The Balanced Scorecard - IT Limited - Essay Example

?BALANCED SCORECARD Table of Contents Table of Contents 2 Introduction 2 2.Company background 3 2 Business scope 3 2.2.External environment 4 2.3.Company vision and mission 5 2.4.Swot analysis 5 2.5.Business strategy 6 3.Strategic map 6 4.Balanced scorecard 8 The BSC is based on four major strategic perspectives namely, financial, customer, internal processes and learning & growth. These strategies have been identified by the company’s strategic map, with the BSC pointing towards specific elements of the strategic perspectives. Each perspective has been subdivided into the key objectives, measures of the objectives and targets for these measures. 10 Under the financial perspective, the company shall focus on satisfaction for shareholders. The main objectives set in providing shareholder satisfaction include increasing customers, new products and orders for products. The company has set targets in terms of percentage increases which must be attained within a trading year. All the targets provided for various perspectives have annual time duration for reaching these targets. On the customers’ perspective, the major focus remains delight of customers where the objectives have been identified as increasing customer referrals and reducing complaints. In enhancing growth and learning the company has identified staff motivation as the major issue. This motivation shall occur through offering training aimed at improving the employee skills significantly. This is expected to reduce turnover of employees within the organisation. Through training, the company shall be able to offer better services following enhancement of employee skills 10 5.Performance management 10 6.Consideration and impacts of the business strategy 12 7.Conclusion 12 References 13 Appendix 3 strategic map 15 1. Introduction Many companies within the apparel industry opt to undertake globalisation independently in order to maximise on the profits resulting from globalisation. The numerous risks involved in globalisation, however could be minimised through joint ventures with existing companies. This report provides an in-depth analysis of I.T. limited, a Chinese global fashion design company. The strategies adopted by the company in becoming a global fashion products dealer are extensively analysed to determine the benefits of each strategy. Similarly, the report also identifies the weaknesses existing within the strategies adopted by the company seeking global recognition. Through joint ventures and multiple partnerships, the company has achieved a significant level of globalisation in a highly competitive industry. A swot analysis of the company operations identifies the various positive and negative effects of the current company position. 2. Company background I.T Limited is a registered limited investment holding company in china. The company engages trading in fashion items and accessories associated with the apparel industry. Though registered in china the company has numerous international connections outside china. The company utilises branding in the operations outside the People’s Republic of china. Among the major international connections for the company include French connections even in Asian countries and European countries as well. The company operates in different countries like Hong Kong and the people’s republic of china through joint ventures with other countries. These joint ventures and international connections have enabled the company to become global, while minimising the risk involved in globalisation. This holding company has managed to have a global outlook through the various joint ventures, consequently providing considerable business expansion. 2.1. Business scope The company is registered as a limited holding company within the people’s republic of china. The company mainly engages in selling of fashion items and fashion related accessories. The company has its own product brands licensed under the international trademarks like Underground and Hyoma, among others. The company also has its in-house brands of fashion products like Izzue. Many of the company’s fashion brands are available internationally beyond the Chinese and Asian borders. Though various business brands exist for the company in-house brands, the distribution stores for the company normally stock all brands from the company. This strategy enables the company to sell different brands within a single store(George & Bock, 2012). Each brand, however, has its stores which stock products for sister brands, consequently increasing the distribution of the company brands and availability of the same. 2.2. External environment The international apparel industry provides sustainable business to the company brands. Increased popularity of Chinese clothing designs within the international market continues to provide sufficient business to enable the company sell its products beyond the Chinese borders. The company however continues to face surmountable challenges outside the Asian continent because of other larger European and American fashion companies. Zara, for example, operates independently in over 60 countries globally. With other companies operating without partners the capacity to develop new fashion designs becomes quick, creating intense competition to companies like I.T. Limited, which have to consult with partners before producing new designs(McAfee, Dessain, & Sjoman, 2007). The international apparel industry consists of numerous companies competing in trend setting within the industry. The business model adopted by the company limits the capacity for trend setting to trend following. 2.3. Company vision and mission The mission of the company has been defined as championing new designers and widening the scope of fashion design. The company seeks to provide the best designs into the apparel industry through enhancing relationships with designers and supporting existing brands. The company also engages in ensuring close relationships with customers, through seeking customer feedback. The customers are enabled to provide their ideas concerning designs of clothing products. The company mission clearly defines the company expectations and business strategy. This mission statement seeks to ensure the company employees remain focused towards enhancing the business operations of the company. The existing relationship with designers and customers alike continues to enhance the successful operations of the company. 