Evaluating Balanced Scorecard Implementation at Toyota Corporation

This report evaluates the Balanced Scorecard (BSC) model, a modern management accounting method, for potential implementation at Toyota Corporation. The report begins with an introduction to Toyota, outlining its vision and mission. It then details the BSC model, explaining its four key perspectives: financial, customer, internal processes, and learning & growth. The report compares the BSC model to traditional performance measurement systems, highlighting the advantages of the BSC approach in aligning with company strategy and providing a more comprehensive view of performance. The report concludes by assessing the suitability of the BSC model for Toyota, offering insights to the CEO to understand the model's benefits and its potential to enhance the company's performance evaluation. The report emphasizes the BSC model's ability to improve communication, strategic alignment, and performance measurement accuracy compared to traditional methods. The report is intended to help Toyota evaluate the BSC model for its business.

Management Accounting

Management Accounting 1
Introduction
The report is based on one of the modern management accounting methods that are Balanced
Scorecard model. Balanced scorecard model is used by numerous companies for effective
evaluation of the performance of the company. Being a newly appointed consultant in the
management consultancy firm you need to evaluate the current budgeting system of the client’s
firm. The client of the management consultancy is Toyota Corporation. CEO of the Toyota
Company currently attended a seminar of private companies that were related to the concept of
the balanced scorecard. The company is prepared to evaluate the suitability of the balanced
scorecard model to the Toyota Corporation.
The suitability of the BSC model can only be understood by the CEO of the company when they
know about the details related to the concept and its features. Along with this, the CEO should be
aware of the fact that the BSC is different from traditional performance measurement systems.
This report will help the CEO of the Toyota Company to understand the concept and the benefits
of the model which will contribute to understand the suitability of the model to the Toyota
Corporation.

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Contents
Introduction......................................................................................................................................1
About Toyota corporation................................................................................................................3
A vision of Toyota.......................................................................................................................3
Balanced Scorecard.........................................................................................................................4
Features of Balanced Scorecard.......................................................................................................7
Comparison of balanced scorecard model with traditional performance measurement systems....8
Suitability for Toyota Corporation................................................................................................10
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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About Toyota corporation
Toyota Motor Corporation is well-known Japanese multination automotive manufacturer with
the headquarters in Toyota, Aichi, Japan. The company has provided its contribution towards a
prosperous society through the manufacture of automobiles, operating its business with the aim
of the vehicle sales and production. The company believes in diversity due to which the company
manufacture and sell different types of product across the globe (Toyota, 2018).
Vision of Toyota
Toyota vision is to lead the way to the future of the mobility with the motive to enriching the
lives of the people across the work with safety and responsibility. The company is committed
towards the quality, constant innovation and all the respect for the plant (Toyota, 2018). The aim
for which the company work is to exceed expectations with a smile. As of the year 2017, the
company is known as the world’s 2nd largest automotive manufacturer (Toyota, 2018). The
company was world’s leading automobile manufacturer who manufacturers more than 10 million
vehicles every year. This was done by the company since 2012 and at that time only the
company reported production of its 200-million vehicles (Toyota, 2018).

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Balanced Scorecard
A balanced scorecard is a framework that is used to implement and manage a strategy that is
associated with a mission and vision of the strategic priorities, objectives, measures, and
initiatives. This method allows the managers of the company to incorporate the financial
measures with the other objectives and the key performance indicators that are associated to the
customers, business processes and the learning & growth (Balanced Scorecard Institute, 2017).
Most of the companies make use of this method because through this method they can get the
overall view of the organization's overall performance. This method was presented by Dr. Robert
Kaplan and Dr. David Norton as a paper in the year 1992 and then formally printed as a book in
the year 1996 (IntraFocus, 2018). The paper and the book that was published by the company
lead to the widespread achievement. Below given is the image of the balanced scorecard
framework.

