Balance scorecard of Incepta Corporation – Term Paper

From the very beginning of Its operations It tries to achieve the confidence of the customers and market share wrought providing accurate and proper products to the customers. To become successful in another time in generic products, Incepts Pharmaceutical Ltd introduced balanced score in measuring its performance to know the exact position of its operation towards goals attainment. So, it developed a balanced scorecard for measuring its operational performance in 2006.

The development of balanced scorecard wasn’t an easy task for the organization as management needs to measure the position of the organization in the market and the capabilities of it in implementing the balanced scorecard. Management first examined the organization ND benchmark used In the worldwide to measure the performance by using balanced scorecard. Then, they examined the goals of the organization.

Training was an Integral part of the organization as performance assessors needed to know about the rating points against the performance measures. After flexing all the complexes associated with the implementation of the balanced scorecard, Incepts Pharmaceutical started using balanced scorecard in the late of 2006. Management of Incepts Pharmaceutical Ltd put emphasized more on the marketing perspectives of the balanced scorecard to grab the biggest market share in generic products in Bangladesh.

Our observations were that Incepts Pharmaceutical Ltd could emphasize more on the financial and learning and growth perspectives as it want to lead the generic market of the pharmaceutical industry and all its success depends on the successful achievement of financial goals. Contents Executive Summary 2 Acknowledgement: 4 Introduction: 5 Organizational Overview: 5 1. 2 History of Incepts: 5 1. 3 Boston: 6 1. 4 Mission: 6 1. 5 Recent Financial Situation 6 Literature Review: 7 Research Methodology: 9 Balanced Scorecard: 10 Balanced Scorecard in Incepts Pharmaceutical Ltd: 12 Introduction of Balanced Scorecard: 12

Implementation of BBS: 13 Development of Balanced Scorecard in Incepts Pharmaceutical: BBS in Incepts Pharmaceutical: 15 Financial Perspectives: 15 Market Perspectives: 16 Internal Business Perspectives: 16 Learning and Growth Perspectives: 18 Findings: 19 Recommendations & Conclusion 20 Recommendation: 20 Conclusion: 20 References:21 Acknowledgement: 1 5 Perspectives of At first, we would like to thank almighty Allah for giving us the abilities to complete this term paper.

There are some people we would like to thank for their contributions to prepare this paper. At first, we would like thank Almighty Allah to bless to us finish his paper. We would thank our Honorable teacher, Associate Professor Md. Babul Smashes for introducing us with many new aspects of management control systems and assign us to prepare such a relevant report with our course. We would like to than Mr.. Alumina Khan, Senior Executive, Department of HER, Incepts Pharmaceutical, to provide us with many useful information about the company.

Above all we want to express our thanks to our parents to support us all the times. Media Has Khan ID-05-028 Md. Rookie Madam Irony Introduction: Balanced scorecard is a framework of understanding the financial and no-financial reference measures in the organization to measure the success of the organizational goal attainment. Counting the non-financial measures, organizations can understand the market trends in the industry and their influence on the industry as well their position in the markets.

Balanced scorecard is a comprehensive measurement techniques in that sense that it helps the organization to measures its performance in context of the markets as well as the goals of the organization. It also helps to measure the learning impact of executing the regular activities in the organizations and their activities on the training of the employees. As customers perspectives help to measure the customers’ perception about the companies. This is very helpful as it helps the organization to understand its customer’s base and the result of the development of new products.

Incepts pharmaceutical Ltd is one of the leading pharmaceutical companies in Bangladesh. Balanced scorecard used in the Incepts Pharmaceutical Ltd help it to understand the overall performance of it by giving the result of financial and non-financial performance indicators. 1. 1 Incepts: Incepts Pharmaceuticals Ltd. Is a leading pharmaceutical company in Bangladesh established in the year 1999. The company has a very big manufacturing facility located at Saver, 35 kilometer away from the center of the capital city Dacha.