2.4. Swot analysis The business operations for the company can be analysed as indicated by the matrix below. POSITIVE NEGATIVE INTERNAL Strength Good customer relationships Wide operating region Minimised globalisation risk through using joint ventures Weakness High dependence on partners for globalisation Adopting a trend chaser business operation model EXTERNAL Opportunities Design knowledge of partners Partner availability in numerous countries Increased demand for Chinese designs in the international market Threats Presence of large international American and European companies in the international fashion market 2.5. Business strategy The business strategy adopted by the company could be defined as a trend chaser approach to the apparel industry. The company comprehensively involves the input of designers while welcoming customer views of the products. These two basic approaches not only enable the company to enhance the relationship with stakeholders, but also enable the company to achieve a sustainable competitive advantage. Through enhanced close relationships with numerous existing and upcoming designers, the company remains updated on the current global fashion trends. The existing fashion trends are similar and all competing companies within the industry seek to satisfy that market. Through keeping close contact with designers, upcoming trends are maintained. Similarly maintaining close relationships with the customers enables the company to produce products according to the desires of potential clients. The globalisation approach pursued by the company is that of entering into joint ventures with existing brands. This enable the company to minimise the numerous risks involved when venturing into new markets. The partners’ knowledge of external markets becomes essential in the management of brands by the company. The customers for the partners become potential clients for I.T. Limited products. The utilisation of business partners can enable the company to expand quickly and widely within a short duration. Increased expansion creates a competitive advantage over other companies who must undertake market surveys before becoming global. The company also manages to reduce operating costs through utilising the facilities owned by their partners, yet still availing their products. 3. Strategic map The company strategic map is based on four major elements namely Financial – this element seeks to provide sustainable stakeholder loyalty to the company. The stakeholders within the context of this company are the shareholders, whom the company pays dividends annually at the end of each financial year. The company has continuously paid dividends all years except 2008/09, when no dividends were paid out. Customer – this element seeks to enhance customer experience when purchasing and using company products. Through continuous customer feedbacks, the company seeks to increase customer satisfaction by ensuring products exceed customer expectations. Through the establishment of close relationships between the company and customers increased customer loyalty is achieved among many clients Internal business processes – these result from customer experiences where the company has ventured into joint partnerships as a way of expanding business and reaching many clients. These operations have also enabled the company to maximise global business operations by utilising the market knowledge possessed by partners. All these moves have enabled the company to improve on the product quality with time(Niven, 2006). Learning and growth – this mainly occurs upon the staff members and translates to the entire business operations. Partnerships and expansions have necessitated recruitment of new staff, while the need for quality improvement results in continuous training of employees. The strategy map could be identified as a breakdown of the strategies employed by the business in achieving the balanced scorecard discussed above. Strategy map also acts as a guideline for the business in maintaining standards together with globalisation(Kaplan & Norton, 2004). Appendix 2 shows an image of the company’s strategic map. 4. Balanced scorecard The major business stakeholders remain the customers and the various designers who provide clothing designs to the company. The company has enhanced its relationship with these stakeholders through creating a database of information received from them. The business operations are normally based on the desires and requirement of these stakeholders. All the product designs from the company are based on feedback received from the stakeholders. The company seeks to provide excellence in design development and support of the fashion design industry in general. Increased sales have been achieved through the relationships created between the company and clients. This measure has enabled the company to increase profitability through customer retention and word of mouth marketing by clients(Jensen, 2001). Increased customer database is bound to increase the number of brands available within the company stores; hence expansion. Customer retention remains a fundamental element in ensuring sustainability of business operations. Through improved customer service, and consequent reaction to customer views, businesses can ensure continuous flow of customers. The company places customers at the top of their priorities, a move aimed at ensuring customer satisfaction with the business products(Hubbard, 2007). The trend-chasing approach adopted by the company could ensure that the company does not produce unpopular fashion designs. Though it might be a disadvantage as companies capitalise on new trends, in instances where trends backfire, the company could be operating with minimal risks. Minimised business risk in fashion development ensures the company experiences minimal failures in the introduced clothing designs. The company’s BSC can be summarised by the chart drawn below strategic perspective objectives measures targets satisfying shareholder increase customers number of customers 10% increase increase product orders sales volumes 15% increase increase new product revenue new products 20% increase delight customers increased customer satisfaction customer satisfaction 30% increase increase customer referrals number of referrals 45% increase reduce customer complaints complaints 100%reduction effective processes reduce defects DPMO 90% reduction reduce costs operations costs 35% reduction motivated workforce reduce employee turnover turnover 80% reduction increase skills training 20% increase The BSC is based on four major strategic perspectives namely, financial, customer, internal processes and learning & growth. These strategies have been identified by the company’s strategic map, with the BSC pointing towards specific elements of the strategic perspectives. Each perspective has been subdivided into the key objectives, measures of the objectives and targets for these measures. Under the financial perspective, the company shall focus on satisfaction for shareholders. The main objectives