Development of a strategic management tool in a power plant using ABC and BSC models
Abstract
In today’s dynamic, uncertain and highly competitive business environment, the long term success of an organization critically depends on the perceptions, choices and actions of its managers regarding their strategies. Activity based costing (ABC) and balanced scorecard (BSC) are the modern-day management approaches acknowledged as reliable tools for strategy formulation and implementation in an organization. In this paper, ABC and BSC models are separately proposed and applied in the merry-go-round (MGR) department of an Indian power plant. The results elicited from adoption of these two models in the said power plant provide more accurate, timely, and reliable operational and financial information at different activity levels of the organization, which would help in effective strategic and tactical decision making. Even though, there are limited published research papers related to application of ABC model in power plants, none of them has adopted ABC and BSC techniques in an Indian contextual environment. Additionally, an integrated ABC-BSC model is designed to harness the complementary synergies of both ABC and BSC models.
References
Amado, C.A.F., Santos, S.P., & Marques, P.M. (2012). Integrating the data envelopment analysis and the balanced scorecard approaches for enhanced performance assessment. Omega, 40 (3), 390-403.
Azadvar, I., Alizadeh, E., & Bozorgmehrian, S. (2012). Implications of activity-based costing/management for decision-making in order management. International Journal of Natural and Engineering Sciences, 6 (1), 31-36.
Banker, R.D., Bardhan, I.R., & Chen, T-Y. (2008). The role of manufacturing practices in mediating the impact of activity-based costing on plant performance. Accounting, Organizations and Society, 33 (1), 1-19.
Cardos, I.R., & Cardos, V.D. (2014). Measuring customer profitability with activity-based costing and balanced scorecard. Annales Universitatis Apulensis Series Oeconomica, 16 (1), 52-60.
Chamsilpa, M., & Kiatsiriroat, T. (2010). Life cycle assessment of amorphous silicon solar cell power plant using activity-based approach. International Journal of Renewable Energy, 5 (1), 57-69.
Dwivedi, R., & Chakraborty, S. (2015). Strategy formulation and monitoring of a SME using activity based costing, balanced scorecard, and quality function deployment models. Transformations in Business & Economics, 14 (1), 173-191.
Fernandes, K.J., Raja, V., & Whalley, A. (2006). Lessons from implementing the balanced scorecard in a small and medium size manufacturing organization. Technovation, 26 (5-6), 623-634.
Gibaly, M.M.E., & Diab, A.A.A. (2012). A model to integrate of the ABC and the BSC in the Egyptian companies: aligning strategic efficiency and performance improvement (field study). Journal of American Science, 8 (6), 543-554.
Hasani, B., & Vakilalroaia, Y. (2013). An ABC analysis for power generation project. Management Science Letters, 3 (7), 1943-1948.
Hoque, Z. (2014). 20 years of studies on the balanced scorecard: trends, accomplishments, gaps and opportunities for future research. The British Accounting Review, 46 (1), 33-59.
Huang, C.D., & Hu, Q. (2004). Integrating web services with competitive strategies: the balanced scorecard approach. Communications of the Association for Information Systems, 13, 57-80.
Jordao, R.V.D., & Novas, J.L.C. (2013). A study on the use of the balanced scorecard for strategy implementation in a large Brazilian mixed economy company. Journal of Technology Management & Innovation, 8 (3), 98-107.
Jordao, T.C., Sampedro, E.L-V., Gonzalez, E.R., & Bata, R. (2011). The strategic planning for renewable energy supply in the Czech Republic based on the balanced scorecard. International Journal of Energy and Environment, 5 (3), 364-376.
Korpunen, H., & Raiko, R. (2014). Testing activity-based costing to large-scale combined heat and power plant using bioenergy. International Journal of Energy Research, 38 (3), 339-349.
Langmaak, S., Wiseall, S., Bru, C., Adkins, R., Scanlan, J., & Sobester, A. (2013). An activity-based-parametric hybrid cost model to estimate the unit cost of a novel gas turbine component. International Journal of Production Economics, 142 (1), 74-88.
