Management Strategic Accounting: The US Postal Corporation - Case Study Example

Business Management Model: The US Postal Corporation Introduction A business model can be described as the guiding frameworkor a blueprint of the organizations business logic. In a case where an organization is not meeting its set targets or is not sustainable, the business model serves as the best element of an audit. The aim of auditing a business model from this perspective is to determine if the sustainability can be achieved through specific actions relating to the industry of the business. It can also serve the purpose of evaluating whether the resources and activities within an organization are focused on the creation of value to the organization and or the public. This, therefore, means that a business model has a significant relation to the sustainability of the organization. According to (Weber 2008, p. 248), " in order for a business to achieve corporate sustainability, the three dimensions of sustainability needs to be enjoined in the management of the business with the intention of transforming the model of business to reach the goal of sustainability." This emphasis explains the importance or relevance of a business model to the concept of sustainability. The three dimensions are identified by (Schaltegger & Wagner 2006) as social economic and environmental aspects. Recently, the United States Postal corporations run into problems that are related to business sustainability. In order to understand the genealogy of the problem, this report examines the United States Postal Corporations business model. This audit of the business model will generate the possible prognosis of the business model of the corporation. Specifically, the report covers the four aspects of a business model that include the product or service, the customer relations, the infrastructure network or partnerships and the financial aspect of the model. These are the four main pillars (Ballon 2007) of a business model. Product In order to achieve sustainability, the management of a firm must develop a business model that will create a condition where more customers are willing to purchase the commodities and services it offers. A high level of sales is directly linked to the profitability of a firm. In profitability, the firm is likely to drift into a position to sustain its operations. The central concern here is how to create value propositions that will steer the high level of sales. Public benefits of a product like the reduction of environmental impacts or social attribute are examples of benefits that can create a value proposition. These public benefits are of good to the customer and also furthers the goals of the firm which is to increase its sales turn over. The result of this configuration of value in the model of the business, therefore, serves the purpose of benefiting all the stakeholders of the firm which include the customer, the firm and its supply chain (Osterwalder 2004). Many studies including (NIRMA ICM & Dhar 2008; Hill & Jones 2012; Wiegandt 2009) recognize that the most common way of creating a value proposition is through product differentiation. The bundle of service offered by a firm needs to follow the same trend. In the case of the case of the United States Postal Corporation, the problem with their business model concerns the lack of value propositions in their bundles of services. In the past, mail deliveries could be prompt and most customers would get at least two deliveries in a day. This trend has since been lost, and there is little focus on the public benefits received from the fast and timely delivery of mail. In most cases, clients received important mail after a long period making the mails meaningless. This overall picture does not create any public benefits of the corporation to the public. As such, the public is likely to seek alternatives of the same elsewhere. This creates a situation in which the company loses out on the customer base, and the public receives poor services. The result is that no stakeholder gains from these activities and as such there is no likelihood of sustainability of the corporation. To improve this situation, the creation of value proposition is imperative. There should be a great focus on the importance of high-quality service that puts the clients at the epicenter of its activities. Providing high-quality service directly translates to a creation of value. However, this has to be done within the confines of sustainability dimensions. The corporation should, therefore, configure its business model to include benefits that the customers are likely to pay for in order to reach sustainability (Ludeke-Freund 2009). Infrastructure The United States postal corporation operates a vast network of players that range from the thousands of contract truck routes, freight trains, commercial air flights and manpower. To move its mails over long distance, arrangements are made with the airlines to ferry the first-class mail on available space. This arrangement seeks to limit the costs involved as the corporation tries to break even when rates of its services are predetermined by congressional regulation. It is also essential since the corporation operates in a vast geographical area that requires outsourcing of some services for purposes of sustainability. The problem that arises here is an effective partnership that is bound by constraints of costs. The sustainability of the operations of the firm becomes threatened due to the limitations in the underlying resources that support the capability of operations. Privatization is a common approach that could be suggested to solve this situation. However with restriction created by the law, this process could be influenced by politics leading to a fail. Therefore, a simpler managerial approach is required to configure the value in this case. Seuring & Goldbach (2006) suggests that cooperation is a possible avenue of bridging the gap created by inadequate resources needed to increase capability. According to this