The company produces various types of dosage forms which include tablets, capsules, oral liquids, ampoules, dry powder vials, powder for suspension, nasal sprays, eye drops, creams, ointments, lotions, gels, profiled syringes, liquid filled hard gelatin capsules, lopsidedly injections etc. Since its inception, Incepts has been launching new and innovative products in order to fulfill unmet demand of the medical community. The focus has always been to bring new, more technologically advanced molecules and innovative dosage forms to this country. . 2 History of Incepts: Incepts began its operation with a handful of highly skilled and dedicated professionals guided by an able leadership. Proper strategic planning, technical excellence, swift and timely decisions helped us achieve our objectives leading to much faster growth. Incepts was able to anticipate the need of the market and provide the right product at the right time. High focus on R investment from the very beginning made possible the introduction of quality products. Incepts Pharmaceuticals Ltd. Now the 2nd largest company of the country and recognized as the fastest growing of the top five manufacturing company in the country. Established in the year 1999, the company has come a long way. Currently the Carob plant consists of several buildings with state of the art technology. Dedicated cosponsoring manufacturing building, a specialized manufacturing building for the production of lopsidedly products, insulin and amino acids and newly built liquid and semisolid manufacturing building and large warehouse is also in operation for performing the business daily functions efficiently.

Another multipurpose building also there. Currently all the products are coming from the plant at Carob. The company now produces almost all types of dosage forms covering nearly all therapeutic area. Incepts now has one of the largest and competent sales force and large distribution network of its own, operated from 18 different locations throughout the country. A most dynamic skilled and dedicated marketing team comprising of pharmacists and doctors are at the core of the marketing operation. These highly skilled professionals play a crucial role in providing the necessary strategic guideline or the promotion of its product. . 3 Vision: Incepts wants to become a research based global pharmaceutical company in addition to being a highly efficient generic manufacturer. To discover and develop innovative, value-added products that improves the quality of life of people around the world. And contribute towards the growth of our Nation. 1. 4 Mission: Provide people globally with high quality health care products at affordable prices in order to improve access to medicine and to provide employees an enabling environment that facilitates realization of their full potential. 1.

Recent Financial Situation: Present Financial situation (2013) of the Incepts is provided below in a table: Figure 1: Present Situation of Incepts Pharmaceutical Ltd. (Incapacitated. Com, 2014) Literature Review: Performance Measurement: “Measurement of the performance of organizations has been of central interest to both managers and management accounting researchers for a long period of time. However, management accounting has had a tendency to restrict itself to only consider financial performance and mainly applying theories drawn from the discipline of economics (Naive, 2005). During the sass the relevance of financial measures was widely debated. Technological and competitive challenges required organizations to reexamine their existing practices which led to the design of new management accounting systems Monsoons and Kaplan, 1987). ” Balanced Scorecard: “Balanced Scorecard complements financial measures of past performance with measures of the drivers of future performance. The objectives and measures of the scorecard are derived from an organization’s vision and strategy.

The objectives and measures view organizational performance from four perspectives: financial, customer, internal business processes, and learning and growth. These four 2001). ” After getting the more concentration from the business organization, Norton and Kaplan included that: “Corporate executives can now measure how their business units create value for current and future customers and how they must enhance internal Capabilities and the investment in people, systems, and procedures necessary to improve future performance (Kaplan and Norton, 2001). ” There are six basic components of BBS.

They are perspectives, themes, objectives, measures, targets, and initiatives. Components of Balanced Scorecard Perspectives: There are four standard perspectives as suggested by Kaplan and Norton. These are financial, customer, internal business process, and learning and growth. However, organizations can choose any number of perspectives as may suit their need of sufficiently measuring the present performance and the drivers of future performance. The number would depend on how the stakeholders’ expectations are being represented and the manner in which the organization would decipher their strategy.

