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Accounting, Finance and Control Project

Academic Members


Professor Arnaboldi.
Dr. Sidorova.
Dr. Conte.

Students



Erwin Agüero.
Carlo Baudino.
Aidin Bayazian.
Peter Cholwinski.

..................................................................................................................................................................................................... 8 iii.....6 a..................... Perspectives..............................................................................................6 IV....................... Methodology. Size and global competitiveness.......................................................................................... Strategy Map....................................... Strategic Objectives.........................................................................................15 1 ...................................................5 a......................................................................................... Description of Company......................................................................................................................................Politecnico Di Milano – Management Engineering Master Program Accounting...... Finance and Control course Project – Managament Dashboard Schneider Electric Contents I........................... 2 ii................................................................2 a.................................................. Management Dashboard................................... Annex............................................................................................................2 i................15 VI.................. Map............... Risk Scorecard................................................................ Overview........................................................................................................................................... Abstract.............................................................15 VIII... Vision.............................................. Strategy................................ Mission and Values......... Acknowledgments..................................................... Industry........................................ Scorecards........... 3 b................................ 10 V....................... The main energy problem.................................................................................. 7 ii.............................................................. Competitive Environment Analysis............................5 b......................7 i............................................................................................15 IX.......................................................2 II..6 b.......................................................................... Critical Analysis...........................................................4 III.......................15 VII.....................................................

Finance and Control course Project – Managament Dashboard Schneider Electric I. This project is prepared for the accounting finance and control project. Description of Company a. Overview 2 .Politecnico Di Milano – Management Engineering Master Program Accounting. For calculating the indicators the data from corporation`s annual reports gathered and no adjustments have been made. so there might be some missing data that we tried to explain the issue and surf the web for similar results. Since the internal data and reports of the company are not available we utilized the external reports as a reference. Industry i. Abstract The following project is a comprehensive study of Schneider Electric corporation`s strategy and financial state and finally a managerial dashboard to have an overall outlook of the corporation`s present situation. II.

The company is the global specialist in energy management with operations in over 100 countries. Schneider Electric has become today the solution provider that will help people make the most of their energy. energy efficiency is a key component of this energy challenge. Schneider Electric is the leader in energy management and a core partner of all actors in the energy supply chain to make the efficiency economy a reality. Secretary General at World Energy Council. the scarcity of resources is becoming more pressing. The lack of global agreement on climate change mitigation. The main energy problem According to Christoph Frei. Finance and Control course Project – Managament Dashboard Schneider Electric From 1836 up to today. efficient. utilization and storage. today the primary global issues for energy situation are:     Energy prices. ii. reliable. Starting from its roots in the iron and steel industry. Energy efficiency.Politecnico Di Milano – Management Engineering Master Program Accounting. leverages its portfolio of products and services to make energy safe. Schneider Electric focalized its efforts to confront the following megatrends that are transversals to all the topics mentioned previously: o Urbanization Cities today contain 50% of the world’s population. While global energy demand is set to rise to support growing industrialization and urbanization. consume 75% of global energy consumption and give off 80% of greenhouse gas emissions. After 170 years of history. Carbon capture. it moved into electricity and automation management. Everyone needs to do more with less. And cities are growing: by 2050. With available and mature technologies that can save up to 30% of business-as-usual energy consumption. they will be home to 70% of the people in the world. and ship building. o Shift in the world economic center and industrialization 3 . In this context. heavy machinery. productive and green. Schneider Electric has transformed itself into the global specialist in energy management.

Size and global competitiveness In our days.3 billion people lack access to energy (20% of the world’s population). Furthermore.Politecnico Di Milano – Management Engineering Master Program Accounting. The advantages of energy efficiency are numerous and impact the entire energy chain from people to power plant to ensure a complete optimization of the smart grid. Their share of global energy demand will continue to rise – from 55% in 2010 to close to 65% by 2035 – because of demographics. and growing affluence. women and children will see their living standards rise: while today 1. The ensuing access to real-time information will grant all stakeholders the opportunity to implement active energy efficiency. According the International Energy Agency (IEA) this market is concerned in producing goods and services that reduce the energy required to fuel. The Schneider’s business target recently changed by the begging of the 2014 from five: Residential. this number will double. or 12% of global population. Internet has connected 2. Millions of men.5 billion people together. In the coming 8 years. this number will fall to 990 million in 2030. 4 . Concurrently the Internet will connect 40 billion machines to those 5 billion connected people. The Schneider’s global position in these markets is demonstrated in figure 2. industrialization. the energy efficiency plays a very dominant role in the world because it involves the awareness of all sectors in any country. Industry and Information Technologies implementations. Energy and Infrastructure and Data Centers and Networks to four reorganized businesses: Buildings and Partner. Finance and Control course Project – Managament Dashboard Schneider Electric Non-OECD economies represented 35% of world GDP in 2012 urban regeneration and should reach close to 58% by 2030. Building. by 2011 the investment in markets worldwide in the energy efficiency was approximately $300 billion under IEA estimations. Industry. b. Infrastructure. In the past 20 years. urbanization. o Digitization and the smart grid.

