）

lesstaxcharge

lesstaxbenefitofinterest

（81）

（88）

––––––

––––––

NOPAT

2,163

1,076

WACC

11%

11%

Capitalemployed

18,785

20,373

Economicvalueadded（=NOPAT–rC）

97

（1,165）

Revenuegrowth

Averagepayperemployee（$p.a.）

Netprofitmargin

6.4%

54,618

8•2%

1.0%

52,299

3•3%

Otherindicators:

Productdevelopmentcost/Revenue

Toptiersupplierstatus（outofpossible20）

11•2%

13

10•2%

14

[Tutornote:

ROCEfiguresarebasedonyearopeningfiguresalthoughyearclosingfiguresareacceptable.Creditwasalso

givenifadjustmentofEVAforproductdevelopmentcostswasconsidered.]

Twonewindicatorshavebeensuggestedbasedonthepreviousanalysisofstakeholders.Itwasidentifiedthattherewasa

majoromissionofmeasuresassociatedwithcustomersandsothelevelofproductdevelopmentspendingandthecompany’s

statusasamainsuppliertolargecustomersareconsidered.Theproductdevelopmentindicatorwilldemonstratethepotential

forinnovationinproductsandpossiblegrowthofthebusiness.Thesupplierstatusgivesameasureofthecustomers’

perceptionofqualityofthebusiness’sproducts.

TheresultssuggestthatBoltzmanisdoingbetterthanGeneralMachinesfinancially（ROCE,economicvalueaddedandprofit

margin）andhasbettercurrentandpossiblyfuturegrowthprospects（revenuegrowthbeingdrivenbyhigherproduct

developmentspending）.TheoneareaofweaknessidentifiedrelatestosizewhereGeneralMachineshasahigherrevenue

andmoretopcustomeraccountsbutwiththehighergrowthofBoltzman,thismaynotlastlong.

（iv）JITinitiative

TheJITinitiativewillbringgreatbenefitstoBoltzmanbutwillalsoplacenewdemandsonmanagementinthebusiness.It

willfitwellwiththemovetoleanmanufacturing.

Thedifficultiesinvolvedinintroducingjust-in-timemanufacturingbeginwiththeneedtoforecastdemandaccuratelyinorder

totimemanufactureasrequired.Thisrequirescloselinkstoourcustomerswhichshouldbepossiblegivenourstatusasa

toptiersupplier.

Ifweareonlyproducingtoorder,thenwecansufferifourownsuppliersfailtomakedeliveriesofsufficientqualityandon

time.Thesuppliersusedatpresentarebulksuppliersandmaynotbeusedtothelevelofqualityandabilitytodeliveron

timewhichJITrequires.Wewillneedtoperformadetailedreviewofoursupplychaininordertoidentifythosesuppliers

whocanmeetourneedsnow,orelsebebroughtuptothatstandard.Wemaythenpartnerwithafewsuppliersinorderto

helpthemtoimprovetheirstandardsofserviceandqualityofcomponents.

Byrestrictingthenumberofsuppliers,wewillbemoreopentodisruptionofoursupplychain.Wemaywishtokeepour

supplierslocaltothemanufacturingsitesbut,ofcourse,thisrestrictsfurtherourchoiceofsupplierandsoincreasestheir

bargainingpowerwithus.

16

AfurtherchallengewillbethechangeinmindsetwhichwillcomefrommovingtoJITwherethefocusofeffortisnolonger

justoncostreductionbutalsoo