Balanced Scorecard and Strategy Map for Marks and Spencer - Case Study Example

Module number and Seminar group number: Balanced Scorecard and Strategy Map for Marks & Spencer and ID Word countExecutive Summary In the current study, international business strategic frameworks like Balanced Scorecard and Strategy Maps are discussed. It has been observed that such tools are helping international firms in developing effective business strategies. Organisations are able to develop strategic plans as per their visions. In the current study UK based multinational retailer Marks & Spencer is selected to outline their vision and strategies using balance scorecard. It has been observed that international operations of Marks & Spencer are facing the challenges of Tesco, ASDA, Sainsbury, Walmart and other global retailers. The Balanced Scorecard of the firm developed on the basis of four quadrants like internal business process, customer, innovation and learning perspective and finance. In addition, such framework are outlining efficiency of supply chain, maintaining products quality, maintaining cost control, customer satisfaction growth, developing customer loyalty, and brand awareness development. Major retailers like Marks & Spencer are concentrating on retaining customers, developing a new market channel, introducing a new product and increasing employee satisfaction level. They are planning to implement training and development of employees. Marks & Spencer try to implement cash flow or revenue development strategies along with increasing the beneficiaries for shareholders. Such strategies helped the firm in improving return, profitability and assets using optimisation. The study also developed a strategic map to maintain proper integration among the vision of the firm and strategies. Finally recommendations like developing new market, online business or E-commerce, environmental sustainability or CSR strategies and value chain are provided to Marks & Spencer. Table of Contents Table of Contents 3 1. Introduction 4 2. Vision and Strategy of the Company 4 2.1 Vision 4 2.2 Strategy 5 3. Balanced Scorecard 6 3.1 Internal Business Process 6 3.2 Customer 7 3.3 Innovation & Learning 9 3.4 Finance 11 4. Strategic Map 14 5. Recommendations 15 6. Critically discuss and evaluate 15 6.1 Limitations of Balanced scorecard 15 6.2 Evaluation and discussion 15 6.3 Analysis of Balanced scorecard 16 Reference list 18 1. Introduction Balanced Scorecard and Strategy Maps are gaining importance among the organisations in order to develop strategies. Such strategic planning and management systems are helping the various organisations to integrate their vision and strategies. Such frameworks are helping organisations in improving interior and exterior communications between the stakeholders. Management level can introduce various performance measurement frameworks that help in monitoring performance of the employees as per the predetermined strategic goals (Gadde, 2013). In the current study, these strategic factors will be discussed on the basis of Marks & Spencer. It is one of the major UK based multinational retailers. They are having the product range of the clothing, home products and food items. The study will be contrasting the vision and strategy of the company along with the internal business process, customer, innovation & learning and financial performance of the company. 2. Vision and Strategy of the Company 2.1 Vision Marks & Spencer is operating the multinational retail industry having the competitors like Tesco, ASDA, Sainsbury, Walmart and many other global retail firms. They are planning to gain more future sustainability and market growth by developing their product or operational line. The organisation is having the vision of transforming the operational infrastructure. From the year 2012-2013 they started focusing on developing their image as the leading international retailer and multi-channel service. They are also aiming to reinforce capabilities as priorities so that they can meet the requirement of UK and international market (Corporate.marksandspencer.com, 2015a). Marks & Spencer is planning to increase the rate of growth in the food ranges. Operating model of the organisation is aiming to drive best possible customer experience. They are planning to develop more features in the M&S.com. Moreover, management of the organisation have the vision o developing high skilled human resource. Management level is aiming to use global talent base, such talent base is enjoying continuous skill development process. Retailers have faced huge change in the UK food market which challenges their profit generation and sustainability. Marks & Spencer is offering their customers with lucrative and multipurpose store format which helps in meeting various shopping behaviour (Corporate.marksandspencer.com, 2015c). 