Lin, W.C., & Yahalom, S. (2009). Target performance management for an international shipping harbor: an integration activity-based budgeting with a balanced scorecard approach, the case of Keelung Harbor. African Journal of Business Management, 3 (9), 453-462.
Liu, L.Y.J., & Pan, F. (2007). The implementation of activity-based costing in china: an innovation action research approach. The British Accounting Review, 39 (3), 249-264.
Mooraj, S., Oyon, D., & Hostettler, D. (1999). The balanced scorecard: a necessary good or an unnecessary evil?, European Management Journal, 17 (5), 481-491.
Nachtmann, H., & Al-Rifai, M.H. (2004). An application of activity based costing in the air conditioner manufacturing industry. The Engineering Economist, 49 (3), 221-236.
Nurminen, T., Korpunen, H., & Uusitalo, J. (2009). Applying the activity-based costing to cut-to-length timber harvesting and trucking. Silva Fennica, 43 (5), 847-870.
Oh, S-C., & Hildreth, A.J. (2013). Decisions on energy demand response option contracts in smart grids based on activity-based costing and stochastic programming. Energies, 6 (1), 425-443.
Papalexandris, A., Ioannou, G., Prastacos, G., & Soderquist, K.E. (2005). An integrated methodology for putting the balanced scorecard into action. European Management Journal, 23 (2), 214-227.
Patrick, E.A., Blessing, I.N., & Gloria, E.C. (2015). The use of activity based costing and balance score card for strategic performance measurement: perception of chartered accountants in Anambra State, Nigeria. American Journal of Economics, Finance and Management. 1 (3), 211-222.
Pedro, M.I., Kengue, M., & Filipe, J.A. (2011). The ABC method - proposed implementation in a structural steel industry. International Journal of Latest Trends in Finance and Economic Sciences, 1 (3), 130-136.
Punniyamoorthy, M., & Murali, R. (2008). Balanced score for the balanced scorecard: a benchmarking tool. Benchmarking: An International Journal, 15 (4), 420-443.
Voelpel, S.C. & Streb, C.K. (2010). A balanced scorecard for managing the aging workforce. Organizational Dynamics, 39 (1), 84-90.
Wong, F.W.H., Lam, P.T.I., & Chan, E.H.W. (2009). Optimizing design objectives using the balanced scorecard approach. Design Studies, 30 (4), 369-392.
Yakhou, M., & Ulshafer, K. (2012). Adapting the balanced scorecard and activity based costing to higher education institutions. International Journal of Management in Education, 6 (3), 258-272.
The Author wishes to submit the Work to SJM for publication. To enable SJM to publish the Work and to give effect to the parties’ intention set forth herein, they have agreed to cede the first right to publication and republication in the SJM Journal.
Cession
The Author hereby cedes to SJM, who accepts the cession, to the copyright in and to the paper.
The purpose of the cession is to enable SJM to publish the Work, as first publisher world-wide, and for republication in the SJM Journal, and to grant the right to others to publish the Work world-wide, for so long as such copyright subsists;
SJM shall be entitled to edit the work before publication, as it deems fit, subject to the Authors approval
The Author warrants to SJM that:
- the Author is the owner of the copyright in the Work, whether as author or as reassigned from the Author’s employee and that the Author is entitled to cede the copyright to SJM;
- the paper (or any of its part) is not submitted or accepted for publication in any other Journal;
- the Work is an original work created by the Author;
- the Author has not transferred, ceded, or assigned the copyright, or any part thereof, to any third party; or granted any third party a licence or other right to the copyright, which may affect or detract from the rights granted to SJM in terms of this agreement.
The Author hereby indemnifies the SJM as a body and its individual members, to the fullest extent permitted in law, against all or any claims which may arise consequent to the warranties set forth.
No monetary consideration shall be payable by SJM to the Author for the cession, but SJM shall clearly identify the Author as having produced the Work and ensure that due recognition is given to the Author in any publication of the Work.
Should SJM, in its sole discretion, elect not to publish the Work within 1 year after the date of this agreement, the cession shall lapse and be of no further effect. In such event the copyright shall revert to the Author and SJM shall not publish the Work, or any part thereof, without the Author’s prior written consent.