All relevant factors for strategy execution are accounted for in these perspectives, thus creating a balance between the short term and long term objectives as well as linking the desired outcomes and the performance drivers for those outcomes. Thus, perspectives form the basic architecture of BBS (Love and *strand, 2002). Figure 2: Perspectives of Balanced Score Card Themes: Themes are inherent in the strategy and provide an insight into how an organization would carry out its mission. There are usually three to four basic themes consisting of a collection of objectives across perspectives which enable execution of the theme.

Objectives: They highlight critical factors to the success of the organization which must certainly be achieved. Measures: What gets measured gets achieved. Measures help organization determine its success in executing strategy. The two fundamental purposes served by measures are organizational motivation and objective evaluation of the strategy as well as strategic learning. Targets: Targets help define the level of performance or the rate of improvement that is needed. Initiatives: These are key action programs that are required to achieve the objectives. This report is descriptive in nature.

The purpose of this paper is to report on the measurement of the performance of the organization taking into the consideration of he organizational financial and non-financial performance. The research was based on the observation on the supply chain and financial statement of the Incepts Pharmaceutical. Data about the supply chain process, financial statement are collected by discussion with employee of Incepts Pharmaceutical. Due to the single source of information there may be some contradictory result in the findings. Research question: 1 . What is the Balanced Scorecard (BBS)? . What performance measures are used in BBS? 3. What are the measures used by the Incepts Pharmaceutical Ltd? 4. What was the implantation process? 5. What are the objectives of instituting balanced scorecard in the Incepts Pharmaceutical? The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives. The Learning & Growth Perspective This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement.

In a knowledge-worker organization, people the only repository of knowledge are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. Kaplan and Norton emphasize that ‘learning’ is more than ‘training’; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed.

It also includes technological tools; what the Baldrics criteria call “high performance work systems. ” The Business Process Perspective This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with our unique missions these are not something that can be developed by outside consultants.

Performance Measures Financial Perspectives Market share Revenue growth Profit ratio Return on investment Economic value added Return on capital employed Operating cost management Operating ratios and loss ratios Corporate goals Survival Profitability Growth Process cost savings Increased return on assets Profit growth Measures Cash flow Net profitability ratio Sales revenue Growth in sales revenue Cost reduction RACE Share price Return on shareholder funds Customer Perspectives Customer service New markets Customer retention Customer satisfaction What does the organization need to do to remain that customer’s valued supplier?

Internal Business Processes Perspectives Percentage of Sales from me products. Time to introduce new products to market Percentage of customer calls answered within 20 seconds. On time deliveries as a percentage of all deliveries. Work in process inventory as a percentage of sales. Unfavorable standard costs. Defect-free units as a percentage of completed units. Delivery cycle time. Throughput time. Setup time. Time from call by customer to repair of product. Percentage of customer complaints settled on the contact. Time to settle a customer claim Learning & Growth Perspectives Suggestions per employee.

Value added employee. Employee turnover. Hours of in-house training per employee. Table 1: Performance Measures in Balanced Scorecard The Customer Perspective Recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good.

In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups. The Financial Perspective Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is hoped that more of the processing can be centralized and automated.

But the point is that the current emphasis on financial leads to the “unbalanced” situation with regard to other perspectives. There is perhaps a need to include additional financial- elated data, such as risk assessment and cost-benefit data, in this category. Extensive research and evaluation of hundreds of Balanced Scorecard implementations has been done by the Balanced Scorecard Collaborative (the consulting organization established by the founders of the Balanced Scorecard methodology) and various other practitioners. A consistent theme emerges from this body of knowledge: the Balanced Scorecard is a cultural change initiative.

Successful organizations use the Balanced Scorecard to create a culture of continual focus on strategy formulation, measurement, and revision. The key elements in creating this treated focused organization are as follows: 1 . Mobile change through executive leadership. Building a strategy focused organization usually involves significant culture change. Organizational change is an evolutionary process. Consistent executive leadership, involvement, active sponsorship, and support are critical to maintaining momentum through the challenges that organizations inevitably encounter.

