The purpose of this report is to discuss ComfortDelGro’s Management Accounting System (MAS). Through examining the strategy, organisational structure, environmental responsibilities and performance measurement systems, this report gives an understanding of ComfortDelGro’s strategy. ComfortDelGro profit centres and performance management system and rewards enable the company to support the meeting of ComfortDelGro’s objectives. An analysis of ComfortDelgro’s environmental responsibilities is also discussed in depth.
ComfortDelGro is a publicly listed company in Singapore formed in 2003, and it is one of the largest land transport companies in the world (ComfortDelGro 2018). The company operates in six other countries: United Kingdom, Ireland, Australia, Vietnam, Malaysia and China (ComfortDelgro Annual Report 2017). ComfortDelGro has a total number of 12,623 employees and generated a $2,483.3 million revenue in Singapore for the financial year 2017 (ComfortDelGro Annual Report 2017).
ComfortDelGro’s businesses include bus, taxi, rail, car rental and leasing, automotive engineering services, inspection and testing services, driving centres, non-emergency patient transportation services, insurance broking services and outdoor advertising. ComfortDelGro owns many companies such as SBS Transit, Comfort, CityCab, and many more (ComfortDelGro Annual Report 2017).
Some of the major competitors of ComfortDelGro in the land transport industry includes SMRT, which mainly provides public bus and train services, and Grab, which mainly provides taxi and ride hailing services. Nevertheless, ComfortDelGro continues to be the leading company of public transport services, as well as the largest taxi operator in Singapore (ComfortDelGro Annual Report 2017).
ComfortDelGro uses the hold approach in its business planning with the objective to protect its market share and remain as the leader of the public transport industry. According to the Boston Consulting Group Model in Figure 1, a company with high market share and high market growth rate should plan their business through the hold approach. ComfortDelGro is still maintaining high market share and gaining high market growth rate in the industry (ComfortDelGro Annual Report 2017).
Figure 1. Boston Consulting Group Model
ComfortDelGro adopts the differentiation strategy in order to maintain its competitiveness, mainly in the taxi industry. The company offers services that are perceived by its customers as being superior and unique relative to those of its competitors (Olson, Slater ; Hult 2005). The strategy is to increase spending on IT expenses, which can be seen through the significant investment made on ComfortDelGro App. Passengers of ComfortDelGro are introduced to new services like the Flat Fare option, which became popular. Morever, ComforDelGro is the first taxi company in Singapore to give its passengers the option to make cashless payments. The investment proved to support the company’s strategy for growth, customer service quality, operational efficiencies and meeting regulatory compliance requirements (ComfortDelGro Annual Report 2017).
Figure 2. ComfortDelGro Organisational Structure
Being a large company, ComfortDelGro adopts a decentralised organisational structure, where work unit managers in the different industries have decision-making power although the Board has the ultimate authority. Decision making often requires specific knowledge which is more likely to reside with business segment managers. ComfortDelGro’s relatively high extent of decentralisation is rather successful as there is clear identification and communication of boundaries of responsibility between work units and managers, as well as the ability to measure accurately the performance of individual work units (ComfortDelGro Annual Report 2017).
Market-based work unit approach
Being a company with a differentiated strategy, ComfortDelGro uses the market-based work unit approach where the focus is a specific market as seen in the Figure 2. For instance, SBS Transit has its own Chief Executive Officer (CEO) in Singapore, ComfortDelGro Taxi has its own CEO in Singapore, Swan Taxis has its own CEO in Australia (ComfortDelGro 2018). Apart from the wholly-owned subsidiaries, subsidiaries of ComfortDelGro have their own organisational structures with their own internal Board of Directors.
The market-based work unit approach is appropriate for ComfortDelGro as it is involved in many industries although they are mainly related to transport. SBS Transit, which is involved in train and bus industries, have different Heads for Downtown Line, Bus Service, Bus Engineering, and many more (SBS Transit 2018). This illustrates that ComfortDelGro subsidiaries have a relatively high independence.
