The BSG report is tied to how a company is able to meet the five performance measures in which the management targets. These parameters and goals include growing the earnings per share, maintaining a positive equity investment, maintain a B+ or more credit rating, improved image rating and increasing the stock price gains in the market. The scoring weights selected are usually reported by the company’s co-managers. Using the assigned weight, each manager tracks the performance of the company by taking into factor investor expectations and “best-in-the industry” standard. The paper seeks to discuss BSG simulation in relation to A Company’s performance analysis.
From the BSG simulation it is evident that investors look at a number of parameters before investing in accompany. The use of investor expectation score is common because it measures the percentage in which the target is achieved by the company. Therefore, achieving a higher targeted performance results in more bonus points, and hence more investors. Secondly, the best industry score is an analysis based on how well a company performs in comparison with the best company in the market during a specific period of time. As mentioned above, the parameters used includes: the ROI, EPS, stock index values, image rating and equity investment. Analyzing these parameters brings us to the overall score of the company. The overall measure determines the firm’s ranking based on the 20 year scoreboard and ‘game to date’ scored board. By combining the investor expectation score and bests-industry scored, an analyst is able to analyze the performance of a company by checking the overall scoreboard.
To begin with, each expected performance target is worth a number of points. In the previous year, the company’s return on equity was 74.3 while in Y20, the value dropped to 37.5. Similarly, game to date scores for A Comeback Company dropped significantly as compared to other companies such as C Flash. However, in the recent weeks, a follow up of the analysis shows promising growth. Except for the most recent week for analysis, the company’s return on equity has been progressive. Between 27th of February and 5th of March, the return on equity was 38.5 percent, making the company the 42nd best performer of the week. Thereafter, from 13th of March 2017 to 19th of March, the company’s ROE score was 42.5 percent, a 4 percent increase as compared to the previous evaluation. In comparison, the week between 27TH of March and 2nd of April saw an increase of ROE to 87.5 Percent. This accelerated the company to become the best performer during that week. Similarly, the week between 3rd of April to 9th of April saw a formidable dropped to 74.3 percent. This made the company the second best performer worldwide, during that week.
Upon comparison between the investor’s expectation score, A Comeback Company had the highest score while the best-industry score reflected an average of 64 as compared to C Flash’s score of 965. For that reason the results for year 20 shows that A Comeback was third overall, based on these parameters. On analyzing the game to date scoreboard, A Comeback had an overall score of 97 while the best company, C-Flash had an overall score of 111.
Among the reasons for the above mentioned poor performance includes decline in internet market sales across North America, Europe, Asia and Latin America. The revenues from internet sales have swiftly declined across the 5 global regions. This is attributed to increase in cost of pairs sold, increased marketing and administrative expenses. More so customer paid fees increased as compared to year 19 (A Comeback 4). Similarly, the whole market performance declined as compared to year 19. Other reasons includes poor footwear models offered, poor Celebrity appeal and unavailability of certain demanded footwear models.
The company’ earnings per share is average as compared to the industry leaders. ‘A Comeback’s’ EPS value is averaged at 7.41 for the past 10 years as compared to C Flash which has a weighted average of 13.89. More so, the EPS value dropped from Y19’s value of 13.20 to year 20’s value of 9.15. Upon analyzing the company’s return on equity, the weighted average is averaged at 37.9, while the previous year’s value is 74.3. It is evident that there is a drastic decline on the return on equity. The company’s stock is also underperforming compared to the previous and competitor companies. The stock in Y19 was 237.85 and then it declined to 118.97 in the most recent year. The severity of the company’s performance is further simulated to the 0 bonus offered based on bull’s eye award. In fact, the percent variance was valued at -4.1 percent (A Comeback 4).
How to Resolve these Issues
On the bright side, these failures will be a motivating factor for change as shown in the past few weeks of the analysis. To begin with, one strategy would be to source for celebrities and convince them to sign long term contracts. Celebrity endorsement will follow a bell curve because most of their fans will purchase from the company. Also, expansion of the plant to Europe-Africa segment will boost revenue as well serve a broader market. Currently, there are no operation in Europe and Africa.
In addition, buying back the company’s stock will guarantee an increase in the company’s share price. Every BSG metric will increase when the stock price increases. This strategy will increase return on equity, increase EPS, stock price as well as pay higher dividends. Underperformance can also be solved by improving the company’s credit rating and overall BSG score. A keen look at the company’s balance sheet and cash flow report will reflect which kind of loans have higher interest rates. Among other techniques includes strategic concentration on internet segment and more resource allocation on wholesale segment
What would your group do differently?
The group would consider prices of better and quality materials centered on demand and supply functions. Therefore, employing a high SQ approach will use materials with low prices and high standards. This will be possible through economies of scale. More so, the group should consider opportunities for refinancing the outstanding debt. Each decision that increases or lowers interest rates will be likely to increase credit ratings. Eradication of high interest rate loans will increase the company’s credit rating. More so, taking out a loan for the same amount while paying out an existing one will solve credit rating and EPS issues.
How to use this experience in the future
The BSG report will be essential for future references especially in the following functions:
- As a manager, it will form a clearer financial perspective especially in setting financial objectives for an organization.
- On a customer perspective, it ensures that consumer objectives are achieved. Such objectives include setting process strategies and formulating market share goals.
- It also enhances a learning and growth perspective especially in covering intangible drivers of success such as capital, informational capital and organizational capital (Kozami.34)
From the analysis, it is clear that the costs and expenses are significant in ensuring that balanced score grading produces a positive outcome. The report provides a scenario of how a BSG report is written and how the issues set out affects managerial decision making. Among factors discussed includes issue learnt from the BSG simulation and how they affect A Comeback Company. The second art entails the solutions to these issues and the future outlook and benefits of the knowledge acquired from analyzing the report.