study, the management can decide to involve different stakeholders in an arrangement that serves the interest of the organization while promoting the corporations business interest. For example, instead of relying on available space that is committed on the airlines for purposes of hauling long distance mail, the United States postal corporation can for partnerships with different airlines. This partnership will ensure that the mails are not left behind in times of full capacity flight bookings. As such, the reliability of the delivery of long distance mail will be guaranteed. A guarantee of the delivery of mail especially the long distance mails is a value proposition to the customers. Corporations, in this case, create value within the supply chain without necessarily causing the need to increase costs (SOPLE, 2012; Ross 2000; Waters 2010). Customers In this pillar of the business model, the most important aspect is marketing. In the business model, the elements of this pillar are given as target customers segment, customer relations and channels of distribution. The United States postal corporation has a wide variety of customers with unique sets of preferences. The preferences range from those that would like first-class mail delivery to those that need second and third class mails and parcels. The Corporation commissioned a study to survey the preferences of different segments and the time taken to deliver mails and parcels. The results showed that for bulk mailers, the consistency of delivery was more important than any factor. As such this group would prefer knowing the exact time that their parcels will take to their destinations so as to time their deliveries to arrive at the correct time. For first-class mail consumers, time and speed is the most important aspect. To this group, the costs involved come second to the urgency of the letters and parcels. From these understanding, the corporation therefore needs to coin sustainable marketing practices. To improve the handling of bulk mail, the US Postal corporation has embarked on an ambitious project to improve the capacity of the bulk parcel deliveries. The postal service is investing a huge amount to create a new network of facilities that will handle bulk mail. There are a number of bulk mail centers that will be developed strategically within different locations within the country to coordinate delivery of such parcels within two days. This strategy is a good example of engaging long-term planning in marketing channels to create value to customers. Customer satisfaction is a means of creating value and maintaining long-term relations with the customers. In conventional models, discovering what the customer needs or wants through research is the most common approach taken before meeting these needs (Malthouse 2013). The research and development department engages in discovering new ideas that best suits the customers wants through innovation and improvement of the products. For sustainability model, the amount of resources committed to innovation can be limited, and the impact of such technology could not be as effective as projected. In order to improve the relationship with the different customers, the business operations of the corporation should be centered on the requirements of each segment rather than innovations that aim at improving the generic attributes of the services that the corporation offers (Nijssen & Frambach 2001). Financial aspects The financial aspect of a business model covers the costs, revenues, and profits. Profits or losses are an outcome of the logic or model of business implemented by the management in the three initial pillars of the business model discussed in this literature. The revenue streams created through value proposition offered by a business is at the core of sustainability of a business. Revenue streams can be internal from the activities performed by the company directly to its customers or can be as a result of the input of a third party (Mootee 2013). The United States postal corporation depends on annual appropriations as a source of capital funding. In most cases, the funding is limited, and this leads to operating capital deficits which pile up yearly. In a bid to improve on the capitalization, the Postal Reorganization Act of 1970 brought in the ability of the corporation to issue bonds. The issuance of bonds meant that the corporation could now have a limited power to make its rates of service. The impact of these actions led to a considerable reduction on the deficits that the corporation experienced annually. Issues that arise from bonds (Ulrici 2007), in this case, are related to the level of security that the bonds issued by the corporation hold and the public opinion towards investing in these bonds. Apart from the public opinion, the sustainability of operations that are capitalized by bonds going into the future is also a factor of consideration. That is bonds are likely to increase the amount of tradable debt (Durning 1992) Recommendations From the preceding discussion, the business model implemented by the United States postal corporation is evidently not sustainable economically or socially. The main issues identified in this audit are the ability of the corporation to create value in their product or service bundles, management of the supporting infrastructure, customer segment value creation and capitalization structure. In sustainability, the aim of any business venture is to bridge the gap between the general public good and the individual good offered to the customers so that all stakeholders involved in a business gain positively (Beck 2013). Economic sustainability mainly deals with the ability of the enterprise to finance its activities and still maintain a profit margin. In order to achieve sustainability, the concepts that relate to the subject must be infused within the mechanisms of business operations or the four pillars of a business model identified above. In the product or services bundle offered by the United States postal