Myer Holdings Balanced Scorecard Analysis: Financial, Customer And Internal Process Perspectives

Financial Perspectives

Discuss about the Myer Holdings Balanced Scorecard Analysis.

Myer is a leading company that enjoys a proud heritage, and its future looks bright. With the retail industry and customer changing, Myer has an opportunity to revitalize and transform the delivery of services (Myer, 2016). The managers and employees of the company continue to work hard to do things right. The company has designed a balanced scorecard ensures the organization assesses its user perspective, financial perspective, innovation perspective, and internal perspective. The BSC is acceptable across the world as it ensures the organization supports its staff through a specified model.

Myer Holdings is a leading retail store company in Australia involves in the working department stores. This business provides eleven product categories under 65 stores (Myer, 2015). The organization deals in include cosmetics, perfumed, beauty, young generation fashion, and electrical products. Based on the prepared Balanced Scorecard, the company will improve its performance. In fact, under the current CEO, Myer Holdings is performing better compared to the previous years. However, the anticipated entry of Amazon in 2018 would have a direct impact on the financial performance of Myer Holding.

Myer Holdings seems to have registered weak overall financial performance. In 2016, Myer’s sales grew by overt 2.9 percent that saw the sales go up by three percent based on the comparable stores’ performance. This followed the rollout if expected brands (Myer, 2016). It also improved the customer services. Myer Holdings made incessant efforts to grow its business as it focuses on the execution of the new business strategy.  In 2016, Myer Holdings’ operating gross profit margin reduced by about 38.7 percent. This followed the robust customers’ responses to its new brand. The introduced brand focused on high concession mix with exemplary sales productivity (Ang, Lin, & Huang, 2010). However, it lowered the gross profit margin. The firms’ continued move to emphasize on exclusive brands has negatively affected the margins. Similarly, the depreciation of the Australian dollars also affected the operating gross profits. This is because; it opted to mitigate the impact through markdown efficiencies and to focus on prices and product.

The measures introduced saw the organization improve its net operating cash flows that improved by $36 million. In response to the positive cash flow and balance sheet, the Board opted to offer its shareholders dividends at about 5 cents per share. Compared to the 2015 financial year, the inventory was higher by $14 million. However, this improved represented only $12 million positive results (Myer, 2015). The company intends to accelerate its capital investment in 2017, in particular, in its priority stores.  The firm targets an average growth in sales greater than 3 percent between 2017 and 2020.  In 2016, the company recorded a sales growth of 2.9 percent. By 2010, Myer Holdings targets an improvement in sales of about 20 percent per square meters.

The Customer Perspective

With the anticipated competition in the industry, reliance on the unstainable and unsustainable cost-cutting would be essential to the company. Myer Holdings will manage to improve profitability. According to Miles (2017), lowering footprint expansion becomes the strategy to counter the Amazon expansion into Australia. Indeed, by opening new specialty stores in various parts of the country can benefit Myer beyond the reproach. The new entrant will disrupt the competitive landscape and the Myer’s competitive position. Since Amazon is an entirely online business, it will increase online competition that would reduce its sales (News.com.au, 2017). However, Myer has opted to implement a new strategy based on detailed customer insights thus offer wonderful customer experiences.

Myer Holdings has focused on serving the local customers with quality products. The customers have responded positively towards the company’s new business strategy. In the firm’s Premium Stores and Flagship have affirmed the significance of the additional investment as they offer customers the best customer service. As a result, Myer has achieved a 6 percent improvement in the Net Promoter Scores. According to Myer Holdings, the cunsumer perspective performance remains weak (Zizlavsky, 2014). Despite its established performance metrics, measuring how the new strategy will deliver remains a nightmare. Nevertheless, the company remains committed to its achievement timelines so that it can achieve sustainable profits. Unfortunately, the company failed to deliver a strategic plan that has affected its share price, reputation, and sales. To this effect, the organization developed a new strategic plan based on the internal and external customer insights, and it intends to implement it in different phases (Pash, 2016). For example, Myer intends to deliver the new Myer, resettle the business, and transform its operations through mobilization of resources.