2.2 Strategy Marks & Spencer is facing the huge challenges in their major products clothing and home markets. The market has reported highly competitive with existence of Next Plc, Tesco, ASDA and Zara. The organisation is planning to develop proper strategies that will bring growth in profitability and market share. Strategic directions of the firm are focusing on fashionable design, high quality and unique identity (Blandon, Henson and Cranfield, 2009). Moreover, during the year 2014 management of Marks & Spencer are seeking for easy availability along with diversified choice (Corporate.marksandspencer.com, 2015b). It has been observed that global business policies of Marks & Spencer are facing various economic and social challenges. Feeble currency exchange rate of euro, pound and dollar and macroeconomic factors like inflation and recession are harming the Marks & Spencer in achieving proper financial stability. Thus, the management developed strategies for coping up with such difficulties. The organisation developed separate strategies for the Middle East segment. Remarks of the local customers are used in the strategic development in order to improve products and services offered by Marks & Spencer. “Like-for-like sales performance” reviews are used by the firm in evaluating their franchised and owned retail outlets, foreign markets and global supply chain (Corporate.marksandspencer.com, 2015a). They are using innovative strategies that are focusing on food retail business expansion. Marks & Spencer are offering more numbers of franchises in the global market. Contemporary market share of the Marks & Spencer is suggesting different growth strategies are helping them gaining market share. The UK based retailer developed strategic plans that suggests various international market expansions. In the post 2015 period they are planning to open almost 250 new stores in global retrial market. Main strategic directions are planning to increase the efficiency of franchise operations of food business. It has been observed that the M&S strategic management teams collated information from their key franchise partner Al-Futtaim. Their key strategic plan is aiming to achieve a growth in the global revenue generation by at least 25% and profits by 40% during the next three years (Corporate.marksandspencer.com, 2015c). 3. Balanced Scorecard 3.1 Internal Business Process Marks & Spencer Internal Business perspective Goal KPI Target Initiatives or actions Efficiency of supply chain Delivering products in time and meet the orders of customers within time Distribution channel, supply chain Productivity, Service quality, change or improvement % Increase production by 3- 4% during the year 2015. Supply chain members need to be guided to achieve more success, Maintaining products quality Marks & Spencer has created high brand image among the retail customers for their high quality products and services in the store (Blandon, Henson and Cranfield, 2009). Rate of rejection of products and inventories Customers review Marks & Spencer is aiming to reduce rejection rate in less than 1% from overall production A new product quality monitoring team will be composed evaluate operational teams and report the fluctuations of quality of various retail and clothing products Maintaining cost control Reducing cost will increase the efficiency of the organisation in reducing the price of products Evaluating operational cost reports of last few years or financial period Reduce the operational which is facing a hike during the year 2012- 2013. Financial reports of the last two years are contrasted with monthly interim cost reports 3.2 Customer Marks & Spencer Customer perspective GOAL KPI Target Initiatives or ACTIONS Customer satisfaction growth Marks & Spencer aims to meet the expectation and perception of the customers in order to gain more profitability and international retail market share (Goodwin, 2007) Customer feedback form and customer satisfaction index are used as KPI Increase the global retail sales by 1.7% during the year 2015. Food products which will be offered in the market place are fresh and tasty, fashionable and comfortable clothing products and vast range of grocery retail products must be offered Developing customer loyalty Satisfied customer will be more loyal to Marks & Spencer Usage of the loyalty membership cards in daily shopping action Increase the UK LFL sales by a minimum of 2.5% by 2015, which will compensate deduction of 1.7% Development of customer satisfaction will increase loyalty. Brand awareness development Marks & Spencer is one of the majorly known clothing brands in world. Recently they are planning to penetrate in the food and grocery segment (Gadde, 2013) Global and UK based market share Increase the global retail sale of Marks & Spencer by 4.7% during the year 2015 Highly active promotional activity and distribution channel will going to help Marks & Spencer in gaining customer attraction Retaining customers Retaining loyal customers will give higher confidence to Marks & Spencer. Words of mouth promotion will increase among the loyal customers (Henke, Foerstl and Zimmermann, 2014). Purchase repetition in each week or month Gross Margin need to be increased from 110bps and 50.7% (2014) it must be 55% in 2015 Loyalty bonus, repeat purchase offers and point on each purchase strategies will be helping the firm in gaining high customer retention 3.3 Innovation & Learning Marks & Spencer innovation and learning perspective GOAL KPI Target Initiatives or ACTIONS Developing a new market channel Developing new stores will aid Marks & Spencer in increasing market share, profitability and explore new markets Numbers of new retail outlets Open new stores in European market, Middle East, and south east Asian countries like India, China, Malaysia, Singapore and many other developing countries Market scanning for the obtaining the demands and expectation of the potential customer, size of the