ENTERPRISE PERFORMANCE

MANAGEMENT
ACCT30002

GROUP ASSIGNMENT
SEMESTER 2 2021

Name Student ID Assignment Group 

Anna Shi En Chin 1052381 81
Han Ny Pham 1068303
Yufei Wang 1083174
Hui Yee Tan 1128168

Word count: 1497

Q1.

In the face of rapid technological expansions, the scope of the PC market has been constantly
redefined. For the case of Magna, PCs are considered as multi-functional computers designed
for individual users (Alsop, 2021). Moreover, given the industry’s substantial involvement in
international trade and offshore procurement, this analysis focuses on the PC market
worldwide. 

Since the early 2010s, the PC industry has experienced steady growth in revenue and
consumer demand, underpinned by technological advancement and mass digitisation
(Statista, 2021). Meanwhile, several disturbances have interfered with the progress in recent
years as the industry reaches the declining stage of its life cycle (Statista, 2021). This implies
forthcoming decrease in enterprise participants within the industry and deceleration in
demand. 
 
During 2020, however, the pandemic has contributed to a surge in the PC market’s sales
volume, notably, PC unit shipments and sales have increased by 13.1% and 15.4%
respectively in comparison to previous years (Statista, 2021). Worldwide retail volume of
PCs has reached 391.5 million units, which marks its first peak since 2013 (Euromonitor
International, 2021). Indeed, the global transition to remote learning and working has a
positive net impact on the industry’s performance (Euromonitor International, 2021).
Nevertheless, the pandemic has also led to international logistical delays and material
shortages, posing upstream pressure on the industry’s supply chain (Jeswanth, 2021). Many
industry players are subsequently compelled to seek alternative suppliers for computer parts.

PEST Analysis (Euromonitor International, 2021; Jeswanth, 2021)

Area Issue Impact 

Political Social-distancing restrictions and lockdown protocols around Positive

the world have driven the demand for PCs upward. In the
short-term, the demand is expected to continue to rise.

Border closures have imposed difficulties for export and Negative

import.

Economic Growth in real household discretionary income during the Positive

lockdowns encourages future spending on non-essential items.

Socio- Consumers adapt to the new norm of remote learning and Positive
cultural working due to COVID-19.

Growing popularity in online activities, including gaming and Positive

shopping.

Tendency of consumers being less willing to replace or Negative

upgrade their devices.
 Technologica Technology change, notably the emergence of 5G, provides Positive
l opportunities for industry expansion.

Rapid technology innovation forces companies to constantly Negative

shift their focus to newer products. This leads to a high
elimination rate of existing products.

Porter’s 5 Forces (Alsop, 2021; Jeswanth, 2021)

                                               Competitiveness                                            Attractiveness

H M L H M L

Industry Rivalry X X

Threat of New Entry X X

Threat of Substitutes X X

Supplier Power X X

Buyer Power X X

Overall
X X

The level of competition in the PC market is high due to forecasted declining market growth,
relatively low market concentration and import penetration (Jeswanth, 2021). Despite the
disruption of the pandemic, offshore procurement from Asian countries for parts and
materials is still prevalent given their price competitiveness. Consequently, industry players
worldwide are forced to engage in price competition, which further results in business
restructuring and downsizing (Euromonitor International, 2021). The barriers to enter the
industry are moderate, provided that attaining economies of scale in PC production requires
considerable investments (Jeswanth, 2021). Threat of substitutes exists due to the rising
popularity in tablets and other devices outside the industry. However, high switching costs
for consumers to some extent offset such an impact (Alsop, 2021). Additionally, an aspect of
supplier power pertaining to the PC market that should be considered is the threat of forward
integration. This is quite common given the nature of the industry. The overall attractiveness
of the PC market is moderate. 
Accumulating previous findings, the key challenges for the PC market remain to be
addressing disruptions of part supply while keeping align with the latest technology trend.
The pandemic and its consequences are expected to continue to shape the market’s dynamic
in the next financial year. Accordingly, in order to garner future competitiveness and success,
companies must offer products relevant to the current trend, develop robust rapports with
both upstream and downstream contacts, and implement effective control over inventory and
productions.
Q2.