The phrase that represents this description is: “We see a world where we can achieve more. Finance and Control course Project – Managament Dashboard Schneider Electric Figure 1 . my customers. vision and mission mentioned previously. Both statements. Vision. Connect: I connect to customers and colleagues. Mission and Values The Schneider’s vision is oriented to development a sustainable environment where their clients can use World’s resources under the philosophy: “more with less”. my team and myself.The Schneider’s global positions and its competitors. while using less of our common planet”. are under a four C philosophy described as: o o o o Care: I care for my planet. Strategy a. Similar situation could be found in their mission where the company want to improve people`s attitudes around the world in order to use the energy in a better way. III. 5 . Challenge: I challenge others and embrace challenges myself.Politecnico Di Milano – Management Engineering Master Program Accounting. Commit: I commit to change by leading the change. the mission statement that reflects its desire is: “Helping people make the most of their energy”. my company.

6 . Leverage the world’s new Energy Challenges: Its means that they provide with their products and solutions a high levels of energy efficiency and savings. Invest in profitable Responsible Growth: Investment in research. Take the new opportunities in from New Economies: In areas with accelerated development rate such as Asia. products and solutions. mid 1990s). in the solutions business they increase service revenues and reinforce project execution. new technologies. Build two complementary Business Models based on products and solutions respectively: First they create new opportunities for distributors and direct partners through win-win relationships. Another reason that motivated us to use this type of scorecard was to reflect the company`s strategic goals and its activities in a graphical. Strategic Objectives First it is necessary define the basics in which Schneider works. b. Connect and Commit to set new standards of efficiency in partnership with customers and communities worldwide”. so as a result we have more lead measures that are more clearly and less ambiguously documented. Methodology In order to introduce the concept of strategic objectives and to align it with financial objectives we decided on using Second generation balanced score card (Kaplan and Norton. Challenge. IV. 3. In addition. Latin America. all the strategic decisions are dominated by four main pillars: 1. The first necessary element is defining Schneider’s foundation that is providing innovative products. On the other hand. Scorecards a. the Middle East. Africa and Eastern Europe corporation leverages opportunities expanding its geographical coverage and also penetrating in these markets with mid-market offerings. systems and solutions based on the energy efficiency concept. 2.Politecnico Di Milano – Management Engineering Master Program Accounting. Finance and Control course Project – Managament Dashboard Schneider Electric All the values mentioned before creates the base of Schneider’s behavior to participate in the market and create the relations with their clients: “We Care.

b. Strategy Map i. Finance and Control course Project – Managament Dashboard Schneider Electric The objectives and actions are derived from strategy statements based on Schneider electric`s corporate vision and strategic plan.Politecnico Di Milano – Management Engineering Master Program Accounting. To select the indicators for each area three criteria of the indicators were of higher importance. a risk scorecard is generated to have a holistic view of the corporation`s risk profile. So after distinguishing casual relationships and linkages between the strategy objectives. the strategy map is built as it goes. After plotting the strategy map since the dashboard is going to report to the CEO so to decide on the proper indicators we tried to concentrate on value based and accounting based indicators more. one of their main objective is created service and products that enables their clients do the same activities with less resources. In addition. Map According to the foregoing strategy objectives and methodology.    Completeness Long term orientation Precision Furthermore since the corporations that act in a broad international range are exposed to various types of risks. 7 . Finally after analyzing the financial reports and resulted indicators in the upcoming chapter all the results will be summarized in a managerial dashboard. Sustainability. The reason for added this new level is because the company has a huge emphasis in this area reflected on their goals such as and also. use and provide services and products to use energy in an efficient way. the diagram presented in the previous sections consists of the common levels of the second generation balanced scorecard and an additional section. Which we inferred from the annual reports. without this new level it would be impossible to analyze the enterprise in a holistic manner because they create. strategy and sustainable highlights and other stakeholder reports about the company.

Strategy Map ii. each part of the map is explained in detail and then proper indicators devoted to each objective. Return on equity is obviously the only indicator that reflects the ability of the corporation to create value for shareholders.Politecnico Di Milano – Management Engineering Master Program Accounting. Perspectives Regarding the strategy map in order to justify the perspectives and objectives. In other word it measures the corporation`s profitability by 8 . Finance and Control course Project – Managament Dashboard Schneider Electric Figure 2 . The ultimate goal of each listed corporation is creating value for the shareholder. Schneider Electric emphasizes on creating sustainable value for its shareholders.

ROE by year 1 1 . Financial Perspective    Profitability Productivity Revenues growth 9 . Finance and Control course Project – Managament Dashboard Schneider Electric revealing how much profit a company generates with the money invested by the shareholders. The ratio is calculated by the amount of profit (loss) over a fiscal year divided by total equity.2 9 % ROE 11.3 3 % 1 1 .Politecnico Di Milano – Management Engineering Master Program Accounting.2 7 % 1 1 .2 5% 2 01 2 2 01 3 Diagram 1 – ROE by year The 0.32%. indicates that the company has to work more to make in desirable and more attractive for the investors.03% increase in ROE indicates that the company is doing well at creating value for shareholders.29% 1 1 . [STATUS} 1.3 0% 1 1 .2 8% 1 1 .3 1 % 1 1 .2 6 % 1 1 . Based on Yahoo finance the ROE for the industry is 14.7% comparing to the results of the corporation in 2013 which was 11.3 2 % 11.32% 1 1 .