The executive team must be in agreement on strategies and must drive the scorecard process for it to be successful. Often executives are too busy to be intimately involved in the process, so a cross-functional team is formed. This can be successful if: The executive team has first participated in facilitated sessions at which the fundamental mission, vision, and strategic themes are established. The team has the ear of the leadership and can readily escalate issues to executives for resolution. Executives continue to communicate their support for, and involvement in, the Balanced Scorecard initiative. . Make strategy a continual process. A strategic focus is not maintained if strategy formulation becomes a one-time activity. Feedback loops are needed to constantly focus attention on and reevaluate the strategy and the measures. To support strategy evaluation, tools for reporting and analysis should be deployed to enable analysis of the factors influencing the measures. The budget process also is often linked to strategy, and in some cases the Balanced Scorecard replaces traditional budget formulation as a way to allocate funds. 3. Make strategy everyone’s Job.

This is done through strategic education and awareness and by cascading the scorecard down through the organization, so that business units, departments-?or even individuals-?create their own scorecards. The linkages to strategy are explicitly defined at all levels. This helps departments and individuals understand and find new ways to support the strategy of the organization. It also helps ensure that employees at all levels are being measured and compensated in ways that support that strategy. 4. Align the organization to the strategy.

This involves evaluating current organizational structures, lines of reporting, and policies and procedures to ensure that they are consistent with the strategy. It can include re-alignment of business units or re-defining the roles of different support units to make sure that each part of the organization is lined up to best support the strategy. 5. Translate the strategy into operational terms. Tools like the strategy maps, cascaded scorecards, and strategy grids are used to integrate strategy with the operational tasks that employees perform daily. This ensures that tasks are done in ways that support the strategies.

Balanced Scorecard in Incepts Pharmaceutical Ltd: The management team in Incepts Pharmaceutical, composed by the general manager, finance and marketing managers, had the cooperation of one of the recommended external consultant companies. The development process in Incepts Pharmaceutical, as recommended by the internal scorecard development handbook, insisted basically of three steps. 1. First, country strategy was discussed – this strategic discussion was then extended to an exchange of thoughts about an appropriate vision and value proposition of international top management.

This initial discussion, occurred in 2006, produced a draft document that would become the basis of the BBS implementation in Incepts Pharmaceutical. 2. The second step included the training of local staff. The necessary pre-knowledge on the BBS was given by having employees occasionally attended internal presentations by the companies’ BBS expert. Such presentations typically included a BBS implementation ease, for example, in one of the company’s production plants. Figure 3: Introduction of Balanced Scorecard in the organization 3.

The third and final step in the BBS development process was again a workshop, which dealt with the discussion of a linkage model (cause-and-effect chain) for the critical few objectives and the determination of appropriate key performance indicators and targets. It was in this final step that, according to the managers. At the end of 2006, it had become quite clear that new opportunities in the Bangladesh pharmaceutical market would arise from the introduction of generic reduces in the market.

In order to assume a leading position in this emerging market, Incepts Pharmaceutical began doing its home work by clearly defining and communicating its vision and values. Mailing campaigns to all employees and posting bills in the office walls, transmitted a clear message to everyone to where the future would be. Implementation of BBS: For all the strategic objectives, Incepts Pharmaceutical Ltd defined 21 key measurements; align with the critical success factors in order to indicate how the company was standing in respect to the overall vision (Kaplan and Norton, 2001).

All goals were presented in percentage points, in order to measure the goal achievement from the previous quarter of the year. The measurements and goals in the scorecard were also documented in a measurement document, which includes all performance measurements reported from the year 2000. According to the information gathered in interviews, Incepts Pharmaceutical Ltd management team first became acquainted with the BBS concept in June 2006, when the official internal scorecard development handbook was distributed company-wide. They then welcomed the new concept due to its logic and similarity to his way of