Strategic Plans for Homebase Business - Coursework Example

Table of Contents Executive Summary 2 Introduction 3 Vision and Strategy: 3 For satisfaction 3 2: Financial performance 4 3: employee satisfaction and innovations, 4 4: internal business process, 4 Balance Scorecard 4 1: Internal Business Process, 5 2: Customer 5 3: Innovation and Learning 5 4: Finance 6 Strategy Map: 7 Recommendations: 8 The use of Balanced Scorecards for performance management and monitoring 10 Limitations of balanced scorecard BSC: 10 Evaluation and discussion: 11 Internal Business Process: 12 Customers: 13 : 13 Finance: 14 References 15 Executive Summary Homebase group is now going to expend its operations and market share for which HRG is launching some strategic plans for its Homebase business that include overhauling of internal business process, more customers satisfaction, increased employees motivation and innovation, and last but not the least increased liquidity so that it become able to be the market leader in this line of business. This part of the company operate in home and general merchandise market with £5.6bn of sales in this financial year and the group saw its overall market share to increase £8bn in spite of challenging market environment and continue to maintain its leading market position in the industry. Financial projection of the Homebase business show a strong market position where from 2009 to 2014 sale show a steady growth from overall 2 to 3 percent increase on average which can be expected in future as well, for which HRG have many plans to implement but among all of them to materialize these objectives the most important thing is the future plan that Homebase is going to implement that include expending sales and capturing more market share by expending its operations (members, 2015). Introduction Home Retail Group HRG is a UK based firm with registered office Avebury Boulevard Milton Keynes England 0533033 VAT145 8990 25. HRG is UK’s leading home-based and general commodity retailer’s that operate businesses of Argos and Homebase, and financial services. Among other businesses Home retail group is changing the future of digital retail leadership and multichannel capability. As the name indicate it offer a range of products and services that cover almost each and every aspect of your home need that include garden, lighting, bathroom, decorating, DIY, kitchen, bathroom, furniture etc. During the financial year 2014 FY HRG has posted a group revenue of £5.667bn that show a slight increase of 3 to 4 percent overall as compared to last year, among this group sales Homebase sales show a slight increase of 1.5% that result in 2% increase of operating profits, but in spite of this improvement of sales net profits have decreased by a considerable amounts i.e. from 86.9£m to 54£m, which is a point of concern for all stack holders of the company. Taking into account the above aspect of the company HRG is now gong for some strategic plan in order to address these issues timely and bring the company to position of market leadership some Vision and Strategy: “We want to accommodate our customers as possible who shop our ranges, with great advice both at retail stores and at online point of sale, it doesn’t means that everyone should know and talk about the “nuts and bolt”, but it means everyone should be able to listen to customer and colleague advice” To convert this vision into tangible results Homebase has a broad range of strategies that include, 1: For customer satisfaction Compelling customer offers by new and improved quality of our product at same market price Quick delivery service Brand loyalty Introduction of different decorating centers 2: Financial performance Conducting cost audit Introduction of internet sales Decreasing debtors turnover period 3: employee satisfaction and innovations, Regular training programs Team orientation in organization plans Investment in R&D 4: internal business process, Replacement of outdated machinery Creating unique digital customer experience Overall restructuring of corporate plan in order to consolidate them in single strategy. Balance Scorecard As a multichannel home enhancement retailer Homebase plan is trying their best to clearly differentiate itself in this line of business by creating both stores and online experience for valued customer, as Homebase has created strong brands (Yourdictionary, 2015) Like Habitat, Laura Ashley, and Odin etc. Homebase has initiated some unique business plan like, Accelerating multi-Channel sale like internet More Exclusive Brands which is the exclusive portfolio of Homebase Loyalty Programs Expending stores over more geographic area. Compelling customer offering Strong financial strength. As per above strategic plan Homebase is confident enough that they will certainly achieve their objective of leadership position in the market. In order to achieve their strategic objectives Homebase has to align their corporate activities around this scorecard There are different perspectives of this card 1: Internal Business Process, Objectives KPI’s or Measure Targets or Performance level Action Plans Manufacturing excellence Improved quality Minimum cost Employee satisfaction New brands Lower CGS by10% Reduce Turnover cost by 20% Streamline communication with customer Improve employee retention and satisfaction Reducing non-manufacturing expenses More design Customer association with our output, and engineering efficiency 15% increase in sales Organizing quality circles Invest in training R&D Decrease the delay in product launch No of production order 2 times more order Strip out all wasteful steps in this process Identify beat rate based on average customer demand 2: Customer Objectives KPI’s or Measure Targets or Performance level Action Plan Public Image External image of the company To be the customer 1st choice Promotional campaign, time Processing time per order Reduces time from 10 to 5 days Deployment of more staff Quality in service Goods return minimum customers complaint