The issue that has further tainted the reputation of Myer is the continued regulatory investigations into its operations and conducts. For example, the Australian Taxation Office and other regulatory agencies have scrutinized the business behaviour of the firm. The outcomes of these investigations have completely affected the company’s financial and operating performance (Myer, 2016). For instance, in 2015, the Australian Securities and Investments Commission exposed the company a scrutiny following the widespread claim over continued disclosure practices. However, the organization has dismissed such investigations as baseless because it has met its disclosure obligations.

The managers and owners of Myer are heightened by the acknowledgment of the significance of customers. The company focuses on the customer satisfaction. In a competitive business environment, customers have high bargaining power. The failure by an organization to meet their expectations would motivate them to seek solace in the rival companies (Glova & Gavurova, 2016). It appears that company has a balanced scorecard because it empathizes on the customer satisfaction and financial perspective. This has made the company remain successful in 2016. With the anticipated entry of Amazon, the company will have to review its strategy. Therefore, retaining customers and attracting new customers by 2020 would involve expanding its market base through diversifications.

The Internal Process Perspective

The internal process focuses on the internal activities that Myer performs. According to Zizlavsky (2014), Myer has distinguished unique activities that have made it excel and maximize performance in Australia. According to the company, it has established a structured proactive management of risks to manage and assess the risk factors. In fact, with the internal control systems, Myer has achieved its business objectives. The control system has also ensured the firm overcome the macro-economic factors including natural events, poor consumer preference, currency fluctuation, terrorism, weak global economy, and dynamic government policies (Zizlavsky, 2014). Myer uses and analyses the available economic data to mitigate the sales impact. As a result, it has implemented capital management, conservative hedging, and anticipated impact on sales. With businesses focusing on technology, Myer is taking the strategic efforts to change its digital environment.

The adoption of the technology is never waterproof but its malfunction of the systems and cyber security concerns are risky factors that must be considered. These risks expose the organization to detrimental effects on its sales. This would the situation in 2020, as the business will invest fully in the technology to outperform other players. Given the significance of Amazon in the online business, Myer might rarely beat it (Huang, 2017). This will see the company reduce its sales even if it offsets the risks. Myer will have to improve its internal process to allow it deliver efficient business operations.

The company’s board had to introduce deferred STI component. The board will make such changes by focusing on the executive top improve the annual performance and support and retain critical talents (Fujii, 2015). As part of its internal development processes, Myer will invest in employee training and growth skills. In fact, it recognizes that the company will manage to retain the top talents by considering the career planning aspects as explained by Myer (2016). Interestingly, the internal processes perspective ensures there is a timely service and product delivery. Myer will have to overcome the unbalanced Amazon’s balanced scorecard by investing in the marketing aspects to attract and retain its customers. Based on these activities, the performance of the firm is average because of its ability to negotiate with suppliers and invest in the IT systems. In the future, the company will have to improve its merchandise and match customer movements.

The employee growth and development remains the cornerstone of Myer Holdings. The learning and growth perspective has defined the company’s future because it has invested in the top talents as explained by Mullins (2017). For instance, the company has incessantly expanded its market share by opening new stores. It also intends to continue opening these stores in the next five years so that it can serve the last customer in the market. Additionally, Myer has balanced its balanced business scorecard by linking all the perspectives (Glova & Gavurova, 2016). With the anticipated entry of the global giant into the Australian market, Myer should invest with it by expanding its digital infrastructure. The success will depend on how it responds to the purchasing patterns of customers. Myer Holdings must strengthen its R&D efforts to understand the market needs thus responds accordingly.

