Strategic Management Accounting and Balance Scorecard

This assignment delves into the concept of strategic management accounting, which combines business objectives with management accounting to inform effective decision-making. A case study on Tata Steel Europe is presented, showcasing its market differentiated strategy based on Porter's generic strategy model. The balance scorecard is also discussed as a performance measurement tool with four perspectives: customer, financial, internal process, and learning and growth.

STRATEGIC MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
A) Current business strategies of Tata steel Europe ..................................................................1
B) Influence of key factors of environment on Tata steel Europe..............................................3
C) Evaluation of Tata steel Europe business operations and corporate social activities............5
D) Evaluation of Balance scorecard concept and assist in delivery its corporate responsibility
commitments...............................................................................................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategic management accounting is related to the strategic business activities which are
merged with the management accounting information in order to make effective business
decisions. In this study, The Tata Steel Europe will be consider which is a steel making company
which is operating in UK. The company earned revenue of US$ 2.167 Billion in the year 2017.
This assignment will analyse the business strategy adopted by Tata steel Europe. Moreover, it
will provide understanding of the key factors of environment which have their influence on the
operation of Tata steel Europe. Furthermore, It will contain information about the business
operations and corporate social activities. Also, it will provide critical evaluation of balance
scorecard and the system which can help Tata steel Europe to drive and measure its performance
and deliver its corporate responsibility commitments.
MAIN BODY
A) Current business strategies of Tata steel Europe
The porter generic strategic which are adopted by Tata steel Europe in order to gain
competitive advantage towards other firms. These strategies adopted by the company assist them
in gaining sustainable competitive advantages towards the competitors in the industry (Morden,
2016). A competitive advantage is the strength for the firm which the firm can use over the other
competitors in order to increase their market share and profitability of business.
These strategies consist of the following :
 Cost leadership : Organisation by adopting this strategy can become the lowest cost
producer in the industry. It assists in controlling the cost in the market. According to this
strategy the organisation can increase their customer base b y providing their products
and services at the lowest cost then the price prevailing in the market. But the cost
leadership strategy also provide an option to the companies to reduce their cost of
products and offer the products and the price prevailing in market which will in turn
assist in increasing profitability of business. Tata steel Europe in order to attract
customers is providing the products at the lower cost which aims at leading the market by
leading the change in the cost of products. The Tata steel Europe have high level of
productivity and are involved in creating innovation in their products.
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 Differentiation leadership : This strategy adopted by business aims at offering unique
products and services to customers which are not present with competitors. This strategy
assist in creating value for the customers and assist in retaining customers for a long run
in business (Otley, 2016). Tata steel Europe is pursuing the differentiation strategy
which aims at maximising the proportion of differentiated products and services. This
company conduct research programmes which are aimed at developing product
technology and improving sustainability of steel products. Tata steel Europe closely work
with their customers in order to identify their demands and develop new products which
will helps them in succeeding in the industry.
 Cost focus : In this the business focus on attaining lower cost advantage in the small
market rather than selling the products and services in different market segments. This
assist the firm in becoming the market leader in that market segment. Tata steel is having
a global presence a strong brand portfolio which make the company a market leader in
this industry.
 Differentiation focus : By using this strategy the firm aims at providing the
differentiated products in the small market segment rather than providing in the large
market segment (Chiarini and Vagnoni, 2015). With the help of this strategy the
companies are able ton gain competitive advantage in the small market segment by
identifying their customers needs regarding different products and services which are not
met by the competitors assist in gaining competitive advantage against the competitors if
company provide differentiated products to customers which are demanded by them top
increase their profitability and market share.
From the above model it is identified that the company in order to gain a competitive
advantage against the competitors can use various strategy which will help firm in attaining a
competitive advantage. Tata steel Europe is using market differentiated strategy in order to meet
the demands of customers which are not met by competitors (Our strategy, 2019). This company
is focusing on creating value for the customers providing them higher quality products and
services. Moreover, the firm is investing in improving the manufacturing and distribution
facilities in order to improve their performance and cost competitiveness. Through the use of this
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strategy the company is able to gain competitive advantage against its competitors which helps
the firm in increasing their profitability and performance and increasing their market share.
B) Influence of key factors of environment on Tata steel Europe
The internal environment of the company includes those factors which consist of strength
and weakness of the firm (Turner and et.al., 2017). It involves The strength of the company
provide them a competitive advantage towards other firms whereas weakness of the company
provide disadvantage to firm in gaining competitive advantage and affect the operation of firms.
