Question

There are several options for evaluating a firm's performance. Among these are Net profit trends, market share trends, and the balanced scorecard. These have all been used to evaluate your firm's performance in the simulation. Provide a comparative discussion of the three indicators mentioned above.

Answer 1

Performance of a firm depends on capability of its managementand work efficiency of employees. Management must be efficient enough to evaluate existing performance standard to promote high-performance skill. Three most effective standards for performance evaluation are net profit trends, market share trend, and balance scorecard.

• Net profit trend: Net profit trend signifies the average amount of profitability from all business activities of an organization. It evaluates internal strategic performance of all activities of an organization and authenticates the amount of profitability. Strategic efficiency of organizational management controls net profit trend.
• Market share trend: It is an effective way to measure external performance of an organization. It highlights the effectiveness of the marketing strategy of an organization to make efficiency in its brand value and capability in expanding its market base. A high market share trend ensures that an organization occupies a large number of market share. For example- Walmart occupies 25% of market share in the USA. On the contrary, a market share depicts that an organization has failed to gain profitability and has not reached expectation level of target consumers.
• Balance scorecard: It is the most impactful performance measurement tool. It evaluates performance standard of both internal and external activities of an organization and highlights performance key performance developmental areas. Effective implementation of this strategic tool signifies the importance of performance development programs to promote skills and capabilities.