Introducing TQM cost Market price Establishing Competitive market prices Reducing cost when dealing with ordering, scheduling delivery, and paying for materials 3: Innovation and Learning Objectives KPI’s or Measure Targets or Performance level Action Plan Satisfaction of employees Employee turnover rate, illness rate Reduce it form 10% to 5 % New bonus scheme, internal promotions Learning and improvement Annual training for employees At least 30 hours per year Annual training programs Launching new products No of new product launched 3 new brands this year 10m£ investment (Timbery, 2015) 4: Finance Objectives KPI’s or Measure Targets or Performance level Action Plan Profitability Return on capital employed 20% increase Increases sales while reducing costs Growth Revenue growth Improve to 3 % Processing all new orders from internet through existing resources Cost leadership Unit cost decreases by 2 to 5% each half year Encourage efficiency in production Strategy Map: As per above strategy diagram it is clear that all activities are inter connected to each other, therefore for effective and efficient strategy that can achieve organizations goal in terms of profitability and both customer and employee satisfaction Homebase has to adopt an integrated approach. Strategy is not just the idea without plan but it should have some course of action for the desired outcome, as per strategy for increase in profitability finance, production, and sales department have to adopt an integrated approach then it would result in desired level of sales volume, In strategy we are free to write what we desire but for effective strategy which can be implemented it is essential that it should be practically applicable, as for as strategy of Homebase is consider there is a clear gap between strategy and its tools to achieve its objectives as the company intend to achieve financial objectives but at same time it is not clear how it can do so, because the figure in efficiency ratio show different pic, As per above strategy map internal business process of Homebase include efficiency, effectiveness in operation, improvement of product quality, and reduction of lead time, all these activities are connected with the other module of businesses also, e.g. efficiency in operation will result in improvement of image of company in public, and ultimately employee motivation for their improved output, and at last result in improved cash flows which is ultimate objective of the company. Similarly efficiency in assets utilization result in increased cash inflows, further with improvement of product quality would render customers reliability in product, and ultimately result in growth of sales, similarly other relations in strategy map are very much clear that if company want new domestic product then they should focus on employee motivation which is connected with employees training and development, and at last if organization want profitability then it must increase its cash flows which is possible through optimum assets utilization. Recommendations: A good corporate strategy is one that highlight all aspect of organization that went wrong and where improvement is necessary, because when problems are identified then it is easy to over them are easy to guess solutions, in HRG the major problems are the competition and higher growth, which all are identified with very much precision. That include internal business process issue, employee’s dissatisfaction, loss of customers, and financial problems. After successfully highlighting the specific problems which is usually difficult to guess in a corporate structure it is now easy to go for their specific solutions, Gap between Strategy Map and Strategy: As per strategy all functional areas of organization are supposed to act coherently, but reality is much different there is no strong bonds in different departments In strategy organizations need both financial and non-financial achievements, but in reality there is conflict in achieving these objectives, e.g. organization need employee motivation but at the same time intend to reduce cost. Conflict of interest among different departments e.g. sales department is always trying to increase sales but on the other hand production department is striving to decrease cost of production. Interdepartmental conflict on available resources Gap between top management and operational staff, as strategies are formulated on the top level and if there is gap between these different managerial level then how is it possible that strategy will effectively implemented Summary of Recommendations 1. Improve liquidity by decreasing debtor’s turnover period, and further as the company is going to start various projects of more R&D and new brands, therefor it’s better to improve liquidity ratios so that there is no hindrance launching such activities. But company’s sales fig for this year show slight upward trend but dramatically its net profit has decreased by a huge amount which actually should have risen, it means either in previous year the company’s financial position has been miss conveyed or in current year lot of miss handling happened there for it is recommended to conduct some forensic audit to invested=gate the situation, 2. As the company is facing strong competition therefor specific consideration is required to address this issue, by more channel of sales like ecommerce and more retails stores, but in long term there is one way to win competition that is what emotion are you selling whether it justify its cost to customer, therefor proper attention should be given to brands and it is also recommended to start a brand promotional campaign 3. As employees are the core assets of any organization therefor specific consideration should be given to them, there should be proper training programs and overall employee friendly environment in organization, as they are the real one who are engaged in all activities of the organization, they should be proper accommodated through new bonus scheme and whatever there genuine