a. Magna's current strategy

Magna’s business strategy focuses on producing acceptable quality products of middle-of-

the-road technology at low prices and produce in high volume, showing that the company is
applying cost leadership strategy to establish competitive advantage in terms of price in the
market. Cost leadership strategy is derived by economies of scale, including company
efficiency, large size and scale of production (Stankevičiūtė et al., 2012). As Magna is one of
the largest private PC manufacturers in the industry with 6,400 employees and 4 factories, the
company can manufacture with high volume and allocate production costs over a larger
quantity of products. Therefore, even though the lowering prices may reduce its profit
margin, selling at low price goes hand in hand with lowering costs and increasing production
scale will help increase the company’s overall profit. Consistent with the strategy, Magna
does not diversify its product lines but only focuses on a certain number to manufacture to
optimize costs and at the same time reduce efforts in R&D. In addition to focusing on
competitive advantage in price, Magna's strategy in terms of customer competition also aims
to improve product quality and reputation as well as customer satisfaction, as evidenced by
the company setting clear standards for quality assurance of inventory and finished products.
 Measures Magna Magna DataMax
(budget) (actual) (actual)
Net sales $1,539.9m $1,424.8m $462.2m
COGS $918.8m $923.1m $268.8m
NOPAT $298.9m $240.8m $89.2m
Average $4,080m $4,176m $815.6m
invested capital
Efficiency ratio 0.377 0.341 0.567
Profit margin 19.41% 16.9% 19.3%
ROA 7.32% 5.77% 10.94%
Revenue per $252,691 $219,470 $243,263
employee
b. Magna’s curent balanced scorecard FINANCIAL$47,571
Profit per PERSPECTIVE
$37,091 $46,947
employee

INTERNAL BUSINESS
PROCESS PERSPECTIVE
Measures Magna Magna DataMax CUSTOMER PERSPECTIVE
(budget) (actual) (actual)
Number of employees 6,094 6,492 1,900

Magna
PCs produced & sold 2.59m 2.59m 780,000
% of working days lost 2.1% 2.2% -
to absenteeism

PC’s
Number of working 3,200 2,500 - Measures Magna Magna
days lost to strikes (budget) (actual)
% of rejected supplier 3.0% 4.5% - Customer 4.0 3.4
parts
Number of reworks 25,000 32,000 - Balanced satisfaction score
% of faulty PC
return by consumers
2.0% 2.8%
Number of PCs 425 PCs 399 410 PCs
produced per employee
% of returned PC 3.0%
PCs
5.6% 2.5%
Scorecard
covered by warranty
LEARNING AND GROWTH
PERSPECTIVE

Measures Magna Magna

(budget) (actual)
Number of patents 6 8
granted
Employee turnover 5.2% 10.3%
Number of new 4 1
products launched
Q3.
Ratios Magna Magna DataMax
(Actual) (Budget)
Profitability:
Retun on invested capital (ROIC )(%) 5.77 7.33 10.94
NOPAT
¿
Average invested capital

NOPAT 16.90 19.41 19.30

Net profit margin( NPM )(%)¿
Net sales

Net sales−COGS 35.21 40.33 41.84

Gross margin(GM )(%) ¿
Net sales

COGS 64.79 59.67 58.16

COGS ¿ sales ( CTS ) (%)¿
Net Sales

Operating expense ¿ sales(OETS )( %) 18.31 20.92 22.54

Net sales−COGS−NOPAT
¿
Net sales

Efficiency:
Net invested capital turnover ( NICT )($) 34.12 37.74 56.67
Net sales
¿
Average Invested capital

Cost-Volume-Profit Analysis:
Average selling price per unit ( ASPPU )($) 550.12 594.56 592.56
Net sales
¿
Number of PCs produced∧sold

Average COGS per unit ( ACPU )( $) 356.41 354.75 344.62

COGS
¿
Number of PCs produced∧sold
Average net profit margin per unit ( ANPMPU )( $) 92.97 115.41 114.36
NOPAT
¿
Number of PCs produced∧sold

Average expense per unit ( AEPU )( $) 100.73 124.40 133.59

Net sales−COGS−NOPAT
¿
Number of PCs produced∧sold

Note:
NOPAT: Net operating profit after tax
COGS: Cost of goods sold
Magna was unable to execute its strategy, thus underperforming relative to its budget and
competitor, DataMax. Magna has lower ROIC (5.77%) compared to its budget (7.33%) and
DataMax (10.94%) because of lower NPM and NICT.

The lower NPM indicates Magna has generated lower profit per dollar of sales. This may be
due to lower selling price and higher COGS. Magna has decreased its selling price to improve
customer demand and achieve targeted PCs produced and sold as evidenced by lower
ASPPU. The customer demand has decreased because of a few reasons.

First, Magna does not meet target market demand as shown by lower customer satisfaction.
Magna targets customers demanding for reliable PCs at lower price. However, it does not
deliver products with satisfying quality better than planned and DataMax as proved by higher
percentage of faulty PCs returned and percentage of returned PCs covered by warranty. The
high employee turnover implies that new employees were hired and trained, but they may not
be properly trained or lack experience to produce satisfying quality PCs.

