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Performance measurement Case Solution & Answer

Performance measurement Case Solution 

  2015 2014
Revenue growth rate -3% 8%
EBIT 4% 3%

Sales volume and market growth

The company placed great emphasis on the volume and market share. It wants to expand, explore, and cover new markets. As per the annual report, the inflow of milk that is raw material has increased, while other ratios have also increased positively. Trading share or market share has increased as well.

Inflow of raw milk (million kgs) 14192 13570
Volume driven revenue growth 4.30% 5.30%
Branded growth 3.40% 2.10%
Trading share 21.50% 20.80%

  1. Suggest and comment upon possible reasons for any changes in the recorded ratios calculated in 1 above. You should also approach this from an academic standpoint examining the concepts which underpin these performance measures.

The revenues have decreased as compared to the previous year. The potential reason for this reduction is that the economy is in stress and the consumer purchasing power has decreased. Moreover, the commodity prices have been decreasing drastically. The global market prices have been decreasing, which has impacted the revenues.

Earnings have slightly increased as compared to the previous year. This is because, although revenues have decreased, but sales volume has increased. The cost has decreased as well. The company has adopted a cost reduction program and it has significantly reduced its costs and expenses. The company has planned and achieves the cost reduction of Euro 330 million. Overall cost has decreased by 4.6 from year 2014 to 2015.

The total milk volume has increased to 14.2 billion kgs and it is about 4.6 percent increment as compared to the previous year. The reason for this is the elimination of the milk quota system from the European Union. Another reason is the acquisition of Walhorn EGM.

  1. Discuss performance measures and their usefulness in the context of charitable or other not-for-profit entities. Also consider other possible performance measurement techniques, for example the balanced scorecard and the Social Return on Investment (SROI). 

The primary objective of the organizations that are not for profit and charitable institutions is to manage and use the scarce resources efficiently. They are mainly funded by governments, donors, philanthropists, donations, and fund raising programs.

The management of these organizations is responsible for the overall operations. They are responsible to use the resources and get most out of the money, which is trusted to them. The management should place systems and procedures so that to use the money effectively and in accordance with the righteous virtues. Performance measurement is a tool, which helps to evaluate whether the operations are being performed effectively. What activities are lacking the required efficiency etc.

The performance measures help to identify and analyze the financial performance. For an example, a charitable institution’s main internal cost is the administrative staff cost. The performance of this activity can be measured by analyzing the activity using comparison with other information available. The entity can calculate the administrative total cost as a percentage of revenues. The sources of funds can be analyzed by observing the time frame and expense incurred to generate it, such as charitable events. These performance measures help the organization to identify whether the resources are being used efficiently, what costs are being incurred, and the needs of improvements.

The balanced scorecard

It is a measurement tool and is more concerned with the strategic performance measurement. The balance scorecard helps the organization to formulate its business strategy around the four perspective of business, which are finance, customers, organizational plans & organizational growth, and learning potential. Thus, the not for profits can use this tool to manage its business operations and plan in a way that gives maximum performance within the available resources (An Introduction To Balanced Scorecards For Nonprofits, n.d)………………

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