Risk Scorecard In order to complete our dashboard we decided to take into account also the risk factors for the company and then create a Risk Scorecard. Finance and Control course Project – Managament Dashboard Schneider Electric          2. Internal Perspective Efficiency Work Conditions 4.Politecnico Di Milano – Management Engineering Master Program Accounting. Learning and Growth Human Capital Organizational Capital 5. First we identified the risk factors and then we mapped them into a matrix formed by the likelihood of occurrence and the impact on the company: 10  . Customer Perspective Product and service quality Image Market growth 3. Sustainability Environmental Responsibility Social responsibility iii.

If the Group is not able to hedge these risks. the Group is exposed to currency risk. networks. fluctuations in exchange rates between the euro and these 11  . human error or computer viruses would adversely affect the quality of service offered by the Group. including servers. applications and databases that are essential to the efficiency of our sales and manufacturing processes. either directly or through service providers. a fulfillment failure by a service provider. a wide range of highly complex information systems. Finance and Control course Project – Managament Dashboard Schneider Electric Figure 3 – Risk Map We decided to focus only on medium. high and extreme risk factors: a) ICT Risk The Group operates. b) Exchange Rates Due to the fact that a significant proportion of transactions of Schneider Electric are denominated in currencies other than the euro.Politecnico Di Milano – Management Engineering Master Program Accounting. Failure of any of these hardware or software systems.

copper.Politecnico Di Milano – Management Engineering Master Program Accounting. aluminum. and are governed by both national and supranational standards. tax laws. Changes to any of these regulations or standards or their applicability to the Group's business could lead to lower sales or increased operating costs. f) Competitive risk 12  .). lead. d) Technology Breakthrough The markets in which Schneider Electric operates are experiencing rapid evolutions due to the introduction of innovative technologies and moreover the market for software based solutions has significantly faster cycles than Schneider Electric’s traditional markets. etc. which are sold in national markets worldwide. as well as to various supranational regulations (sales restrictions. c) Raw Material Prices The Group is exposed to fluctuations in energy and raw material prices. zinc and plastics. this could have an adverse impact on financial results. tariffs. silver. Finance and Control course Project – Managament Dashboard Schneider Electric currencies can have a significant impact on results and distort year-on-year performance comparisons. in particular steel. security standards. the Chinese yuan and to currencies linked to the US dollar. compensate for or pass on to customers any such increased costs. The main exposure of the Group in terms of currency exchange risk is related to the US dollar. The products are also subject to multiple quality and safety controls and regulations. e) Legal risk The Group’s products. This would lead to the loss of a big amount of market shares if SE wasn’t able to follow the market or if other players with new technologies will come up. are subject to regulations in each of those markets. which would result in lower earnings and profitability. If they are not able to hedge. nickel.

restrictions on capital transfers and other obstacles to free trade. some of whom are larger than it or are developing in certain lower cost countries. and local tax laws. j) Product’s Defect Despite its testing and quality procedures. quality of products. the Group’s products might not operate properly or might contain design faults or defects. development and introduction time for new offers. legal and political risks in the countries in which we operate. claims under warranty and legal proceedings. 13  .Politecnico Di Milano – Management Engineering Master Program Accounting. i) Political Disturbances The Group’s wide international presence exposes them to many economic. h) Suppliers Risk Considering the importance for the Group of quality and service the reliability of suppliers is fundamental. Moreover plants and products are subject to extensive and increasingly stringent environmental laws and regulations in the countries in which they operate. notably in Europe. Schneider Electric faces strong competitors. which could give rise to disputes in respect of our liability as seller or manufacturer. political instability. These include risks arising from social unrest (particularly strikes and walk-outs). g) Interest Rates Risk The Group is exposed to risks associated with the effect of changing interest rates in different countries. where liability related to defective products could lead to a loss of revenue. unforeseen regulatory changes. systems and services. Finance and Control course Project – Managament Dashboard Schneider Electric The worldwide markets for the Group’s products are competitive in terms of pricing.

Finance and Control course Project – Managament Dashboard Schneider Electric k) Natural Catastrophes They could create problems damaging resources. Management Dashboard 14  .Politecnico Di Milano – Management Engineering Master Program Accounting. Then we created a possible risk scorecard for the company: V.

Conte for their support and hard work. Acknowledgments The team would like to thank Professor Arnaboldi. Annex IX. 15  . Sidorova and Dr. it is really appreciated. Finance and Control course Project – Managament Dashboard Schneider Electric VI.Politecnico Di Milano – Management Engineering Master Program Accounting. Dr. Critical Analysis VIII. Competitive Environment Analysis VII.