Second, rapid technology innovation has led to change in customer demand, consumers
demand newer products. Nonetheless, Magna does not satisfy their needs as shown by lesser
new PCs models launched. Having the right balance of autonomy spurs innovation (Mankins
& Garton, 2017). The way Magna manages the factory employees suggests that Magna gives
limited autonomy to employees, including research and development employees. This limits
employee innovation and new PCs models launched. Third, the lower OETS may indicate
that Magna spends less on advertising and marketing to promote its product, leading to lower
customer demand.  

Moreover, Magna has higher CTS despite the benefits of economies of scale. This is due to
higher materials and labour costs. Other COGS such as factory rent, factory machine
depreciation is similar to DataMax as they manufacture PCs in the same country using similar
production techniques and processes. Magna has borne higher materials cost than budgeted
because of unexpected increase in freight costs due to pandemic as discussed.

Furthermore, Magna has incurred higher labour costs. Repetitive work has resulted in
boredom and job dissatisfaction, leading to low productivity and high employee turnover
(Thomas & Robert, 2012; Hom & Kinicki, 2001). New workers are hired and trained,
incurring additional training costs. The new workers who are less skillful may produce more
faulty products, requiring more rework. Therefore, more employees are needed to produce
the same number of PCs. These factors have raised labour costs. Briefly, high materials and
labour costs have increased CTS.

Besides, Magna has lower NICT, implying that it has not operated efficiently and generated
lesser sales per dollar of asset. This is due to lower net sales caused by decreased selling price
as discussed. Additionally, Magna has higher average invested capital since it has purchased
more patents than budgeted to safeguard its new innovation.

To shed further light on the underperformance, we need investigations on organisational

structure since having inappropriate organisational structure may lead to underperformance.
For example, due to rapid technology change, divisional structure is best suited in this case to
enhance market responsiveness, but Magna may have functional structure that results in slow
response to consumer needs.
Q4.

a. Magna’s new strategy

Implementing a new strategy can be costly and difficult for Magna due to rapid growth in
technology and market entry barrier. It can also cause them to spend longer time in
developing high quality or more innovative products due to inexperienced employees.
Therefore, it is recommended for Magna to keep their current cost leadership strategy but
improve its approaches to implement the current strategy. 

The cost leadership strategy helps to improve business sustainability as less cost or
investment is incurred to develop and manufacture a particular product (Tanuja, n.d.). Hence,
when one of the products collapses, Magna incurs less losses and remains sustainable. Other
than that, Magna is able to reduce its competition in the market as competitors may struggle
to achieve the same price.

Magna should provide more training to employees as having skillful employees helps to
improve the quality of PCs being produced and reduce the production of faulty PCs which in
turn reduce the number of returned PCs covered by warranty and increase customer
satisfaction. In addition, increasing autonomy to employees not only helps to improve job
satisfaction but also increases employee innovation. This is because it boosts employees’
confidence to act creatively and they are able to feel satisfied to achieve work that they can
be proud of, and therefore reduces employee turnover and increases the number of new PCs
models launched. As a result, this helps to reduce cost and increase customer demand due to
improvement in quality and more innovative products being attracted by customers. Also,
revenue will be increased as higher customer demand enables Magna to increase its selling
price and outperform its competitors.
 b. Magna’s new strategy map

Improve profitability

Financial
perspective
Increase revenue in high
Improve productivity Lower operating costs
volume manufacture

Increase competitive Improve product quality Improve customer

Customer
advantage in price and reliability satisfaction
perspective

Improve product quality and manufacturing efficiency

Sustain robust rapport

Internal Product quality assurance Innovative technology
with suppliers
business
process
perspective
Improve employee Optimise resources Improve scale of
efficiency allocation production

Culture of efficiency and low-cost strategy

Reduce faulty in assembly Improve employee Create common goals for Go along with
process & Improve engagement each individual and products innovation
Learning employees’ productivity company to achieve
and growth
perspective Focus on training to Improve employee
Develop cost Focus on manufacturing
improve employees satisfaction by increase
leadership culture certain product lines
skills employee autonomy
Perspective Strategic objectives Measures Measurement Methods Explanation
s
Financial Improve productivity Number of PCs produced Total number of PCs manufactured Higher number of PCs produced or sold by each employee implies greater productivity
by each employee during and how the firm leverages on the economies of scale. This consequently enhances
the year Total number of employees profitability.
Lower operating costs Cost reduction and Cost Cost reduction = Higher % of reduction in operating costs compared to previous year and greater amount
avoidance Current year operating costs−Prior year operating
of costs
costs avoided implies that costs are well-managed and help to increase profitability.

