Strategic Analysis and Development of Balanced Scorecard for Sheng Siong Group Ltd

Question

Strategy

Memorandum

To: Management Team

From: Management Consultants

Subject: Strategy Analysis and Balanced Scorecard Development

< br >This business memorandum is written on the basis of analyzing Sheng Siong Group Ltd’s strategy and putting the company’s interests first to create a balanced scorecard. This memo is divided into two different sections. The first part of the memo reviews the company’s strategy and discusses the company’s strategic objectives, actions taken, organizational structure, financial performance, competitive advantage, and corporate social responsibility performance. His second part of the memo creates a balanced scorecard for the company. It consists of five different perspectives and for each perspective he has two strategic objectives.

Company Strategic Objectives:

< br> Sheng Siong Group Ltd’s strategic objectives can be adequately explained by the company’s mission and vision. The company’s vision is to constantly strive to be the retailer of choice in markets beyond Singapore through further offshore expansion. The company’s mission is to create value for its customers by providing a comfortable and convenient shopping experience and environment with excellent service and ensuring quality products at competitive prices (Reuters, 2022).

Comments on strategic actions taken:

We have taken several strategic initiatives and actions to achieve our strategic objectives. rice field. One of these efforts is to give customers access to a diverse portfolio of products and brands, both offline (in brick-and-mortar supermarkets) and online (e-commerce websites). From 2014 to 2015, Sheng successfully expanded its stores strategically to drive growth and sales, reaching 63 stores with a retail area of ​​50,000 square meters. The company is also expanding its business in China. Both Kunming branches are profitable and intend to continue growing after COVID-19 restrictions are lifted. Finally, over the years, the company has maintained cost efficiencies and improved productivity by leveraging innovation, technological progress, and digitalization (Sheng Siong Supermarket, 2022).

Company Organizational Structure:

The group consists of Mr. Lim Hock Eng, Executive Chairman of the Company and Mr. Lim Hock Chee, Chief Executive Officer of the Company. (Bloomberg.com, 2022). Sheng Siong Group Ltd has a sophisticated organizational structure with vertical management, mostly with strict hierarchical relationships. Organizations use a top-down approach as a communication channel with their employees.

Company’s Strategic Goals

Comments on Company’s Financial Performance:

Sheng Siong Group Ltd has, in the past five years from 2016 to 2020, I have had good results. Overall sales have increased year-on-year from 2016 to 2020, with the latest figures increasing from S$991.3 million in 2019 to S$1,394 million. The sharp increase in total turnover allowed the company to achieve excellent profitability. This can be confirmed by interpreting gross and net profit margins. Gross margin is a financial rate of return that indicates the percentage of sales remaining after covering a company’s direct costs, i.e. cost of goods sold (Jiambalvo, 2019). Furthermore, net profit margin can be interpreted as the gross profit or portion of sales remaining after covering all costs incurred in the year, including direct expenses, operating costs and financial costs (Warren, Reeve, Duchac). 2016). The company’s gross margin in 2020 was 27.4% (up from 26.9%), the highest in five years due to the upward trend in revenue.

Similarly, total net profit represents the ultimate bottom line profit that a company derives from its business operations. This is nearly double from S$75.8 million in 2016. Apart from the increase in total sales, the company also saw an increase in other revenue streams, which was reflected in its consolidated income statement and increased absolute net worth. The sharp increase in absolute net income also helped the Group’s earnings per share increase from 5.04 cents in 2019 to 9.22 cents in 2020, more than doubling compared to 4.17 cents in 2016. Increased profit figures allowed us to generate profits continuously. Enhancing shareholder value, the dividend per share increased from 3.55 cents per share in 2019 to 6.5 cents per share in 2020. An increase in total working capital in 2020 due to higher cash and cash equivalents confirmed the strength of liquidity, resulting in favorable liquidity ratios and absolute liquidity ratios. Finally, the company’s relatively low level of debt has reduced the risk of its financial liabilities, as interest-bearing debt, which is part of its capital structure, has been significantly reduced (Ehrhardt & Brigham, 2016).

Please comment on the strategic steps taken.

Competitive Advantage and Increased Competitiveness:

Sheng Siong Group Ltd has a competitive advantage in terms of market positioning. While competitors such as Cold Storage and NTUC Fairprice aim to appeal to the middle and high end, Sheng Siong Group caters to price-sensitive customers by offering an unrivaled shopping experience. I’m here. In addition to its cost leadership strategy, Sheng Siong Group will also differentiate its portfolio by developing its own brand and product range to provide target markets with high-quality alternatives that enable significant cost savings. and To date, the group has sold a total of 1,400 of its products offline and online.

Based on some recommended points, you can improve and increase your competitive edge. The COVID-19 pandemic has increased the demand for e-commerce. The company has an online presence, but focuses on offline operations. They should consider stepping up their efforts in the e-commerce field. Additionally, the group has very limited marketing efforts and may be looking to spend on digital and traditional marketing. Finally, the group may look to accelerate growth in China, where the market can be very lucrative (Hbsp.harvard.edu, 2022).

Corporate Social and Environmental Responsibility:

Benefiting as a Retailer The company benefits greatly from its customer base and community in Singapore and is one of the leading retailers. It is our social responsibility to contribute to the lives of local communities and provide them with an enriched life by making comprehensive use of our strengths. From an environmental point of view, it is up to companies to be guardians and stewards of today’s generation by minimizing their environmental footprint, ensuring the sustainability of their operations, and promoting green thinking throughout society.

