Transcript Business Simulation Seminar - B-K

Business Simulation Seminar
Evaluating a Business
The Balanced Scorecard
Evaluating a Business
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Difficult to find one number to
evaluate how well management is
doing
For example
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Stock price may go up but machinery is
obsolete
Profits may be good but employees are
leaving and you have stock-outs
Evaluating a Business
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Each measure trades off with others
What you measure is what you get
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If you emphasize only one metric,
others will suffer
E.g. If emphasize profits only, then
may get no new investments or
maintenance
Balanced Scorecard
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Answers four questions
1. How do our customers see us?
(customer perspective)
2. What must we excel at?
(internal business perspective)
3. Can we continue to improve and create
value?
(innovation and learning perspective)
4. How do we look to shareholders?
(financial perspective)
Balanced Scorecard
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For each round
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Measures are defined in each of the four
areas
Results are totaled for an overall score
At the conclusion of all rounds (recap)
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Summary measures are defined for each
area
Results are totaled for overall score
Balanced Scorecard
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To see scoring details
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Go to Industry Scoring -> Balanced
scorecard
Click on a round score
Click on the specific measure
E.g. Stock price
 Will show how score is determined
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Customer Perspective Concerns
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Quality
Time
Performance
Service
Customer Perspective Measures
No Credit
Partial Credit
Full Credit
<= 21
21 – 39
>= 39
Customer
Awareness
<= 50%
50% - 90%
>= 90%
Customer
Accessibility
<= 50%
50% - 90%
>= 90%
Product
Count
<= 1
1–8
>= 8
SG&A
Expense
<= 5%
or
>= 25%
5% - 7%
or
20% - 25%
7% - 20%
Customer
Buying
Criteria
(SG&A / sales)
Internal Business Perspective
Contribution
margin (Price -
Labor - Material Inventory Carry)/Price)
Plant
utilization
Days of
working capital
(curr assets – curr
liab.)
Stock-out costs
(lost sales as % of
sales)
Inventory
carrying costs
(cost of inv as % of
sales)
No Credit
Partial Credit
Full Credit
<= 27%
27% – 36%
>= 36%
<= 90%
or
>= 200%
90% - 100%
or
180% - 200%
100% - 180%
<= 15 days
or
>= 105 days
15- 30 days
or
90 – 105 days
30 – 90 days
>= 5%
0% - 5%
0%
>= 3.5%
1% - 3.5%
<= 1%
Financial Perspective
No Credit
Partial
Credit
Full Credit
<= $2
$2 - $32
>= $32
Profits
<= $1M
$1M - $7M
>= $7M
Leverage
<= 1.3
or
>= 4
1.3 – 1.8
or
2.8 – 4
1.8 – 2.8
Stock price
(assets / liab)
Innovation and Learning Perspective
No Credit
Partial Credit
Full Credit
>= 10.5%
9.5% – 10.5%
<= 9%
<= 100%
100% - 118%
>= 118%
0%
0% - 7%
>= 7%
TQM R&D
Reduction
0%
0% - 40%
>= 40%
TQM admin
cost reduction
0%
0% - 60%
>= 60%
TQM demand
increase
0%
0% - 10%
>= 10%
Employee
turnover rate
Employee
productivity
(improvement due to
HR and TQM)
TQM material
reduction
(effect on process
impr. Vendor and 6
Sigma)
Recap Scoring
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Evaluation at the end of the
simulation
Looks at factors that may fluctuate
during the rounds
Looks at same four areas
1.
2.
3.
4.
customer perspective
internal business perspective
innovation and learning perspective
financial perspective
Customer Perspective Measures
Weighted
Cust Survey
(combines buying
criteria, awareness,
and accessability)
Market Share
(sales / industry
sales)
No Credit
Partial Credit
Full Credit
<= 8
8 – 31
>= 31
<= 8%
8% - 22%
>= 22%
Internal Business Perspective
Operating
Profit
(net profit, excluding
extraordinary items)
No Credit
Partial Credit
Full Credit
<= $2.225M
$2.225M $135M
>= $135M
Financial Perspective
No Credit
Partial Credit
Full Credit
<= 1%
1%- 30%
>= 30%
<= $15M
$15M - $181M
>= $181M
>= 1%
0% – 1%
0%
Market Cap
(company stock
value as $ of
industry)
Sales
Emergency
Loan
(% of assets)
Innovation and Learning Perspective
No Credit
Partial Credit
Full Credit
Sales per
Employee
<= $118k
$118k - $271k
>= $271k
Assets per
Employee
<= $84k
$84k - $253k
>= $253k
Profits per
Employee
$0
$0 - $273k
>=$273k
Balanced Scorecard
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Score for entire simulation is sum of
round and recap scores
Available in Capsim
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Under Reports
Will also be used for final exam