E3 Task 1

Question 1

Should Runn consider wealth maximisation of shareholders?

Answer 1

Yes, as a listed business this is a legitimate objective for them which should be achieved in line with their vision, mission and values.

Question 2

Why is the method of wealth maximisation an important consideration for Runn?

Answer 2

In the past year it has paid out 83% of retained earnings to shareholders in the form of dividends. Looking ahead, there appear to be potential liquidity issues along with funding sourcing considerations for any future growth initiatives.

Question 3

What would be the danger of seeing profit as the ultimate goal for Runn.

Answer 3

Without adding value to the stakeholders it seeks to serve in some way then, profit for Runn would likely diminish in the longer term as focus on cost and/or price is not in line with meeting this ambition. (i.e. link businesses and individuals in a sustainable manner).

Question 4

Name a few areas which could land on Runn’s balanced scorecard

Answer 4

Financial - Total Shareholder Return, Free Cash, EBIT, Return on Equity, Return on Capital Employed.

Learning and Growth - Staff Training (e.g. new penalty laws), Internal Projects (3D Printing, Pick up lockers), Success of Acquisition integrations.

Internal Processes - Average deliveries per day, depot handling time per package, Hub and spoke efficiency (e.g. distance travelled per package)

Customer - Satisfaction, NPS,

Question 5

What are benefits to the Balanced Scorecard

Answer 5

• Links strategy to operational performance in a more holistic fashion.
• Supplements short term financial performance with the need to understand long term health (i.e. sustainability) of the organisation

Question 6

What are disadvantages to the Balanced Scorecard

Answer 6

• Potential for contradiction (e.g. deliveries per day, and staff training on new penalties)
• Data collection is time consuming
• Indecision through need to collect the data and analyse before making decisions