Diversification is another strategy that Myer has used to survive in the current market environment. Despite the fierce competition, it has proved its ability to develop new products based on the market demands (Mullins, 2017). For example, it introduced apparels as part of its product line. Myer has also focused on developing tailored offers for its customers to avoid losing its loyal customers to the rivals and new entrants. It must leverage the loyalty programs. With the intensive effort to train and invest in human capital, Myer has confirmed its future is bright. According to Bartholomeusz (2017), this perspective addresses the aspects of training hours, employee skill levels, and employee turnover. Myer has to implement the BSC so that it can improve the results and performance by 2020. Although the company is currently doing well, with the entry of Amazon, Myer will have to review its marketing approach and employee development plans.

A dysfunctional balanced scorecard is disastrous to the organization because it shows how a firm uses the worst business strategy. Based on the result of this analysis, the performance of Myer is average. For example, it intends to accelerate its capital investment and open new stores. Refurbishing and upgrading the stores across Australia will be beneficial to the success of this organization. Myer (2016), by expanding its footprint in the market and expanding in a specialty store would help to improve its profitability. Therefore, the organization must address the issues emerging from its financial and customer perspectives to improve its chances of dominating the market. For instance, by avoiding litigations would improve its reputation among the customers.

References

Ang, J., Lin, W. & Huang, Y.H. (2010). A performance-oriented risk management framework for innovative R&D project. Technovation, 30(11/12), pp. 601-611.

Bartholomeusz, S. (2017, Mar 16). New Myer Business Strategy Gaining Traction. Business Review. Retrieved 13 April 2017 from <https://www.theaustralian.com.au/business/opinion/stephen-bartholomeusz/new-myer-business-strategy-gaining-traction/news-story/6fd31588f708fd50d5ffddc6622bd6f7>

Fujii, T. (2015). Global Competitive Advantage Skill of Balanced Scorecard by SWOT Analysis and Strategic Map New Version, Kindle Edition. Tom Publishing.

Glova, J. & Gavurova, B. (2016). Performance Indicators as a Part of Balanced Scorecard System within a Company. Retrieved 13 April 2017 from <https://emi.mvso.cz/EMI/2012-02/08%20Glova/Glowa.pdf>

Huang, E. (2017, Apr 5). Big Changes Coming to Australia When Amazon Arrives, Says Customer Experience Expert.” CNBC. Retrieved 13 April 2017 < https://www.cnbc.com/2017/04/05/big-changes-coming-to-australia-when-amazon-arrives-says-customer-experience-expert.html>

Miles, N. (2017, January 20). Prediction for the Australian Grocery Retail Market. Research. Retrieved 12 April 2017 from < https://www.igd.com/Research/Retail/Five-trends-shaping-Australian-grocery-in-2017/>

Mullins, K. (2017, May 10). Balanced Scorecard: A Model for Improving Government Performance. BPM Institute.org. Retrieved 13 April 2017 < https://www.bpminstitute.org/resources/articles/balanced-scorecard-model-improving-government-performance>

 Myer. (2015, Jul 25). Annual Report. Retrieved 12 April 2017, <https://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_MYR_2015.pdf>

Myer. (2016, October 17). Myer Holdings Limited 2016 Annual Report and Notice of Annual General Meeting. ASX & Media Release. Retrieved 12 April 2017, from <https://investor.myer.com.au/FormBuilder/_Resource/_module/dGngnzELxUikQxL5gb1cgA/file/Myer_Annual_Report_2016.pdf>

News.com.au. (2017, Mar 27). Australian Retailers are Unprepared for the Entry of Amazon. Retrieved 12 April 2017 from < https://www.news.com.au/finance/business/retail/australian-retailers-are-unprepared-for-the-entry-of-amazon/news-story/7fa56b9aded85aae0a47ea4155c9aa8f >

Pash, C. (2016, Mar 17). Myer’s 4-Point Plan for turning it around. Business Insider. Retrieved 13 April 2017 from https://www.businessinsider.com.au/this-is-myers-4-point-strategy-to-bring-back-sales-2016-3>

Zizlavsky, O. (2014). The Balanced Scorecard: Innovative Performance Measurement and Management Control System. Journal Technology in Management Innovation, 9(3), 210-222.