GREAT ZIMBABWEUNIVERSITY

MUNHUMUTAPA SCHOOL OF COMMERCE

DEPARTMENT OF ACCOUNTING & IS
MASTERS DEGREE IN PROFESSIONAL
ACCOUNTING AND CORPORATE GOVERNANCE

NAME : ANORLD MUNAPO M226132

SANDRA PHIRI M224670
HAPPINESS H. MOYO M050946
SHEPERD MUWIRIMI
DIMUS CHANGUNDA M226306
JULIUS MAFUNDA M172639

LEVEL : LEVEL 1 SEMESTER 1

MODULE NARATION : APPLIED COST & MANAGEMENT

ACCOUNTING

MODULE CODE : MACC 514

LECTURER : DR. E. GWANGWAVA

GROUP ASSIGNMENT

Question
a) Outline the four main perspectives (sections) of a balanced score card, discuss
the view that the financial perspective should be treated as being much greater
than the other three perspectives. (12 marks)

A balanced scorecard is defined as a strategic planning framework that companies use to

assign priority to their products, projects, and services; communicate about their targets;
and plan their routine activities (Drury, 2012). The scorecard enables companies to
monitor and measure the success of their strategies to determine how well they have
performed. The balanced score card management system maps an organization’s
objectives into performance metrics in four perspectives namely financial perspective,
internal processes perspective, customer perspective, and learning and growth
perspective.

The balanced scorecard acts as a structured report that measures the performance of a
company and its management. By analyzing perspectives other than the financial one,
managers can better translate the organisation’s strategy into actionable objectives and
better measure how well the strategic plan is executing. The Balanced Scorecard was
necessitated by the desire to integrate financial and non-financial measures of
performance and identify key performance measures that link measurements to strategy
(https://corporatefinanceinstitute.com/finance/balanced-scorecard/, 2022).

Financial Perspective

Under financial perspective, the goal of Mhunga Coaches Ltd is to ensure that it earns a
return on the investments made and manages key risks involved in running its business.
Mhunga Coaches Ltd can achieve its goals by satisfying the needs of all players involved
with the business, such as shareholders, suppliers and customers.

The shareholders are an integral part of the transport business ventured into by Mhunga
Coaches since they are the providers of capital and are only satisfied when the company
achieves financial success. The financial perspective objectives includes revenue growth,
cost reduction and asset utilization (Drury, 2012). The steps that can be taken to achieve
the goals may include introducing new products in the market, improving the company’s
value proposition, and cutting down on the costs of doing business.

Customer perspective
The customer perspective helps Mhunga Coaches to identify the customer and markets
segments in which its business units will compete. It underpins the revenue elements for
the financial perspective objectives. The customer perspective monitors how Mhunga
Coaches is providing value to its clients and customers, and determine the level of
customer satisfaction with the company’s services.

The Balanced scored card helps the organization to step out of its comfort zone to view
itself from the customer’s point of view rather than just from internal perspective. The
key performance measures to assess if the company is faring well include market share,
sales to new customers, survey satisfaction ratings, price relative to competitors amongst
others. The overall objective of the company should not be getting satisfied customers but
getting profitable customers.

Internal Business perspective

The internal business perspective requires that managers identify the critical internal
processes for which the company must excel in implementing its strategy. A balanced
scorecard puts into perspective the measures and objectives that can help the business to
be run more effective. According to (Drury, 2012), the proponents of the balanced
scorecard identified process value chain that provides guidance for companies applying
internal process perspective namely innovation process, operations process and the post-
sales process.

Under this perspective, companies like Mhunga Coaches researches the needs of
customers and tailor make products to meet the needs. A key part of this perspective aims
to answer the question, “What are we good at?” The answer to that question helps the
company to formulate marketing strategies and pursue innovations that leads to new and
improved ways of meeting the needs of customers.

Learning and growth perspective

This perspective stresses the importance of the company to investing in infrastructure to

provide the capabilities that enables the accomplishment of the other three perspectives.
Organisational capacity is very important in optimizing goals and objectives with
favourable results. The personnel in the company are required to demonstrate high
performance in term of leadership, entity’s culture, application of knowledge and skill set.
The objectives under this perspective includes increased employee capabilities, increased
information system capabilities and general increase in motivation.

