DEFINITION OF BALANCED SCORE CARD

A balanced scorecard is a management tool that supports the successful implementation of corporate strategies. It was developed as a new approach to performance measurement due to problems of short-terms and past orientation in management accounting. The concept is based on the assumption that the efficient use of investment capital is no longer the sole determinant for competitive advantages, but increasingly soft factors such as intellectual capital, knowledge creation or excellent customer orientation become more important.

It comprises of quadrants giving equal consideration for long term and short term financial performance, customer issues, internal business processes and organisational learning and growth.

The balanced score card 4 perspectives are as follows:
1. The financial perspective
It indicates if the transformation of a strategy leads to improved economic success. Thus, the financial measures assume a double role: On the one hand, they define the financial performance a strategy is expected to achieve. On the other hand, they are the endpoint of
cause and effect relationships referring to the other balanced score card perspectives.

2. The customer perspective
It defines the customer/market segments, in which the business competes. By means of appropriate strategic objectives, measure, targets and initiatives the customer value proposition is represented in the customer perspective, through which the firm/business
unit wants to achieve a competitive advantage in the envisaged market segments.

3. The internal process perspective
It identifies those internal business processes, which enable the firm to meet the expectations of customers in the target markets and those of the shareholders.

4. The learning and growth perspective
It describes the infrastructure which is necessary for the achievement of the objectives of the other three perspectives. In this case, the most important areas are qualification, motivation and goal orientation of employees and information systems.

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