market, select the area of opening stores. Introducing a new product Marks & Spencer is specialised in developing clothing products, they are now aiming to penetrate in the overall retail sector of the world with food and grocery products (Kershenbaum et al., 2012) The quantity of newly developed brands or products after 2014 Marks & Spencer is aiming to introduce 50 more product ranges during the fiscal year 2015 Testing prototypes in the last quarters of 2014 and introducing new products in the Asian and African market. Increasing employee satisfaction level The retail giant offers different type of the clothing and food retail products employees are very much crucial resource. Satisfied employees will be contributing more to the organisation. On the other hand, satisfied employees will reduce turnover rate. They will work for more time in the organisation (Johnson, 2004). Yearly employee turnover rate, comparison with the past years data and figures Marks & Spencer is planning to reduce the rate of employee turnover by 5% in 2015 in regarding to what it reported in 2014 The firm have planned for offering high value incentive schemes to the existing and new employees, proper role appraisal policy, performance based remuneration, Training and development of employees Employees are facing huge challenges like technological up gradation, socio economic issues, political challenges, workplace conflicts and changing customer behaviours Allotted training timing week, days or hours Such timing will be judged on the basis of a contrast with past years training time or investment made in training and development Marks & Spencer is planning to provide high-end training to its staff. Technological and customers based training will be provided to the employees in an interval of two or three weeks or maximum one months The firm is implementing various training strategies so that they are able to increase knowledge base and skills among the employees. 3.4 Finance Marks & Spencer Financial perspective GOAL KPI Target Initiative or ACTION Cash Flow or revenue development The organisation is able to increase revenue generation during the last two years (Menayotin, Macias and Moongkulprasith, 2015) Total revenue earned by Marks & Spencer during fiscal year, sale value increment They enjoyed a growth of 2.82% during the year 2013-14 now they are planning to increase the revenue by 3.12% during 2015-16 fiscal year Implementing sales margin development strategies, and cost control Shareholders orientation or improving the return Increasing stakeholder benefits in order to increase the image of the organisation as secure and safe investment options Return on equity ratio, dividend payout, return on shareholders’ funds Return on capital will be increased by minimum 3% in 2015 to cover decrement faced during the year 2014 (Menayotin, Macias and Moongkulprasith, 2015). Developing markets in new areas or international areas. Profitability Marks & Spencer is facing intense challenge from Next and ASOS. Thus, the firm is planning to increase their profitability (Menayotin, Macias and Moongkulprasith, 2015). Net profit ratio gross profit ratio, operating profit Marks & Spencer has faced a decline of profit margin ratio during the year 2014. They will target to increase profit margin to 7.5% in the year 2015 Sales increasing strategies like campaigning, product values, values added services and discounting options Assets using optimisation Marks & Spencer will try to consume their assets as most as possible Net Asset Turnover, Return On Net Assets Developing the assets utilisation rate to nearly 3.9 times during the year 2015 (Menayotin, Macias and Moongkulprasith, 2015) Investing in latest technologies, use more overtime benefits 4. Strategic Map Figure 2: Strategic Map of Marks & Spencer (Source: Created by Author) From above-mentioned strategic map it has been observed that Marks & Spencer have identified their competencies very well. In the framework they used the attributes or themes of balance scorecard. Marks & Spencer have developed the strategic map to link their objectives as per their resources. In addition, the retail firm have used appropriate KPI for measuring the performances of the employees as per predetermined targets (KhodayarYeganeh and YokhanehAlghyani, 2015). 5. Recommendations Developing new market: Marks & Spencer must focus on developing business in new areas. They need to use their existing goodwill in the new markets and driving profitability. They need to set priorities in the new markets like “India, China, south east Asian countries, Russia, Middle Eastern countries and Western European countries”. Online business or E-commerce: peoples are looking for online stores of the retail firms in order to save time and use flittered search. They need to expand in the global market with a ‘bricks & clicks’ approach. M&S Food stores must be having a full online offer that will attract major number of customers irrespective of the geographic and demographic barriers. Environmental sustainability or CSR strategies: Marks & Spencer being one of leading retail giants are requires too maintain certain CSR or environmental sustainable strategies. They need to use recyclable packaging, renewable energy resources, employee training and development programs and society development. Value chain: value chain of Marks & Spencer need to expand their food business in the intense populated Western Europe. The number of the food stores need to be increased in the next three years. Moreover, fresh food must be provided through the franchise partnerships. 