Strength of Tata steel Europe
 Strong brand Portfolio : It is the subsidiary of Tata steel group and thus it has strong
brand image which act as strength for the company and provide the firm with competitive
advantage.
 High customer satisfaction : This company provide the customer with high satisfaction
by providing the high quality products and services which assist in retaining the
customers with business for long run.
 Differentiated products : Tata steel Europe provide unique products and services to
customers which act as strength for business. Moreover, it provide the customer with
products on the basis of their demands which are not met by competitors assist firm in
gaining competitive advantage towards other firms in industry.
 Efficient supply chain : The Tata steel steel Europe is having an efficient supply chain
which act as the strength for them. With the help of better supply chain firm is able to
distribute its products effectively and efficiently which assist in increasing the
profitability of firm.
Weakness
 The biggest weakness of Tata steel Europe is increasing debt to equity ratio. The
financing of Tata steel Europe is mostly through debts which may dangerous for them in
the long run.
 Lagging in technological front : The Tata steel Europe due to lack of technological
tools face problems in their operations which assist in adopting the business strategy
(Cooper, Ezzamel and Qu, 2017). There are various changes in the technology which
are adopted by the competitors but as they are not adopted by Tata steel Europe the
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company have to face difficulty in operation and thus the company in order to reduce
those weakness and convert them into strength require to formulate new strategies.
Tata steel Europe in order to reduce those weakness and gain competitive advantage
towards the other firms operating in environment have chose thee strategy of marker
differentiated in which it is offering the different products which re not provided by the
competitors.
External business environment of the company consist of factors present in the external
environment on which the business does not have any control on that factors. The following are
the factors present in external environment.
 Political factor : The factors which consist of government regulation and policy which
affect the business environment to a large extent (Sedevich-Fons, 2018). This factors
consist of taxation policy , government regulation etc. The Tata steel Europe is affected
by the taxation policy of the government which affect the business environment.
 Economic factor : It consist of factors such as inflation,. Interest rate etc. which affect
the business environment of Tata steel Europe.
 Social factors : It consist of culture and other factor . Tata steel ethical image have the
influence on customers
 technological factors : It consist of factors which are related to technological
advancement. For example, technological advancement adopted by competitors have
their impact on business profitability.
 Environmental : its consist of factors relating to environmental protection, pollution etc.
The Tata steel Europe has adopted the sustainability policy which assist in protecting the
environment.
 Legal factors : This consist of laws and legislation which have their impact on business
operations. Because if company does not follow the laws and legislation there is negative
impact on the business.
From the above business environment analysis it is identified that business is affected to a
great extent if the factors present in the environment have negative impact on the business
operation and thus in order to gain advantage the organisation have adopted the differentiation
leadership strategy which assist the company in proving unique products in the market to gain
competitive advantage against the rival firms.
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C) Evaluation of Tata steel Europe business operations and corporate social activities
The Tata steel Europe have to two integrated steel making sites in which one in nether
land and other in South Wales. This company operates rolling mills and coating lines in south
Wales. The company is involved in designing more sustainable products to contribute to
solutions which are lighter and last longing. It operates in a way to provide the safe environment
it employees and protect the environment and communities surrounding and impacted by its
operations. The following is the theoretical framework for evaluation of Tata steel Europe:
Charles Handy - The Stakeholder View : This theory addressees the morals and values
in managing and organisation such as corporate social responsibility etc (Johnstone, 2018).
According to this theory the company should focus on creating value for its stakeholders not not
just for its shareholders. The company through performing its operation by identifying the
stakeholders view is able to achieve fulfil its corporate social responsibility by working towards
development of society.
The following are the stakeholders of Tata steel Europe
 Customers : The Tata steel customers require that the company provide the sustainable
products. The company provi8de the steel products which help its customers to succeed.
Moreover, it enable responsible consumption.
 Employees : The Tata steel Europe in order to create value for its customers is aiming to
provide healthy and safe workplace. Moreover, it provide training and continuous
development for its employees. It aims at satisfied and capable workforce.
 Local communities : The company business operations may impact on the local
community so it focus on building reputation to provide the communities with safe place
to create value for the society. The firm n and trust by performing sustainably towards
dust, noise and odour (Suzuki and Gurd, 2018). Also, It focus on providing the quality of
life to the communities in which the company operates.
