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Strategy map and the balanced scorecard: the AMCOR case

1. Introduction

The long-term goal of Amcor is to be a leader in the packaging industry and achieve consistent earnings growth for shareholders by promoting industry structures and building core competencies within the company (AMCOR, 2016). It is believed that the company will achieved higher than industry-average growth in the packaging market. In addition, it aims to either establish a strong global presence or a high reputation in local area (Amcor, 2013). Operating in the manufacturing industry, Amcor act in a responsible manner with a strong focus on sustainability issue and care for the environment. Moreover, e sustainability approach of the company makes up with its Belief Statement, the five core values, and the Amcor Way Operating Model. To achieve these objectives, Amcor proposed five well-defined core values of this company, including safety, integrity, teamwork, social responsibility, and innovation. The companies mainly operating in three business sectors: Flexible packaging, Rigid Plastics, and Tobacco and specialty packaging. There are three common characteristics of the three markets: growth is higher than industry-average; strong ability to created value-added differentiable products; and enable the company secure leading position (Amcor, 2015).

Basically, the shareholders related to the company can be categorized into types, including investors and debtors, competitors, managers, employees, customers, suppliers, and regulator and environment protection associations. The company holds responsible for Investors because it has to maximize the shareholders’ value by improve earnings from operating and making the company grow in a strategic manner. In addition, managers control, monitor, and make decision to allocate resources and operate business in best possible way to create value for shareholders. They are involved in the strategies making and implementation processes. Employees are people who actually carry out actions to fulfill the objectives at operational level. The company is responsible for customers, such as Coca, and it should provide high quality products. To make sure value creation during the whole product cycle, the company has to cooperate with suppliers. Furthermore, regulations and requirements by regulator and environment protection associations are closed related to the actions of the company. Key competitors in the market include Ball corp., Mondi PLC, Sealed Air Corp UPM Kymmene OYJ, and Weyerhaeuser Co. The company is also related to competitors, because they will compete for existing market or for market shares in the emerging market. The strategies and performances of participants in the same sector are closed observed and analyzed by each other.

2. the Balanced Scorecard for AMCOR 

There are four components in the Balanced Scorecard of Amcor: financial performances, customer’s perspectives, Internal Business Process, and Learning and Growth. For each group, specific objectives are identified and related measures are presented with respect to lag indicators and lead indicators.

There are five basic objectives in the financial performances section: to increase shareholder value of more than 10% annum, to generate strong operating cash flow, to decrease the cost, increase package innovation, and to increase return on investment. The objective of increasing shareholder value is measured by leading indicator of allocation of strong cash. If the company invest cash into profitable projects and markets, it is more likely to create value for the investors. Share price, on the other hand, is the lag indictor, since it is the result of value creation, increased shareholder value leading to increase in market price. The goal of strong operating cash flow is measured by level of decentralization and the complexity of decentralization. If it is easy to decentralize the business, it is possible that the company can expand new market and generate more cash, reflected by high level of decentralization. The goal of decrease the cost is evaluated by the leading factor of level of innovation and lagging factor of expenditure of production. Detailed and informative analysis of investment project is positively related to increased return on investment, because knowledgeable management is more likely to made sound decision. The ROI can also be directed measured by the outcome of investment. Increased packaging innovation results in more efficient usage of raw materials, which might be indicated by the number of patents.For the other three perspectives, detailed analysis is listed in the following table 2.1.

3. The Strategy Map for AMCOR 

The Strategy Map outlines the relationship of each objective with the four types of objectives. The bottom objectives serve as the contributors to achieving the upper level goals. The two objectives in learning and growth contribute to achieving the goals ininternal process categories. Increased core skills of employees lead to more responsible management accounting team and improved management information system.

Established suitable incentive plan improves the investment decisions-making process. The objectives of controlling fuel consumption and improving the annual budget process contribute to the financial objective of decreasing the cost. And the improved management accounting team and information lead to high quality and more functional products, which creates value for customers and increases customers’ satisfaction. The increased satisfaction lead to large customer base and increased sales, which increases the revenue and profitability of the company. At the same time, the company will receive well perception and high expectation from investors, thus the share price will increase.

4. Conclusion and recommendation 

The identified Balanced Scorecard helps align key performance indicators with objectives in terms of financial performance, customers, internal process, and learning and growth perspectives, which provides a comprehensive understanding and analysis of the objectives and ultimate strategy and at all levels of an organization. While currently, the senior management is facing difficulty in integrating budgeting information from divisions, the balanced scorecard suggests that it should begins with acquiring talented experts and employees to management team. In addition, to establish the information system, the company should evaluate the experience and skills of the people in charge of the design and implementation processes. On the other hand, the management information system also helps connect the sale performances of each product with the contribution of innovation, which provides a direction for future R&D activities. By understanding the contribution of innovation to the annual revenue, the company is more likely to make trade-off between investment in innovation or existing products. In addition, the Balanced Scorecard also enables management to better motive and inspire all employees. The Balanced Scorecard provides measures to evaluate the effectiveness of incentive package, thus the management has a better understanding of how to motive employees’ performance that both contribute to the current and long-run benefits of the company. Moreover, the analysis demonstrates the importance of human capital for the company, which lays the basic foundation for the company to achieves its goal in all levels. As a result, it is of great importance for the company to provide continuous training and education programs for its employees and improve their core business skills. The Balanced Scorecard also suggests that sustainability improvement relies on talented people and consistent innovation.

Reference List

Amcor 2013, Amcor - FAQs, viewed September 10 2016, <https://www.amcor.com/about-us/faq/faqs>.

—— 2015, 'Full Year Financial Report 2015', viewed 2016 September 10, <https://www.amcor.com/CorporateSite/media/Annual-reports/2015-Annual-Report.pdf>.

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