Imagine that you are Magna's new corporate controller and answer the following: 1. Describe Magna's strategy...

 
 
 

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Imagine that you are Magna's new corporate controller and answer the following: 1. Describe Magna's strategy in terms of how it competes for customers. 2. Based on Magna's strategy and the data included in the case, prepare a BSC for Magna in the format from the table below by allocating the appropriate measures to the proper BSC perspective. Add DataMax's actual numbers to the BSC where available. You may also want to use the data provided in the case to calculate possible profitability and productivity ratios for Magna and DataMax. Magna DataMax FINANCIAL Actual Budget Actual Net Sales 1,424.8 1,589.5 462.2 (in millions) CUSTOMER INTERNAL LEARNING AND GROWTH 3. Use the BSC you have prepared to: - Deduce why Magna may not have been able to successfully implement its strategy. - Describe what information you would need to collect as the corporate controller to confirm your findings. - Provide suggestions on how Magna might improve its performance. INTRODUCTION The customers for Magna's private-label PCs are large electronic retailers, such as Best Buy, who place their in- You have just been hired as the corporate controller at Magna store brands on the PCs and then sell them in their stores. PC to help investigate its performance issues. Magna PC Magna competes with DataMax and other private-label designs, manufactures, and sells private-label PCs. In an PC manufacturers for orders from electronic retailers to sell attempt to gain scale advantages, Magna merged with its reliable PCs with middle-of-the-road technology at low prices. main competitor two years ago. Since the merger, Magna is one of the largest private-label PC manufacturers with more EMERGENCY MEETING OF MAGNA'S EXECUTIVE than 6,400 employees at four PC factories of similar size. TEAM MAGNA'S PRODUCTION PROCESSES AND CUSTOMERS The CEO called an emergency meeting of Magna's executive team to review Magna's prior-year performance (see Table 1). Visibly stressed because of an upcoming meeting with Magna manufactures a high volume of PCs on its production investors planned for the next week, Magna's CEO angrily lines. The majority of the parts used in Magna's assembly asked the CFO to explain why the company was unable process, such as the chips, processors, memory drives, to effectively execute its strategy as evidenced by its poor screens, power supply components, and cases, are purchased performance relative to its budget: Was the budget poorly from foreign and domestic suppliers. Prior to being used, done, or does Magna have operational issues that need to be samples of the parts are tested by Magna's quality assurance addressed? The CFO confidently replied that the prior year's department. If Magna's quality assurance staff finds more budget was well done, noting it was reasonable and fully than one faulty part in every 20 tested, the batch is rejected reflected Magna's strategy. The CFO added that Magna's and returned to the supplier. inability to execute its strategy must have been caused by Assembling PCs is a relatively labor-intensive process. operational issues. The CFO then quickly explained to the The factory employees are largely semiskilled and have been CEO that she had been so busy dealing with the auditors to trained by Magna to perform simple, repetitive steps. After finalize Magna's year-end financial statements that she had not the PCs are assembled, staff from Magna's quality assurance had time to investigate what may have caused the failure to department test each PC, and any that are found faulty are reach the budgeted numbers. returned to the production line and reworked. After the CEO's angry outburst, the CFO calls you into her office and directs you, the newly hired corporate controller, to use a balanced scorecard (BSC) and the performance data for Magna and DataMax to deduce the cause of Magna's failure to successfully implement its strategy. Although you do not have enough information or time to confirm your deductions, your report to the CFO should outline the information you would collect to verify your findings. Table 1. Select Financial and Operating Information from Magna's Prior Fiscal Year Magna PC: Select Financial Information (in millions) Actual Budget Net Sales $1,424.8 $1,539.9 Cost of Goods Sold $923.1 $918.8 Net Operating Profit After Tax $240.8 $298.9 Average Invested Capital $4,176.0 $4,080.0 Magna PC: Select Operating Information Number of employees 6,492 6,094 PCs Produced and Sold (in millions) 2.59 2.59 Percentage of Total Working Days Lost to Employee Absenteeism 2.2% 2.1% Number of Finished PCs Reworked Prior to Sale 32,000 25,000 Percentage of Supplier Parts Magna Rejects 4.5% 3.0% Average Score from Annual Customer Satisfaction Survey (5-Excellent) 3.4 4.0 Percentage of Employee Turnover 10.3% 5.2% Number of PC Patents Granted to Magna During Fiscal Year 6 Number of New PC Models Successfully Launched During Fiscal Year 1 4 Percentage of Faulty PCs Returned by Consumers 2.8% 2.0% Percentage of Returned PCs Covered by Warranty 5.6% 3.0% Number of Working Days Lost to Strikes 2,500 3,200 Note: All monetary values are represented in U.S. dollars. DATAMAX PC DataMax PC, one of Magna's largest and strongest competitors, also manufactures and sells private-label PCs to the same markets as Magna. It has one manufacturing plant in the same country as Magna's factories and uses production techniques and processes similar to those used by Magna. The information in Table 2 was obtained from DataMax's prior fiscal year financial statements and from a PC manufacturers' trade association of which Magna and DataMax are members. Table 2. Select Financial and Operating Information from DataMax's Prior Fiscal Year DataMax: Select Financial Information (in millions) Actual Net Sales $462.2 Cost of Goods Sold $268.8 Net Operating Profit After Tax S89.2 Average Invested Capital $815.6 DataMax: Select Operating Information Number of Employees PCs Produced and Sold 1,900 780,000 Percentage of Warranty Claims for PCs Sold 2.5% Note: All manetary values are represented in U.S. dollars. Imagine that you are Magna's new corporate controller and answer the following: 1. Describe Magna's strategy in terms of how it competes for customers. 