Management Decision Making

You are asked by a consulting firm We will make your business great again- to design a strategic management system for a business specialising in retailing home improvement and outdoor living products called The Business.

The Business was recently acquired by a grocery and liquor retail chain, traded on the Australian Stock Exchange. You were told that though The Business made A$1 billion in sales last year, its operating income was nil, and the new manager, John Clarkson, was given five years to improve the operation of The Business. The 5-year goals for The Business are:

increase sales every year to reach at least A$5 billion in five years or sooner
achieve positive operating income with a Return on Sales of 15%
increase market share to at least 11% in five years or sooner.
Currently, the business owns 23 stores, mainly in Victoria, New South Wales and Queensland, however, the parent company will make a financial commitment of $1 billion to improve existing stores and to open 5 more new stores in the next 2 years. Part of the group, The Business will operate as a separate company and its management will be responsible for all decisions in relation to the types of products being sold, the expansion and other activities of carrying on the business.

Background to The Business and to the Hardware and building supplies retailers industry
Like most of the hardware and home improvement companies, The Business is exposed to a range of factors such as price, product range, consumer sentiment, discretionary income, and residential construction activity which all affect demand for hardware and building supplies.

The Business operates in a highly competitive market. National chain stores such as Bunnings, Mitre 10 and Home Timber & Hardware dominate the market. However, the industry is still fragmented. Most businesses are relatively small, privately operated, employ fewer than 20 staff, and have annual revenue of less than $2 million. The majority of hardware stores are located in New South Wales, Victoria and Queensland, accounting for an estimated 77.2% of industry enterprises. Tasmania, the Northern Territory and the Australian Capital Territory account for only 3.9% of the industrys hardware stores.

It is forecast that over the next five years, the industry will be growing and that growth will be due to increased residential and commercial construction.

Some key financial data:

Operating revenue (A $m)


Earnings before Interest and tax (A $m)


Current Assets (A $m)


Total Assets (A $m)


Current Liabilities (A $m)


Total Liabilities (A $m)


Return on Investment


Required Rate of Return


Please note: You can find more information about the Hardware and building supplies retailers industry on the IBISWorld Database (Links to an external site.)Links to an external site. available from Swinburne Library website.

The hardware stores operations
After a quick visit to a number of stores owned by The Business you concluded that stores are located rather inconveniently, or next to busy shopping centres, where customers need to compete for car parking with other shoppers. You found the stores offered a poor range, old or out of season and often inappropriate products. You wondered why it is the stores have hundreds of light fittings, but none you would want to install in your own house.

You were disappointed to find out that the advertised 20% discounting applied to very few products, which were otherwise unsaleable, whilst the products you could have been interested in were offered at full price or discounted by 5%. You felt that it was misleading advertising. Furthermore, prices of many products were higher than those of competitors.

The stores themselves were rather dark and lacking an appropriate signage resulting in wasting a lot of time just to find a product. It was challenging to find a product but even more frustrating to learn was that the particular product had its price tag missing.

The floor staffs were very scarce so it was difficult to find a staff member to help and if there was someone available, they usually had very little knowledge about the products. You had to wait for half an hour for someone to mix your paint, and when finally an employee appeared, he did not know how to read the mixing instruction.

One of the staff members said to you that she never learned about the products they sell and neither of the staff had any training about customer service. She also was quite dismissive about her boss, stating that the floor managers or even top management did not know how to deal with their employees and with customers.

Though, there were not many people in the shop, you observed long queues at the checkouts. A number of people were complaining about being overcharged.

On the way to the car park youve noticed that there was no one to help an elderly lady to carry a plant to her car.

The balanced scorecard
After assessing the financial situation of The Business and its operations, you realised that The Business needs a total overhaul of its management system. You decided that the balance scorecard with its measures that drive performance will be a perfect strategic planning and management system for The Business.

Steps to completing this assignment
Perform a SWOT analysis of The Business –
you need to list at least four issues for each element of SWOT analysis Strengths, Weaknesses, Opportunities and Threats; and
you also need to elaborate why you considered these particular issues in your analysis.
Tip: Strengths and Weaknesses relate to internal matters of a company, whereas Opportunities and Threats relate to external issues such as competitive advantage

Formulate a vision, mission and overall strategy/s for The Business.
Design a balanced scorecard for The Business.
In particular you need to:

Draw a strategy map based on the objectives that you develop for The Business. Tip: you should utilise your SWOT analysis in developing the objectives for The Business.
Briefly define the objectives included in the strategy map and explain why these particular objectives are important for The Business. Tip: you can describe and explain the objectives in the strategy map
Prepare a scorecard with measures, targets and initiatives (action plan) that you need to develop for ‘The Business
Explain how your balanced scorecard will help to achieve the overall strategy/s of The Business. You need to support your discussion with appropriate literature.
Evaluate how your balanced scorecard will promote goal congruence for The Business. Again, you need to support your discussion with appropriate literature. Tip: an appropriate reward system will be useful in promoting goal congruence.
Write a memorandum to John Clarkson summarising your report and outlining what you believe to be the strengths of your balanced scorecard. Tip: write a memorandum instead of an executive summary.
This assignment must be written in the form of a report (Links to an external site.)Links to an external site.. However, instead of an executive summary, please write a memorandum to John Clarkson.
The assignment should contain appropriate referencing using the Swinburne Harvard (Links to an external site.)Links to an external site.. References to online sources should provide direct links to the source.

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