A look at Mhunga Coaches Ltd reveals that the company’s major concern is on the
profitability of the company’s business units, hence emphasis has been put on financial
performance. This approach is hinged on the view that the financial perspective is more
important than the other 3 perspectives.

Traditional financial performance metrics provide a firm’s past results, but are not well
suited for predicting future performance or implementing and controlling the firm’s
strategic plan. An analysis of the balanced score card system shows that there is a cause-
and-effect relationship between the 4 perspectives. The measures of organisational
learning and growth perspective are the drivers of internal business processes. The
measures of business processes are assumed to be the drivers of customer perspective
which in turn drives the financial perspective.

An independent person would conclude that the four perspectives are equally important in
formulation of the strategy for Mhunga Coaches Ltd. Mhunga Coaches Ltd by merely
recognizing current financial measures, it will not reveal the business unit’s progress
towards long term financial success. The assumption of cause-and-effect relationship
allows measurements relating to non-financial perspectives to be used to predict future
financial performance.

Mhunga Coaches may focus on the financial perspective only by reducing spending on
vehicle repairs and maintenance and achieve increased gross profits which only lasts in
the short run. The approach may affect repeat business in the future something that could
have been identified and dealt with under customer perspective and internal processes. It
can therefore be concluded that there is large interdependence between the four sections
of the balanced score card and management should not prioritise one theme over the
other.
b) For each of the two business units described above, give three examples of
measures which you feel should be included in each of the perspective of that
unit’s balanced score card. Justify the selection of each measure, and explain the
assumed linkage between each measure and explain the assumed linkage
between each measure and the business unit’s long-term financial performance.
(13 marks)

Mucheke cabs

Immigration language advertisement success rate

The expenditure spend on a certain language for example Chinese language should be
matched with an increase in Chinese customers. Any advertising expenditure not
commensuration with increased customers from that base is an indication of wastage
of financial resources. Given low margins that are in this business, ineffective
advertising will be an unacceptable expense.

Customer satisfaction ratings

Mhunga Coaches should conduct customer satisfaction surveys to measure customer
satisfaction on Mucheke cabs. The customer satisfaction measures should be
benchmarked against competitors. It can be noted that when customers are satisfied,
they are likely to do business against with Mucheke cabs thereby giving a competitive
advantage to Mhunga Coaches in the long run in terms of market share and increased
revenue.

Repeat customer/business
Under this business unit Mhunga should include repeat business as a measure. The
number of repeat customer will reflect the value and reliability of the service
Mucheke cabs is offering to the customers compared to its customers. As a general
rule, when a company is offering best product or service, customers are bound to
come back and over and over again. This is important in assessing financial
performance as it indicates that the business unit is securing a strong market shares
Northern Cabs

Satisfaction of Passengers
Each passenger has expectations which they look up to be satisfied hence there is
need to assess passenger satisfaction. Passengers under this business unit have an
influence over the corporate client which has an ultimate decision on whether to keep
on doing business with Northern Cabs or to look for an alternative. A dissatisfied
passenger can influence the corporate client in a negative way resulting in possible
closer of the corporate account.

Length of time with a corporate customer

Mhunga should include the length of time serving a corporate client by Northern Cabs
on its measures. The older the client’s account indicate that the corporate customer is
satisfied with the service it is being offered by Northern Cabs. A satisfied customer is
very important in long term profitability of the company. It can be noted that
corporates brings more business to the business unit in form of repeat customers.

Third party quality rating

The party quality rating has of late been of much importance in service sectors world
over especially in fast food, hotels and accommodation among others. Service is rated
from 1 start to 5 stars and customers believes the more stars a service provider has,
the better quality it offers to clients. These individual assessments have potential of
creating considerable customer loyalty from corporate clients who always want to
maintain a good image of providing best service to its visitors. If Northern cab is
consistently rated as best service provider, it may have a competitive advantage on the
market share in the long run.
References
Drury, C., 2012. Management and Cost Accounting. 8th ed. s.l.:Brendan George.

https://corporatefinanceinstitute.com/finance/balanced-scorecard/, 2022. Corporate Finance

Institute. [Online]
Available at: https://corporatefinanceinstitute.com/finance/balanced-scorecard/
[Accessed 09 September 2022].