Conceptual Overview About Balanced Scorecards:

The Balanced Scorecards tool is a popular tool that helps you track and measure the financial and non-financial performance of a given organization through appropriate measurements. It is a performance measurement tool, also referred to as a key performance indicator (Awadallah & Allam), 2015). While the original Balanced Scorecard introduced by Kaplan and Norton in the 1970s had four different perspectives, modern scorecards have five or six different perspectives. Performance measurement tools help organizations track progress toward their strategic goals, which in turn helps them achieve their overall vision.

Company Organizational Structure

Sheng Siong Group Ltd Balanced Scorecard:

With the help of extensive secondary research on company annual reports and annual sustainability reports Therefore, considering the organization’s best interests, the following Balanced Scorecard was developed covering five different perspectives.

Financial Perspective:

From a financial perspective, our two main strategic goals are to increase earnings and create shareholder value. The company reported a 40.6% increase in overall sales in 2020 compared to the previous financial year 2019. Sales growth rate is one of the most important indicators for evaluating the improvement of a supermarket’s financial performance. Finally, creating value for shareholders is one of the company’s most important strategic goals, which can be measured by his dividend per share ratio. This is because shareholders have high expectations for returns and paying high dividends is synonymous with creating value and maximizing wealth. The 2020 dividend per share increased from 3.55 cents in 2019 to 6.5 cents in 2020.

Customer Perspective:

Caring for the customer is also one of the company’s strategic priorities and forms an important foundation of the company. company mission. Therefore, it is of utmost importance to measure customer performance and perceptions, as a company’s financial performance depends on the customer’s perspective. One of the main reasons for measuring customer satisfaction is to constantly improve the consumer’s shopping experience and focus on customer service and care. The company measures this using the CSISG Score (Singapore Customer Satisfaction Index), which has been continuously improved over the years. Finally, to understand customer needs and preferences, the company collects feedback through social media platforms. This is measured by the complaint-to-compliment ratio, which improved from 1.40 to 1.29 in 2020 (Investor – Sheng Siong Supermarket, 2022).

Internal Business Perspective:

One of the company’s key strategies is to accelerate growth by establishing and opening new stores in appropriate locations across the country. Progress must therefore be measured to assess the added value created by new store openings. In 2020, the company successfully opened 5 new stores, resulting in a 4% market share increase in the supermarket segment (Investor – Sheng Siong Supermarket, 2022). After all, supermarkets are inventory-intensive businesses, so maintaining optimal inventory levels is critical. Businesses should use automated inventory tracking software to improve inventory management. Understocking leads to lost sales, while overstocking increases inventory costs and the risk of breakage or misappropriation.

Comments on the Company’s Financial Performance

Learning and Growth Perspective:

Providing more qualified staff training and development services is the One of the most important aspects of ‘consideration’. This allows employees to develop their skills and competencies, which is mutually beneficial for the company and employees. This is measured by the average training hours per employee. Courses offered to employees include vocabulary training, management programs, product knowledge workshops, cybersecurity and more. One of the side benefits of this is improved employee retention as measured by turnover. The turnover rate he has steadily decreased from 33.5% in 2019 to 24.3% in 2020 (Investor – Sheng Siong Supermarket, 2022). >Social and Environmental Aspects:

Sheng Siong Group Ltd also has a social and environmental perspective as described in the Social and Environmental Goals section of this report. believe. Therefore, it makes sense to measure performance to assess her CSR performance of a company. Giving back to the community through employee support, employee family support, and community engagement is in line with stakeholder expectations. In 2020, the group donated SS$134,700 to the community, excluding in-kind donations. Finally, from an environmental point of view, the Group strives to reduce its carbon footprint and electricity consumption through the use of solar energy, LED lighting, rainwater collection systems and refrigeration heat recovery systems. It is therefore important to measure and track the GHG emissions intensity ratio (representing emissions per kilogram of carbon dioxide per S$ of revenue generated) used by the Group.

References

Awadallah, E.A. & Allam, A. (2015). Criticism of the Balanced Scorecard as a performance measurement tool. International Journal of Business and Social Sciences, 6(7), 91-99.

Bloomberg.com. (2022). Bloomberg – Are You A Robot? Retrieved 01/25/2022

From https://www.bloomberg.com/profile/company/SSG:SP

Ehrhardt, M.C. & Brigham , E.F. (2016). Corporate Finance: A Focused Approach. Encourage learning.

Hbsp.harvard.edu. (2022). Harvard Business Publishing Education. January 25, 2022

https://hbsp.harvard.edu/product/W14526-PDF-ENG

Acquired from Investor – Sheng Siong Supermarket. (2022). Investor – Sheng Siong Supermarket. January 25, 2022,

Retrieved from Jiambalvo, J. (2019). management accounting. John Wiley & Sons.

Reuters. (2022). https://www.reuters.com/companies/SHEN.SI

Retrieved from Sheng Siong Supermarket on 01/25/2022. (2022). Overview – Sheng Siong Supermarket. Retrieved January 25, 2022

From https://corporate.shengsiong.com.sg/about/#our-story

Warren, C.S., Reeve, J.M. & Duchac, J. (2016). Financial and operational accounting. Get down to learning.