 Suppliers and contractors : They are the people that are responsible for the success of
the company. The company in order to fulfil the suppliers expectation which is that
company apply fair business practices to behave in ethical manner. So, Tata steel Europe
suppliers and contractors are entitled to safe working conditions, ethical behaviour and
compliance and the good health and safety performance.
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 Legislators and society at large : The company require to invest in the development of
new climate neutral steel making technology. The firm is complying with the laws and
legislation and behave in a ethical manner.
 Shareholders : This people expect that the company provide them high returns on their
investment. And for complying with this expectation the firm require to effective strategy
hi8hc focus on providing customer value, efficient operational performance and and
effective financial framework.
As per the stakeholders view , It is identified that Tata steel Europe require to create
value for its stakeholders by working towards their expectation which will assist in enhancing
their trust towards the company and build reputation for the company. It is also identifying by
the stakeholder view that the expectation of the stakeholder from the company and that the firm
is working towards fulfilling their requirement to complete their corporate social activities. Tata
steel Europe is working towards satisfying the expectation for its stakeholders and creating value
for them (Ismail, Isa and Mia, 2018). Tata steel Europe has delivered their corporate
responsibility commitments and is working towards creating value for them by performing their
operations as per their expectation from company.
Tata steel Europe is working sustainably towards the fulfilling their corporate
responsibility towards the society. It focus on improving the quality of products to create the
value for society. Also, They focus on spreading quality education, healthcare and sustainable
livelihood opportunities. The corporate social activities of Tata steel Europe consist of zero harm
to employees, contractors and communities. Another corporate social activity include packaging
recycling etc.
D) Evaluation of Balance scorecard concept and assist in delivery its corporate responsibility
commitments
Balance scorecard is a performance metrics used to identify and improve the internal
business operation of organisation to achieve their performance goals. This concept is based on
the leading and lagging indicators. It is a management system which focus on accomplishing the
organisation strategic goals into a set of performance. This concept of strategic management
assist the companies in achi9vng their performance goals by competing the actual performance
with that of targeted helps in improving the organisation strategy to achieve the goals effectively
and efficiently. This metric is used to measure the performance and provide the feedback to
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organisation regarding various changes in organisation operations. Tata steel Europe by using the
balance scorecard is bale to measure the performance and can monitor the performance to
improve its operations and functions for improvement of various operational functions.
Moreover, this approach will helps the firm in delivering their corporate responsibility
commitments (Shields, 2018). This concept consist of identifying the vision and mission of firm
and the strategies to achieve the mission and analysing the per4formance of firm from certain
perspective. As per this concept there are four perspective which are considered which includes
financial perspective, customer perspective , business and production perspective and learning
and growth perspective.
Advantages
 It is comprehensive approach of judging and controlling organisation performance by
setting objectives and performance measures in four perspective.
 It is useful for communicating and understanding business goals and strategies.
 It assist in improving the performance reporting
 It indicates organisation performance and measure to improve the performance.
Disadvantages
 This concept consider only four perspective but there can be more perspective such as
managerial development perspective etc.
 It is expensive as it requires huge investment for implementing balance scorecard in the
organisation. It is a long term solution rather than short term solution (Disadvantages of
Balanced Scorecards, 2017).
 Lack of external focus because this concept is wholly based on internal focus.
 Implementing balance scorecard can be resisted by employees because few employees
might think that implementing balance scorecard for performance measurement is not
effective.
On the basis of above evaluation it is understood that balance scorecard can assist the
company in improving their performance and can derive effective results. The balance scorecard
is effective way of monitoring the performance and the strategy of Tata steel Europe is related to
this measure because the the strategy of Tata steel is to provide differentiated product in the
market to attract more customers towards the firm and increases their profitability (Wong,
2018). The balance scorecard implementation will assist Tata steel in providing better quality
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products to customers. Through balance scorecard company is able to measure its performance
and this will assist the firm in fulfilling their corporate responsibility activity. The firm through
implementing balance scorecard can take measures regarding implementing of safe equipment in
the organisation to provide zero harm to employees which is the corporate responsibility activity
of firm. Balance scorecard. There are four perspective of balance scorecard of Tata steel Europe
which consist of following :
 Customer perspective : In this perspective , the organisation focus on identifying the
customer and market segments and then the measures are taken to track related
performance. It consist of factors which are important to customers such as time, quality ,
performance, service and cost. Tata steel Europe is following this perspective in which it
provide the products according to their requirement (Höglund and et.al., 2018). It focus
on differentiated market strategy in which it provide unique and different products to its
customers at the best price.