Prior year operating costs

Cost avoidance = Total expenses avoided for each activity
Increase revenue in high Net revenue growth Current year revenue−Prior year revenue A higher net revenue growth indicates a higher revenue in high volume manufacture,
volume manufacture suggesting an increase in the company's total profit
Prior year revenue
Customer Increase competitive Price competitiveness Market price of relative products Being able to produce good quality products at low cost enhances Magna’s
advantage in price competitiveness among its competitors. Since production cost is low, selling price can
be adjusted downward.
Improve product quality Faulty products returned by Actual number of faulty products returned by customers Lower faulty products returned by customers indicates higher product quality and
and reliability customers reliability which helps to improve rapport with customers
Improve customer Customer satisfaction score Conduct surveys where customers rate their satisfaction on the Improving customer satisfaction helps to increase the likelihood of the number of PCs
satisfaction products on a scale of 1 to 5 sold and therefore increase the net sales and cost of goods sold.
Internal Optimise resources Asset utilisation Actual number of products manufactured A high asset utilisation rate indicates effective management and usage of the firm’s
business allocation assets in generating revenue. Excess idle capacity signifies an operational threat.
process Maximummanufacturing capacity
Sustain robust with Gap analysis Email suppliers with a survey which consists of the following A qualitative survey dedicated to the suppliers provides Magna with insights into how
suppliers variables: Trust, Power, Involvement, Commitment  upstream contacts perceive their firm. The ratings should be scrutinised in conjunction
Suppliers are asked to rate the relevance of the variables on a scale with the firm’s expectations on each of the variables. Any gap or deviation should be
of 1 to 5. (E.g., if the supplier feels highly involved in their further investigated in order to strengthen Magna’s relationship with the suppliers,
collaboration with Magna, they should rate a 5 for Involvement.) which is essential to procuring good quality parts at reasonable prices
Improve employee Number of PCs Determine the variance between the actual and budgeted number of While higher number of products manufactured per employee can indicate greater
efficiency manufactured per employee products manufactured per employee. production efficiency and employee competency, it imposes a threat to the quality of
production (i.e., the process is roughly conducted). Therefore, a benchmark (budgeted
amount) is required to mitigate the counter effects. 
Innovative technology Resources used in R&D Total expenses for R&D activities Expense in R&D reflects the firm’s capacity in generating novel products. An increase
activities each year represent the firm’s effort in keeping up with the current technology trend.
Product quality assurance Percentage of reworks Number of products reworked Minimising the % of reworks enables greater efficiency in production, notably reducing
additional costs pertaining to waste in materials and labour. The percentage also
Total number of products manufactured provides insights into the level of skills of employees and the adequacy of raw materials
procured.
Improve scale of Number of units produced Total units produced−Previous year units produced An increment in the number of units produced each year reflects sustainable growth and
production how the firm is able to leverage on its economies of scale, namely lower fixed costs per
Previous year units produced unit of output (if within the relevant range).
Learning Focus on training to Average training hours per Total number of training hours Providing more training improves employees skills, enabling them to produce more
and growth improve employees’ skills employee satisfied quality PCs. This improves customer satisfaction, increasing customer demand
Total number of employees undertaking the trainingand revenue
Improve employee Employee satisfaction Conduct anonymous surveys where employees rate their Improving employee satisfaction helps boost productivity, increasing the number of PCs
satisfaction by increasing index satisfaction based on a variety of perspectives such as working produced, subsequently reducing COGS. It also decreases employee turnover, reducing
employee autonomy environment, relationship with colleagues on a scale of 1 to 5. costs of training new employees and improving employees skills.
Total scores
Number of respondents
 Develop cost leadership Cost leadership culture
culture index
Focus on manufacturing Number of product lines
certain product lines and Number of new
c. Magna’s new balanced scorecard
products launched during
the year
Conduct surveys where stakeholders including employees,
customers, suppliers rate the successfulness of implementing cost
leadership culture based on a number of perspectives on a scale of
Total scores
1 to 5. 
Number of respondents
 Count the number of product lines and the number of new
products launched during fiscal year.
Developing cost leadership culture helps achieving goal congruence in Magna.
Employees from different levels cooperate with each other to implement strategy and
achieve goals. 
Focusing on manufacturing certain product lines enables Magna to produce their
products in high volume, achieving economies of scale and having reduced COGS. The
product lines should include some new products, retaining and attracting customers,
increasing revenue.
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