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(Source: Kaplan, Norton and Rugelsjoen, 2010)
The company doesn’t consider it as a scorecard but it is also identified as the methodology that is
mainly used by the company to determine a small number of financial and non-financial
objectives which are linked to the strategic priorities. This approach emphasizes the firm to think
about the ways through which they can measure the objective and what initiatives can be put in
place to meet the objective of the company (Paul, 2018). Balanced scorecard approach emphases
on the financial and non-financial objectives of a company that is attributed to the four areas
which are discussed below: -
Financial perspective
Considering the opinion of the Kaplan and Norton the financial perspective is one of the
important essential perspectives for the company that is required to be measured. The financial

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data or statistics is very important for every company to achieve the success and the competitive
advantage in the current working environment. Managers of the company need to pay the
attention towards the appropriate financial data on time. This financial perspective of the
balanced scorecard model ensures an effective return on investment in a firm along with the
effective management of the risk that is associated with the business (KPI Expert, 2018).
Financial goals should be aligned with the strategic planning, revenue and the productivity
variables that are presented as the performance indicators of the actions of the company.
Customer perspective
Modern management believes in studies the client-oriented business activities which are
essential for the business and for its strategy. Balanced scorecard model include this perspective
with the motive to precisely monitor the ways through which the company is delivering the value
to its customers with the use of the pointers of the outcomes and satisfaction like surveys and
continuously taking into account the deadline, cost, performance and the quality of the product
and services that are offered by the company. Low performance of the customer-oriented
activities might cause a decline of business (Agarwal, 2018). This perspective is very important
for the company because if the company is not able to satisfy the needs of the customers then
they won’t be able to continue their business no matter what the other activities are working
effectively or not.
Internal processes perspective
This internal process activity purposes to arrange a tree for the business process so that
monitoring and optimization of the performance can be done in an effective way from the
company’s point of view. most of the CEO found that the activities linked with the internal

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process perspectives seem to be more sophisticated due to which they are not able to analyze the
performance of the internal business process. This method provides the support to the companies
to analyze the internal business processes (Erbasi and Parlakkaya, 2012). BSC model consists of
determining and mapping the processes which are essential to be accomplishing the company
objectives and applying those strategies for bringing the continuous improvement. BSC model
will support in analyzing those activities which are essential for adding the value to the products
and services of the company. The major motive behind measuring the performance is to satisfy
the needs of the shareholders of the company by providing them maximum returns.
Learning and growth perspective
Learning and growth of the employees in an organization are very essential because without this
the company is not able to perform its operations effectively. Employees of the company are
considered as the assets due to which it becomes the priority of the company to retain the
employees in the company. The growth of business and employees is only possible in the
organization when they make use of the skills and abilities because this is the only way through
which they can achieve the success (Valmohammadi and Ahmadi, 2015). Most of the companies
invest the amount because this is the way through which they can bring the long-term growth in
the operations of the business. BSC model helps the companies in evaluating the learning and
growth perspective of the company so that they can identify the loopholes and work effectively
to bring the improvement in proving training to the employees.
Features of Balanced Scorecard
 BSC model provides the value added to the company so that they can map their strategies
effectively.

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 BSC contributes to improve the effective communication between the departments of the
company.
 Balanced scorecard model measures the 4 perspectives which include financial, customer,
learning & growth and the business internal processes which are considered as a most
crucial perspective of the company.
 This model gets align with the daily working and strategy of the company which is
essential for the accurate evaluation of the performance of firm (Lueg, 2015).
 Balanced scorecard model points out the company’s effective strategy by focusing on the
cause and effect relationship of the firm.
 The companies get the feedback to bring the improvement in the performance of the
organization which is only possible after effective analysis.
 Balanced scorecard model helps the company for the effective communication as the
department of the companies interact because of the BSC model as this model provide the
analysis of the entire organization and all the activities of the company are interrelated
with each other (Kerai and Saleh, 2017).
 Balanced scorecard model can be used by the company to monitor and measure the
progress of strategies that the company has implemented to support the working.
Comparison of balanced scorecard model with traditional performance
measurement systems
Balanced scorecard approach is different from the traditional performance system. Some of the
difference between both the approaches of the accounting method is explained in this section of
the report. Traditional performance system is totally different from the modern approach of the

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accounting method. A balanced scorecard method is a modern approach which is used by most
of the companies in the current market because they know that the environment brings the
change in businesses. The traditional method is not appropriate for the current business
environment because this method doesn't bring the change in the evaluation of the performance
of the companies (Coe and Letza, 2014). The traditional method of accounting includes the
financial analysis of the company which can be done effectively with the use of the different
tools such as cash flow, ratios, financial statement and many others.
On the other hand, the balanced scorecard method provides the analysis of the performance of
the company with the help of the financial, customers, business internal process and learning &
growth perspective of the company. This is the modern approach to manage the accounting due
to which they include all the aspects that are essential for the business to be considered while
evaluating the performance of the company. Therefore, this can be said that it includes both the
financial and non-financial analysis. The traditional method of the accounting provides the true
picture to the company. On the other hand, the balanced scorecard method provides the analysis
along with the feedback to the company (Biazzo and Garengo, 2012). Along with this, BSC
model highlights the capabilities of the company that contributes to improve the performance of
the company.
One of the major difference between both the method is that Balanced scorecard model gets
align with the strategies and vision of the company. Considering the strategies, the BSC model
conducts the evaluation and provides the feedback to the firm. On the other hand, the traditional
accounting method doesn’t get linked with the strategies and vision of the company due to which
they are not able to provide the accurate results that fit with the strategies of the company.

