7 Apm L4

Advanced Performance
Management
Lecture 4
By Ramia Kiran
Example - BCG
• Domestic Appliances Ltd (DAL) commenced trading in 1955, when it started to manufacture
semi-automatic washing machines. From 1965, DAL expanded its product portfolio. Core
products now include fully automatic washing machines, dishwashers, and cookers. The market
in domestic appliances is extremely competitive. DAL’s principal competitor is the Jarvis Electrica
Group (JEG), which has achieved the position of market leader in many similar areas of the
market. Other information is as follows:
• JEG is the market leader in dishwashers, having 48% of the market. DAL has only 30% of the
market. Environmentalist pressure groups, concerned about water consumption, have caused a
significant diminution in the size of the market for dishwashers. However, the market remains
profitable and this is expected to continue.
• DAL continues to manufacture washing machines using a process which uses new materials for
each unit. Legislation now requires that 35% of all materials used comprise recycled materials,
which means that DAL will no longer be able to sell its washing machines in certain markets.
• Both DAL and JEG have invested very heavily in the manufacture of steam ovens. DAL has 12%
of the new market, while JEG has an 18% share of the new market.
• DAL has recently produced a new washing machine, the Celeribus, which washes three times
faster than any other machine on the market. Market awareness of this machine is growing. The
development costs of the Celeribus were significant. At present the company is making heavy
losses on production of this product.
• Required:
• Analyse the product portfolio of DAL using the Boston Consulting Group matrix.
Solution
• The steam oven appears to be a star at the moment since it has a relatively large
market share in what is probably a high-growth market.
• The Celeribus is a question mark as it has generated losses to date, and has a
relatively low market share in a high-growth market. The challenge facing the
management of DAL is to convert the product into a star.
• The dishwashers are cash cows as even though the rate of market growth is low, DAL
has a relatively high market share. Cash generated can be used not only to further
develop stars but also question marks where it is deemed appropriate.
• The washing machines will soon become dogs as they are no longer able to be sold in
certain markets.
Example - BCG
• Chalk Co manufactures teaching aids for use in schools and training companies.
• One of the company's oldest products is the overhead projector. Teachers write notes on
acetate screen rolls, and the notes are projected onto a wall by the projector. Demand
for these products has been declining steadily in recent years due to the use of laptop
computers with built in projection.
• The company also produces "electronic blackboards", which are large flat screen
devices that are connected to a desktop computer that teachers use in class. This is a
new market and competition in the market is very fierce particularly from television
manufacturers, whose flat screen TVs can generally be plugged into any computer.
• The company has a division that writes computer programs to assist learning, and
teachers in classrooms use many of these programs across the country. Students also
buy the programs for home study. The company is recognised as the market leader in
this field. The market for such applications is fairly mature now.
• The company has a division specialising in the production of online training seminars
and meetings using Internet-based protocols. This is a developing area. Chalk Co has a
reputation for providing a good online experience.
• Required:
• Catagorize the Products using the Boston Consulting Group matrix.
Solution
• Dog
• The overhead projectors are serving a declining market. Although it is not clear what share of the market for
overhead projectors Chalk Co commands, it is clear that as a teaching tool, their importance is declining.
• In due course the product may be discontinued. Management focus will be on keeping costs down and managing
the redeployment of staff.
• Question Mark
• The electronic blackboard looks like a question mark. It is a relatively new market, but the company is facing a lot of
competition from other manufacturers.
• If a decision is taken to support the question mark and try to convert it into a star, an entrepreneurial style of
management would be appropriate, focusing on increasing revenues and market share. If a decision is taken to
divest the product, management focus will be on deploying staff and resources to alternative products.
• Star
• The online training and meetings division appears to have established a good position in a developing market. If it
can maintain this position as the market continues to develop, it may become a cash cow.
• An entrepreneurial style of management will be appropriate, focusing on market share, which must be maintained,
and revenue. In the short-run, making a profit will not be considered to be important.
• Cash Cow
• The computer learning division appears to be a cash cow. The market is now established, and the company has a
good reputation in it.
• Management focus will be on maintaining margins by keeping costs under control.
External Standards
Benchmarking
• HOW ORGS DO THE ANALYSES
Evaluate your Processes with the industry Best
• VARIANCE ANALYSES
Practice
• STANDARD COSTING
• BENCHMARKING
Benchmarking -Types
Benchmarking – Industry Benchmarking
Dis-advantages:
Advantages:
It enables the organisation to × It may be difficult to obtain information,

establish the gap between their particularly from competitors who will not
own performance and those of wish to share information with the
others in the same industry group. organisation.
It enables the organisation to learn × Comparison may be difficult, due to
from the best practice in the differences between the two
industry. organisations.
Benchmarking – Internal Benchmarking
Dis-advantages:
Advantages :
It is easy to obtain the information,

as it comes from internal sources. × It may lead to less challenging
Internal departments are more benchmarks. The fact that the best
likely to help other internal performing department may still be
departments to learn about how performing way below that of competitors
best practice is achieved.. would not be identified.
Benchmarking- of best-in-class benchmarking
Dis-advantages :
Advantages :
It provides the opportunity to learn

how to perform a process or
activity well. × Differences in the nature of the two
It may enable the organisation to organisations may make comparison of
overtake competitors, as the the business processes more difficult and
comparator is not in the same subjective.
industry. × Large differences in performance
The best-in-class may not be a between the organisation and the
competitor, so will be more willing benchmark may lead to demotivation.
to participate in the exercise.
Benchmarking - Stages
1.Planning and organisation
2.Identifying key internal processes for analyses:
Practices – steps in a process;
Metrics – measures of times and outcomes (e.g. cost,
quality, speed, reliability).
3. Researching potential partners (those perceived to be
the best).
4. Making agreements and developing plans for exchange
visits. Formulating a common programme.
5.Benchmarking teams visiting sites.
6.Analysing data and developing plans for improvements.
7.Implementation and monitoring.
Examples
An organisation wishes to benchmark the effectiveness of its finance
function. It may identify the following metrics as those that it wishes to
use. These would then be compared against industry best practice:
Cost of finance function as a percentage of revenue;

Cycle time – time taken (days) to perform annual close of the
accounts;
Staff productivity (e.g. number of invoices processed per member of
staff);
Error rate (e.g. percentage of invoices processed incorrectly).
Case Studies
Reference

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Advanced Performance

It enables the organisation to × It may be difficult to obtain information,

It is easy to obtain the information,

It provides the opportunity to learn

Cost of finance function as a percentage of revenue;

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