corporation, the creation of value is an important aspect that can lead to economic sustainability. Cutting costs through reduction of employees or using cheaper operations modalities do not necessarily translate to the economic sustainability. As noted, the Corporation services a huge market that requires an equally large workforce. Efficiency is one method of improving the quality of service while keeping costs low. Customers are always attracted to firms that offer high-quality services and would be willing to pay for the different qualities or attributes of a service. Therefore, it is essential to not only focus on the reduction of costs but also to consider the impact of such costs reduction in the service delivery. Benefits of the product bundle to the public can be an important way of creating value for the customers, in this case. Delivering mail on time can reduce the negative social impacts of late deliveries and make customers develop the attitude to pay for the products or services of the firm. This in turn will translate to the higher revenues that are received by the company that leads to sustainability. Customers can be willing even to pay higher to avoid these social costs; however, in the case of the US postal corporation, however, this is impossible because of the caption of rates by the government. Through privatization, the efficiency of the US postal corporation can be achieved. It will also lead to a state where the pricing of services is competitive and related to the costs involved in delivering the same service (Mahmud 1992). As observed in the audit, the US postal corporation is expected to break even with minimal capitalization from the government, a vast network of supporting infrastructure and a caption on the rates by the government. Cooperation can also be a viable option in dealing with the problems associated with the supporting business infrastructure. Through this arrangement, even in the absence of financial might, the corporation will be in a position to get capacity to manage its operations. An example of a viable cooperation could be between the firm and its long distance haulers. The company can reach an agreement that suits both the transportation company and itself. Through this arrangement, the capacity of the corporation is increased and its ability to reliably deliver services is created. The result of this cooperation is a creation of value in the supply chain network (Kleinaltenkamp & Ehret 2006) that makes customers ready and willing to pay for its services. Conclusion For an institution to sustain its operations, it must consider the three basic dimensions of sustainability. These are the economic aspects, the social dimension, and environmental impact. Integrating these dimensions in to the business model will create a sustainable business. The dimensions of sustainability are usually applied to the conventional pillars of a business model in order to create a business that is sustainable. The main pillars of a business model identified in this study are the product or service bundle, the customers, the supporting infrastructure and the financial aspect. Creating of value at each of these pillars through the dimensions of sustainability is the core principle of attaining sustainability of an enterprise. Bibliography MOOTEE, I. (2013). Design thinking for strategic innovation: what they cant teach you at business or design school. Hoboken, N.J., John Wiley. KLEINALTENKAMP, M., & EHRET, M. (2006). Relationship theory and business markets. Bradford, England, Emerald Group Publishing. MAHMUD, M. F. (1992)Privatisation: a solution to problems of public enterprises. J. KAU: Econ. & Adm., Vol. 5,. pp. 33-49 BALLON, P. (2007): Business modeling revisited: the configuration of control and value, The Journal of Policy, Regulation and Strategy for Telecommunications, Information and Media, Vol. 9, No. 5, 6–19. WEBER, M. (2008): The business case for corporate social responsibility: A company-level measurement approach for CSR, European Management Journal, Vol. 26, No. 4, 247–261. SCHALTEGGER, S. & WAGNER, M. (Eds.) (2006): Managing the business case for sustainability. The integration of social, environmental and economic performance. Sheffield: Greenleaf. NIRMA INTERNATIONAL CONFERENCE ON MANAGEMENT, & DHAR, U. (2008). New age marketing: emerging realities. Ahmedabad, Institute of Management, Nirma University of Science and Technology. HILL, C. W. L., & JONES, G. R. (2012). Strategic Management. Cengage Learning. WIEGANDT, P. (2009). Value creation of firm-established brand communities. Wiesbaden, Gabler. OSTERWALDER, A. (2004): The Business Model Ontology. A Proposition in a Design Science Approach. Dissertation, Lausanne: Universite de Lausanne. LUDEKE-FREUND, F. (2009) Business Model Concepts in Corporate Sustainability Contexts. Lueneburg, Leuphana University of Lueneburg SEURING, S. & GOLDBACH, M. (2006): Managing Sustainability Performance in the Textile Chain, in: Schaltegger, S. & Wagner, M. (Eds.): Managing the business case for sustainability. Sheffield: Greenleaf, 466–477. MALTHOUSE, E. C. (2013). Segmentation and lifetime value models using SAS. Cary, N.C., SAS Institute. NIJSSEN, E. J., & FRAMBACH, R. T. (2001). Creating customer value through strategic marketing planning: a management approach. Boston, Kluwer Academic Publishers. BECK, M. (2013). Social business as a sustainable business concept: developed by Muhammad Yunnus and the Grameen Bank. Norderstedt, Grin Verlag. ULRICI, V. (2007). Bond valuation in emerging markets. Lohmar, Eul. DURNING, D. W. (1992). Mortgage revenue bonds: housing markets, home buyers, and public policy. Boston, Kluwer Academic Publishers. ROSS, D. F. (2000). Competing through supply chain management: creating market-winning strategies through supply chain partnerships. Boston, Kluwer Academic Publ. WATERS, C. D. J. (2010). Global Logistics New Directions in Supply Chain Management. London, Kogan Page. SOPLE, V. V. (2012). Supply chain management. New Delhi, Dorling Kindersley (India). Read More