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Apart from this, another major difference that takes place between both the methods of the
accounting is the accuracy. The accuracy of the results is only possible in the BSC model as this
model is more accurate than the traditional method of the accounting (Amado, Santos and
Marques, 2012). Along with this, BSC model will help the company in achieving the success in
the near future which is possible only if the company has performed the effective implementation
of the balanced scorecard model.
The overall analysis between both the traditional and the balanced scorecard management
accounting reflect that the BSC model fulfills all the drawbacks of the traditional management
accounting model due to which it will be effective for the company if they will implement the
BSC model of the accounting management. Though, this is the fact that this model is difficult to
implement in the organization because the company needs to appoint an accounting expert who
can offer all the services to implement the balanced scorecard model. This will cost high for the
company as they have to pay high amount to the expert who will implement the balanced
scorecard model in the organization. After considering the whole analysis, it can be said that the
balanced scorecard method or approach is effective for the business in the dynamic world.
Suitability for Toyota Corporation
The suitability of the balanced scorecard model for the Toyota Corporation is discussed in this
section of the report. The below given is the analysis of every perspective that helps the company
in achieving the desired goals and objective which is essential for the business success.
 Financial perspective: - Toyota Company has numerous numbers of strategic objectives
that the company is looking to measure the effective implementation of balanced
scorecard model. These strategic goals are a rise in the profitability of the company,

Management Accounting 11
increasing the sales of the products and services of the company in the emerging markets
and the sustainable financial growth of the business in the current market. Moreover, the
strategic measures of the company include the lag indicators. The company can measure
these all objective with the help of the BSC as it includes all the ways through which the
company can measure the perspective (Keyes, 2016). Some of the measures that can be
used by the company include profit margin growth of Toyota, the rise in the cash flow of
the company and the participation in the emerging markets.
 Customer perspective: - The major objective of the company from the customer
perspective is to regain the trust of the customers, enhance the effective communication,
maintaining an ethical approach towards the customers and becoming the worldwide
leader. The balanced scorecard model provides the support to the company through
which they can improve the working of the business. The company can measure the
objectives with the help of the balanced scorecard model. The BSC model will also
provide the effective way through which the company can improve the customer
satisfaction and retention (Agarwal, 2018). Toyota can measure the objectives with the
help of BSC and the ways through which the company can measure the strategic goals
are an improvement in the brand recognition of the company, brand trustworthiness and
the feedback that is received by the company after selling any of the cars.
 Internal business process: - The internal business process is very important for the
company to evaluate which can be done with the help of the balanced scorecard model.
The company can make the strategy such as strengthen the establishment of the internal
system which is essential for the improvement in the quality, improvement in the product
development processes, innovative products and the rise in the research and development

Management Accounting 12
of the sustainable products. These strategies are effective strategies for the Toyota
Company with the fulfillment of which the company will be able to achieve the success
and these strategies will add value. The BSC model will help the company in measuring
the objectives of strategic goals (Hoque, 2014). The effective measures that can be used
by the companyare increase in revenue from the new product and the rise in the customer
satisfaction.
 Learning and growth: - This is the fact that the Toyota Company needs to bring the
training programs and effective strategies for the company because the skills of the
employees contribute in improving the operations which is essential for the success of the
company. The company can form the strategies that they are willing to achieve with the
help of the learning and growth of the employees. The objective of the company related
to the learning and growth include improvement in the abilities of the employees to
respond quickly to the customers, empowerment, employee recognition, and the training
programs to enhance the employee's abilities (Sainaghi, Phillips and Corti, 2013).
Balanced scorecard tool helps the company in accomplishing the objective of the
company. Along with this, this tool provides the opportunity through which the company
can measure the effectiveness of the strategies that are implemented by the company. The
measure provides the support to the company through which a company can measure that
objectives are achieved or not. The measurement of the learning and growth objectives
can be done with the help of the employee’s satisfaction and the employee’s
improvement.
The above overall analysis reflects that the balanced scorecard model is suitable for the Toyota
company as all the objectives of the company can be fulfilled with the help of the balanced

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scorecard model. Balanced scorecard model is essential for the company to implement as with
the help of this the company can bring the improvement of the future strategies. BSC model
provides the feedback to the company.