set in providing shareholder satisfaction include increasing customers, new products and orders for products. The company has set targets in terms of percentage increases which must be attained within a trading year. All the targets provided for various perspectives have annual time duration for reaching these targets. On the customers’ perspective, the major focus remains delight of customers where the objectives have been identified as increasing customer referrals and reducing complaints. In enhancing growth and learning the company has identified staff motivation as the major issue. This motivation shall occur through offering training aimed at improving the employee skills significantly. This is expected to reduce turnover of employees within the organisation. Through training, the company shall be able to offer better services following enhancement of employee skills 5. Performance management The company has managed to maximise stakeholder loyalty through ensuring continuous flow of cash to sustain annual dividends to the stakeholders. Since 2009 the company dividend ratios have continued to increase gradually, signifying sustainable growth in the business. The financial rations also indicate a continuous increase in turnover over the years. This could be an indication of customer satisfaction and improved product quality. The turnover increases indicate increased sales, which could be attributed to superior product quality. The company’s operating profits have also continued to increase despite the expansion being undertaken by the company. This increase clearly indicates sustainability of the globalisation strategy adopted by the company. While the strategy minimises risks, it ensures market entry becomes easy. The various company stores operate independent of each other enhancing the profitability of the company. Each store performs its own accounting functions while maintaining its operational costs independent of the others. This means that the company can easily identify non- profitable stores and consequently close them. Similarly, the company can also identify the most profitable stores among the operational ones. The partnership strategy of join venture has ensured the company minimises operational costs and other expenses incurred during expansion. The expansion programme utilised by the company is that of availing company products in outlets owned by partners. The partners also stock the company stores with their products. The existing customers become the major clients to purchase the newly available products. The various selling outlets monitor their stocks and request new stocks from the company warehouses located in various places. The customer feedback is normally received from a central location and consequently addressed from there. Centralisation of the company operations has significantly contributed towards overall smooth operation of the company. The central location ensures that any complaints received become handled in a similar manner. Such uniform response to customer requirements increases the customer satisfaction with company operations, consequently aiding in customer retention. In order to maintain the customer service at the highest levels, the company must invest sufficiently in human resource. This involves hiring of highly qualified individuals and training staff to increase their skills and knowledge. These moves could enhance customer satisfaction, through offering quality in products and services. 6. Consideration and impacts of the business strategy The business strategy adopted by the company has had numerous impacts upon the company, both positive and negative. The prioritisation of customers and partners has enabled the customer numbers to increase gradually, consequently resulting in increased company profits. Though this strategy has produced positive results, the company should also increase focus on the prevailing market fashion trends. This would move the company from being a tend chaser to a trend setter. This move would ensure the company maximises on arising fashions before they flood the fashion market. Though this might be viewed as a high risk option, a cost-benefit analysis can prove otherwise. The joint venture option has enabled the company to achieve a significant globalisation level for its various in-house brands easily. This move has also involved the company in selling of products owned by other companies within its stores. Though a considerable element of globalisation has been achieved, the company has incurred human resource costs in training their staff about other company products. The major benefit of this partnership remains achieving globalisation at minimal operating costs. In these partnerships, some level of resistance to change might be experienced among certain partners. However, change management strategy could possibly eliminate the adverse effects of such resistance. 7. Conclusion Within the international apparel industry, competition remains high among many companies involved. The business strategy adopted by a company could become the defining moment for the company’s growth. I.T Limited has opted for partnerships and joint ventures as opposed to independent globalisation. Joint ventures present companies with opportunities to expand cheaply as they involve sharing of operation costs between the companies. While the strategy could be identified as a cost-cutting measure in globalisation, it could become a weakness if partners produce higher quality products. The company customers might shift and begin using partner products. This could possibly reduce the profitability of one of the partner companies. The partnership could also produce brand competition among brands from the partner companies. Analysis of the expected market conditions remains essential in ensuring both companies maintain their brands at desirable market levels. References George, G., & Bock, A. (2012). Models of opportunity: How entrepreneurs design firms to achieve the unexpected. Cambridge: Cambridge University Press. Hubbard, D. W. (2007). How to Measure Anything: Finding the Value of Intangibles in Business. New Jersey: John Wiley & Sons. Jensen, M. C. (2001). Value Maximization, Stakeholder Theory, and the Corporate Objective Function. European Financial Management Review, 7(3), 297–317. Kaplan, R. S., & Norton, D. P. (2004). Measuring the strategic readiness of intangible assets. Harvard Business Review, 82(2), 52–63. McAfee, A., Dessain, V., & Sjoman, A. (2007). Zara: IT for Fast Fashion. Boston: Harvard Business School. Niven, P. R. (2006). Balanced Scorecard. Step-by-step. Maximizing Performance and Maintaining Results (2nd ed.). New Jersey: John Wiley & Sons.  Appendices Appendix 1 I.T. Limited business logo Appendix 3 strategic map Read More