2. Based on Magna's strategy and the data included in the case, prepare a BSC for Magna in the format from the table below by allocating the appropriate measures to the proper BSC perspective. Add DataMax's actual numbers to the BSC where available. You may also want to use the data provided in the case to calculate possible profitability and productivity ratios for Magna and DataMax. Magna DataMax FINANCIAL Actual Budget Actual Net Sales 1,424.8 1,589.5 462.2 (in millions) CUSTOMER INTERNAL LEARNING AND GROWTH 3. Use the BSC you have prepared to: - Deduce why Magna may not have been able to successfully implement its strategy. - Describe what information you would need to collect as the corporate controller to confirm your findings. - Provide suggestions on how Magna might improve its performance. INTRODUCTION The customers for Magna's private-label PCs are large electronic retailers, such as Best Buy, who place their in- You have just been hired as the corporate controller at Magna store brands on the PCs and then sell them in their stores. PC to help investigate its performance issues. Magna PC Magna competes with DataMax and other private-label designs, manufactures, and sells private-label PCs. In an PC manufacturers for orders from electronic retailers to sell attempt to gain scale advantages, Magna merged with its reliable PCs with middle-of-the-road technology at low prices. main competitor two years ago. Since the merger, Magna is one of the largest private-label PC manufacturers with more EMERGENCY MEETING OF MAGNA'S EXECUTIVE than 6,400 employees at four PC factories of similar size. TEAM MAGNA'S PRODUCTION PROCESSES AND CUSTOMERS The CEO called an emergency meeting of Magna's executive team to review Magna's prior-year performance (see Table 1). Visibly stressed because of an upcoming meeting with Magna manufactures a high volume of PCs on its production investors planned for the next week, Magna's CEO angrily lines. The majority of the parts used in Magna's assembly asked the CFO to explain why the company was unable process, such as the chips, processors, memory drives, to effectively execute its strategy as evidenced by its poor screens, power supply components, and cases, are purchased performance relative to its budget: Was the budget poorly from foreign and domestic suppliers. Prior to being used, done, or does Magna have operational issues that need to be samples of the parts are tested by Magna's quality assurance addressed? The CFO confidently replied that the prior year's department. If Magna's quality assurance staff finds more budget was well done, noting it was reasonable and fully than one faulty part in every 20 tested, the batch is rejected reflected Magna's strategy. The CFO added that Magna's and returned to the supplier. inability to execute its strategy must have been caused by Assembling PCs is a relatively labor-intensive process. operational issues. The CFO then quickly explained to the The factory employees are largely semiskilled and have been CEO that she had been so busy dealing with the auditors to trained by Magna to perform simple, repetitive steps. After finalize Magna's year-end financial statements that she had not the PCs are assembled, staff from Magna's quality assurance had time to investigate what may have caused the failure to department test each PC, and any that are found faulty are reach the budgeted numbers. returned to the production line and reworked. After the CEO's angry outburst, the CFO calls you into her office and directs you, the newly hired corporate controller, to use a balanced scorecard (BSC) and the performance data for Magna and DataMax to deduce the cause of Magna's failure to successfully implement its strategy. Although you do not have enough information or time to confirm your deductions, your report to the CFO should outline the information you would collect to verify your findings. Table 1. Select Financial and Operating Information from Magna's Prior Fiscal Year Magna PC: Select Financial Information (in millions) Actual Budget Net Sales $1,424.8 $1,539.9 Cost of Goods Sold $923.1 $918.8 Net Operating Profit After Tax $240.8 $298.9 Average Invested Capital $4,176.0 $4,080.0 Magna PC: Select Operating Information Number of employees 6,492 6,094 PCs Produced and Sold (in millions) 2.59 2.59 Percentage of Total Working Days Lost to Employee Absenteeism 2.2% 2.1% Number of Finished PCs Reworked Prior to Sale 32,000 25,000 Percentage of Supplier Parts Magna Rejects 4.5% 3.0% Average Score from Annual Customer Satisfaction Survey (5-Excellent) 3.4 4.0 Percentage of Employee Turnover 10.3% 5.2% Number of PC Patents Granted to Magna During Fiscal Year 6 Number of New PC Models Successfully Launched During Fiscal Year 1 4 Percentage of Faulty PCs Returned by Consumers 2.8% 2.0% Percentage of Returned PCs Covered by Warranty 5.6% 3.0% Number of Working Days Lost to Strikes 2,500 3,200 Note: All monetary values are represented in U.S. dollars. DATAMAX PC DataMax PC, one of Magna's largest and strongest competitors, also manufactures and sells private-label PCs to the same markets as Magna. It has one manufacturing plant in the same country as Magna's factories and uses production techniques and processes similar to those used by Magna. The information in Table 2 was obtained from DataMax's prior fiscal year financial statements and from a PC manufacturers' trade association of which Magna and DataMax are members. Table 2. Select Financial and Operating Information from DataMax's Prior Fiscal Year DataMax: Select Financial Information (in millions) Actual Net Sales $462.2 Cost of Goods Sold $268.8 Net Operating Profit After Tax S89.2 Average Invested Capital $815.6 DataMax: Select Operating Information Number of Employees PCs Produced and Sold 1,900 780,000 Percentage of Warranty Claims for PCs Sold 2.5% Note: All manetary values are represented in U.S. dollars.

Answer rating: 100% (QA)

1 Magna is better than its competitors for customers a less per unit cost Magna enjoys economies of scale due to large production capacity and investment Magnas investment is around 4176 million vs in... View the full answer