 Financial perspective : The measures in this perspectives indicate about the organisation
strategy and its execution are contributing in the improvement of bottom line results. It
focus on increasing the value for shareholders buy increasing the returns. It includes
measurement for revenue, gross profit etc (Scapens, 2018). Tata steel Europe is using this
perspective for creating value for shareholders.
 Learning and growth perspective : It represent the organisation ability to innovate ,
improve and learn. It focus on identifying the needs infrastructure for supporting other
perspective. With this perspective Tata steel is able to create value for company, increase
employee satisfaction and skills etc. Tata steel is providing the employees with proper
training in order to improve their skills and provide them learning.
 Internal process perspective : In this perspective the company focus on creating value
proposition for customers and the productivity improvement to reach its financial
objectives in order to satisfy shareholders (Qian, Hörisch and Schaltegger, 2018). Tata
steel Europe is focusing on improving its internal process such as inventory turnover,
development expenses etc.
The Tata steel Europe face various barriers in implementation of Balance scorecard which
consist of the following :
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 lack of knowledge and understanding about balance scorecard act as barriers during its
implementation.
 There are lack of key performance indicators in organisation which have their impact on
implementation of Balance score card in organisation.
 Lack of balance scorecard eduction and training because without training the members of
organisation will not be able to understand the use of balance scorecard.
CONCLUSION
From this assignment it has concluded about strategic management accounting which
aims at merging the strategic objectives of business with the management accounting in order to
make effective business decision. Moreover, this assignment has concluded about the current
business strategy of Tata steel Europe which is market differentiated strategy ion the basis of
porter generic strategy model. This assignment has also shown understanding about balance
scorecard which is a used as performance measurement tool and include four perspective such as
customer , financial internal process and learning and growth.
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REFERENCES
Books and Journals
Chiarini, A. and Vagnoni, E., 2015. World-class manufacturing by Fiat. Comparison with Toyota
production system from a strategic management, management accounting, operations
management and performance measurement dimension. International Journal of
Production Research. 53(2). pp.590-606.
Morden, T., 2016. Principles of strategic management. Routledge.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research. 31. pp.45-62.
Turner, M.J. And et.al., 2017. Hotel property performance: The role of strategic management
accounting. International Journal of Hospitality Management. 63. pp.33-43.
Cooper, D. J., Ezzamel, M. and Qu, S. Q., 2017. Popularizing a management accounting idea:
The case of the balanced scorecard. Contemporary Accounting Research. 34(2). pp.991-
1025.
Sedevich-Fons, L., 2018. Linking strategic management accounting and quality management
systems. Business Process Management Journal. 24(6).pp.1302-1320.
Johnstone, L., 2018. Environmental management decisions in CSR‐based accounting
research. Corporate Social Responsibility and Environmental Management. 25(6).
pp.1212-1222.
Suzuki, K. and Gurd, B., 2018. Fixed Revenue Accounting: A New Management Accounting
Framework. World Scientific Publishing Co. Pte. Ltd..
Ismail, K., Isa, C. R. and Mia, L., 2018. Evidence on the usefulness of management accounting
systems in integrated manufacturing environment. Pacific Accounting Review. 30(1). pp.2-
19.
Shields, M. D., 2018. A Perspective on Management Accounting Research. Journal of
Management Accounting Research. 30(3). pp.1-11.
Wong, I., 2018. Managerial Accounting Strategies for Optimal Costs.
Höglund, L. and et.al., 2018. Strategic Management in the Public Sector: How Tools Enable and
Constrain Strategy Making. International Public Management Journal. 21(5). pp.822-849.
Qian, W., Hörisch, J. and Schaltegger, S., 2018. Environmental management accounting and its
effects on carbon management and disclosure quality. Journal of Cleaner Production. 174.
pp.1608-1619.
Scapens, R., 2018. ENROAC-European Network for Research on Organizational and
Accounting Change (Doctoral dissertation, Aalto University, Finland).
Online
Our strategy. 2019. [Online]. Available through :<https://www.tatasteeleurope.com/en/about
%E2%80%93us/strategy>.
Disadvantages of Balanced Scorecards. 2017. [Online]. Available through
:<https://bizfluent.com/list-6630586-disadvantages-balanced-scorecards.html>
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