MAS supports the development of a successful decentralised approach through the development of responsibility centres. Responsibility centres are decentralised sub-units or work units in which managers are accountable for specific types of operating activities. Choice of types of responsibility centres depends on size and nature of organisation, as well as the organisational structure. Since ComfortDelgro is a large company with a market-based work unit approach, profit centres are used, where managers are given control of both inputs (costs) and outputs (revenue) and evaluate in terms of effectiveness in controlling costs and revenues.
Environmental responsibility is defined as the environmental commitment of a company where it achieves sustainability and putting an impact on the environment and society (Jamison et al. 2005). Environmental responsibility has been an important component in every company since the 1980s (Das 2006). Demonstrating environmental responsibility aids to improve the economy as well as making business for the company that does so (Uecker-Mercado ; Walker 2012). It also gives the opportunity for the company to gain comparative advantage (Uecker-Mercado ; Walker 2012).
The extent of how huge a company should implement on environmental responsible efforts depends on the size, culture and industry of the company (Das 2006). Environmental impacts of huge companies are more significant as their impacts are easy to measure and evaluate. Larger firms also have more experience and knowledge of creating business in a more environmentally-friendly way (Schaper 2002). Therefore, it is essential for large companies to focus on environmental efforts.
As ComfortDelGro is the largest public transport company in Singapore, the company is committed to minimising the impact to the environment by ensuring continuous improvement in environmental performance whilst bearing in mind prevailing technical and operational constraints (ComfortDelGro Sustainability Report 2017).
Its subsidiaries implement environmentally responsible initiatives such as by reducing resource usage and minimising waste, investing in environmentally-friendly vehicles and researching into alternative fuels (ComfortDelGro Sustainability Report 2017). SBS Transit invests in hybrid buses which use both diesel and electricity. By using electricity to power the bus, it saves up to 30% of fuel, reducing fuel consumption (SBS Transit 2018). ComfortDelGro Taxi has over 15000 taxis and most of them meet at least the Euro 4 emissions standards. Among them, 1250 are petrol-electric Toyota Prius hybrid taxis which produce zero emission in 2017 (Comfort Transportation and City Cab 2017). ComfortDelGro is also able to gain comparative advantage and maintain transport efficiency through their green efforts.
Performance Measurement System and Rewards
The Remuneration Committee plays an important role in the Group’s remuneration policies, as well as oversees the talent management and succession planning for senior management staff. Besides providing the Board with an independent review and assessment of Directors’ remuneration, it also reviews the remuneration framework and strategy for executive compensation, with the purpose of developing talent and building leadership bench strength to ensure the Group’s continued success (ComfortDelGro Annual Report 2017).
According to the annual report, ComfortDelGro Group seek to implement a new Share Award Scheme for Executive Directors and Key Executives as part of the long-term incentive programme to attract talent, retain them and reward those who make significant contributions to the Group. In awarding the incentives, the Group considers the key executive’s performance in four key broad areas which are: Financial, Customers, Processes, and People Development (ComfortDelGro Annual Report 2017).
The four performance measures are consistent with consistent with the strategies, key success factors and organisational structure of ComfortDelGro. However, there is no relation between the performance measures and environmental responsibility, therefore explaining that the system is not consistent with the environmental responsibility.
ComfortDelGro Board of Director’s performance measurement system includes target achievement of financial and non-financial activities, but should be updated to include environmental responsibility targets. As discussed above, the environmental impact that ComfortDelGro caused is very significant. Moreover, as environmental responsibility creates opportunities to cut cost and gain comparative advantage, having targets for senior executives to meet could improve ComfortDelGro’s performance without incurring negative impact to the environment.
In conclusion, ComfortDelGro’s MAS enables it to collect and communicate necessary information which supports the company to achieve its objectives. ComfortDelGro decentralised structure and market-based work unit approach enables the company and its subsidiaries to operate with a high level of autonomy and responsibility, resulting in further support.
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