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Conclusion
In the end, it can be concluded that the balanced scorecard model is suitable for the company.
The company should implement this model of management accounting in their organization
because this is the effective way through which they can improve their operations. The report
includes the brief details related to the balanced scorecard model along with this it states the
features of the BSC. It also includes the difference between the BSC model and the traditional
performance measurement systems. The four perspective of the balanced scorecard include
financial, customer, business internal process, and learning & growth are very important for the
company. Therefore, the Toyota Company can take the benefit of this accounting method for
achieving the growth and success in the coming years.

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References
Agarwal, R. (2018) Balanced Scorecards: Characteristics, Requisites, and Precautions [online].
Available from: http://www.yourarticlelibrary.com/accounting/performance-measurement/
balanced-scorecards-characteristics-requisites-and-precautions/53091 [Accessed on 16th May
2018]
Agarwal, R. (2018) Perspectives in Balanced Scorecard (4 Perspectives ) [online]. Available
from: http://www.yourarticlelibrary.com/accounting/performance-measurement/perspectives-in-
balanced-scorecard-4-perspectives/53100 [Accessed on 20th May 2018]
Amado, C.A., Santos, S.P. and Marques, P.M. (2012) Integrating the Data Envelopment Analysis
and the Balanced Scorecard approaches for enhanced performance assessment. Omega, 40(3),
pp.390-403.
Balanced Scorecard Institute (2017) Balanced Scorecard Basics [online]. Available from:
http://www.balancedscorecard.org/BSC-Basics/About-the-Balanced-Scorecard [Accessed on
23rd May 2018]
Biazzo, S. and Garengo, P. (2012) Performance measurement with the balanced scorecard: a
practical approach to implementation within SMEs. Springer Science & Business Media.
Coe, N. and Letza, S. (2014) Two decades of the balanced scorecard: A review of
developments. The Poznan University of Economics Review, 14(1), p.63.
Erbasi, A. and Parlakkaya, R. (2012) The use of analytic hierarchy process in the balanced
scorecard: an approach in a hotel firm. Business and Management Review, 2(2), pp.23-37.

Management Accounting 16
Hoque, Z. (2014) 20 years of studies on the balanced scorecard: trends, accomplishments, gaps
and opportunities for future research. The British accounting review, 46(1), pp.33-59.
IntraFocus (2018) What is a Balanced Scorecard? [Online]. Available from:
https://www.intrafocus.com/balanced-scorecard/ [Accessed on 23rd May 2018]
Kaplan, R.S., Norton, D.P. and Rugelsjoen, B. (2010) Managing alliances with the balanced
scorecard. Harvard business review, 88(1), pp.114-120.
Kerai, S. and Saleh, A. (2017) Applying the Balanced Scorecard to Improve Student Satisfaction,
Market Share and Profitability. AMR, p.27.
Keyes, J. (2016) Implementing the IT balanced scorecard: Aligning IT with corporate strategy.
CRC Press.
KPI Expert (2018) What is The Balanced Scorecard Concept: the Four Perspectives [Online].
Available from: https://bscdesigner.com/bsc-four-perspectives.htm [Accessed on 23rd May
2018]
Lueg, R. (2015) Strategy maps: the essential link between the balanced scorecard and
action. Journal of Business Strategy, 36(2), pp.34-40.
Paul (2018) Balanced Scorecard As A Performance Measurement System [online]. Available
from: http://www.differentiateyourbusiness.co.uk/balanced-scorecard-as-a-performance-
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Sainaghi, R., Phillips, P. and Corti, V. (2013) Measuring hotel performance: Using a balanced
scorecard perspectives’ approach. International Journal of Hospitality Management, 34, pp.150-
159.

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Toyota (2018) Company Profile [Online]. Available from:
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Toyota (2018) Facilities [Online]. Available from:
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http://www.toyota-global.com/company/vision_philosophy/ [Accessed on 23rd May 2018]
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