6. Critically discuss and evaluate 6.1 Limitations of Balanced scorecard The above mentioned balance score card has certain limitations like it neglected the importance of many financial factors. The process is indirect in terms execution of plans, key performing drivers are not focused in detail. Synergies and complex communication process are not maintained. Staff development and measurement process are last effective as non-quantifiable data exists in the reports (Ranganathan, Ye and Jha, 2013). 6.2 Evaluation and discussion The balance scorecard and strategic map outlines the connectivity among the strategic factors. It involves key risk indicators that are helpful in maintaining efficient operations. Marks & Spencer selected their KPI measures on the basis of exclusive requirements of operations (Saldanha et al., 2014). They have developed strategies like assets using optimisation, profitability, cash flow or revenue development, and shareholders orientation or improving the return. Apart from this strategies for training and development of employees, increasing employee satisfaction level, introducing a new product, developing a new market channel and retaining customers (Savino, Manzini and Mazza, 2013). In addition, Marks & Spencer are using strategies like brand awareness development, developing customer loyalty, customer satisfaction growth, maintaining cost control, products quality and increasing efficiency of supply chain are the key part of the strategic map (Wei, 2010). Such map and scorecard worked on the key factors like increasing learning, growth and innovation in the retail operations. The management also aims for improving the process. In addition, customer satisfaction and loyalty development process are also part of the strategies of UK based retail firm. Management of Marks & Spencer is planning to increase revenue with the help of sustainable growth and cost management models and predetermined financial objective (Thompson, 2007). 6.3 Analysis of Balanced scorecard Areas Number Weight Internal Business Process 3 20 Customer 4 26 Innovation & Learning 4 27 Finance 4 27 Total 15 100% Figure 3: Analysis of Balance Scorecard (Source: Created by author) Reference list Saldanha, J., Mello, J., Knemeyer, A. and Vijayaraghavan, T., 2014. Implementing Supply Chain Technologies in Emerging Markets: An Institutional Theory Perspective. J Supply Chain Manag, 51(1), pp.5-26. Corporate.marksandspencer.com, 2015a. [online] Available at: http://corporate.marksandspencer.com/plan-a/85488c3c608e4f468d4a403f4ebbd628 [Accessed 27 Jun. 2015]. Corporate.marksandspencer.com, 2015b. Marks & spencer unveils plans for further international growth fuelled by 250 new stores over three years. [online] Available at: http://corporate.marksandspencer.com/media/press-releases/2014/marks-and-spencer-unveils-plans-for-further-international-growth-fuelled-by-250-new-stores-over-three-years [Accessed 27 Jun. 2015]. Corporate.marksandspencer.com, 2015c. Our Plans for the Future. [online] Available at: http://corporate.marksandspencer.com/aboutus/our-plans-for-the-future [Accessed 27 Jun. 2015]. Goodwin, A., 2007. The UK retail hierarchy: Beyond the shopping centre pipeline. Journal of Retail and Leisure Property, 6(1), pp.79-83. Henke, M., Foerstl, K. and Zimmermann, F., 2014. Performance Measurement entlang der Supply Chain. CON, 26(1), pp.26-32. Johnson, M., 2004. Marks & Spencer implements an ethical sourcing program for its global supply chain. Journal of Organizational Excellence, 23(2), pp.3-16. Kershenbaum, A., Spencer, M., Blaustein, L. and Cohen, J., 2012. Modelling evolutionarily stable strategies in oviposition site selection, with varying risks of predation and intraspecific competition. Evol Ecol, 26(4), pp.955-974. KhodayarYeganeh, S. and YokhanehAlghyani, M., 2015. The role of supply chain management on improvement of financial reports. 10.5267/j.uscm, 3(1), pp.21-26. Menayotin, V. Macias, C., and Moongkulprasith, J., 2015 Marks and Spencer Financial Analysis. Unpublished Coursework. London: Coventry University London Campus Ranganathan, C., Ye, C. and Jha, S., 2013. Market Value Impacts of Information Technology Enabled Supply Chain Management Initiatives. Information Resources Management Journal, 26(3), pp.1-16. Saldanha, J., Mello, J., Knemeyer, A. and Vijayaraghavan, T., 2014. Implementing Supply Chain Technologies in Emerging Markets: An Institutional Theory Perspective. J Supply Chain Manag, 51(1), pp.5-26. Savino, M., Manzini, R. and Mazza, A., 2013. Environmental and economic assessment of fresh fruit supply chain through value chain analysis. A case study in chestnuts industry. Production Planning & Control, 26(1), pp.1-18. Thompson, B., 2007. Availability and requirements in UK retail markets — New data sets. Journal of Retail and Leisure Property, 6(3), pp.195-201. Tournois, L., 2015. Does the value manufacturers (brands) create translate into enhanced reputation? A multi-sector examination of the value–satisfaction–loyalty–reputation chain. Journal of Retailing and Consumer Services, 26, pp.83-96. Wei, H., 2010. The strategic value of supply chain visibility: increasing the ability to reconfigure. Strategic Direction, 26(9), pp. 157-167. Read More