demands are because low net profit in spite of more sales indicate that may be some employees are engaged in malfunctioning therefor if organization want to prosper in long run then it properly address employees issues 4. Further as customer are the boss of every corporate sector there should be customer support Centre where customers grievances can be addressed, through which we can retain our valued customers. As the organization’s every activity are for their customers but if still their customers are not satisfied then definitely organization is not going on right track, therefor it is recommended that some changes should be made to this area of business that why it is not getting results such changes may include employees training, customer support desks etc. 5. Increase responsiveness of company to the customer so that company could not lost its valued customer, this could be made by streamlining the business activities through introduction of IT enabled services like ERP (enterprise resource planning) implementations etc. 6. Make it easy to collaborate between all stake holders that include customers, employees, leads, suppliers etc. which is surely a successful way to improve way efficiency of employees. 7. There should a proper risk management procedure, in order to be proactive about possible risk that may harm the company, which is a good measure for long term planning. 8. Standardize customer service requirement, where customer satisfaction activities could be rewarded so that each and everyone know about the set rules that how to deal with customer grievances, (Homebase, 2015) The use of Balanced Scorecards for performance management and monitoring “Balanced scorecard is a technique to performance management that combine financial measure with non-financial measure” Just having a good balanced scorecard is not the big gain but its correct application make it worthwhile, in different organizations its usage may change according to situation but in general it has two approaches that is management control and strategic control. Limitations of balanced scorecard BSC: This section will explain the most critical points of BSC that limit its use, If all the stake holders like supplier, govt authorities are not involved in implementation of performance management then it may not result in required result In BSC there is just psychological connection between departments but in reality it is not that much easy It may result in confusion that whether employee should stick to the old strategy or new one after BSC if there is some differences. There is problems in its implementation where organization attempts to achieve both financial and non-financial goals simultaneously. Unparalleled approach for underperforming or non-performing contributors BSC does not take into account any interest group but other than shareholders and client and no attentions is paid to daily activities of competitors Lack of integration between top level and operational level, which may lead to strategic problems, because of low level to understand the BSC, as a result organization strategic plan may fail, due to weakness in coherence and integration of organization goal. Just internal focus of BSC is also one of the limitation of BSC, as external major stake holders or totally ignored, like competitors, bankers, government authorities, The areas of measurement in BSC are unidirectional and too simplistic, some scholars state noted that there is no cause and effect relationship between some suggested areas of measurement Evaluation and discussion: After designing BSC now it is time to implement it and achieve desired outcome, but before going for live operation it is necessary to sell it organization wide for detailed study and take employees on board because ultimately employees are the real one who can effectively implement these plans. After careful analysis of BSC, where limitations are discussed in details, now we can understand that what the real problems in its effective implementation, as detailed in limitations paragraph where it is criticized on the ground that it take a very few factors into consideration for developing effective strategy and plan, but actually this point is the core advantage of BSC as it avoid information overload which is a basic problems in all other strategies where on paper they provide detailed study but with no plan of action, but in BSC it not only identify problems but also provide a complete plan of action for the achievement of such strategic objectives, Since from the last one decade performance management has become a legislative requirement for private and public sector for which BSC provide a complete solution , a recent study by Bain and company indicate 57% of firms worldwide use BSC as a tool for performance management, which indicate how effective BSC is in performance management. Analysis of Balance scorecard According to the survey of balanced scorecard collaborative only 5% of the employee understand the strategy of their organization, which means rest of employees are not aware of their corporate strategy and big plan, this is point from where concept of balanced scorecard develop, In Homebase corporate strategy have been designed in balanced scorecard where each and every aspect of strategy have been defined in tables from where we can take a bird eye view of our corporate objectives and the way forward to achieve these objectives, further this a short way to sell our corporate organization wide. Here are the different prospects of Homebase corporate wise strategy Internal Business Process: In this part of strategy Homebase is trying to be efficient in its production side which means it is trying to optimize its production facilities that may result in lower cost of production but at the same time improved quality that what exactly needed by customer Homebase also want to be effective in its production and intend better utilization of its resources, which is a good idea because with economies of large scale production business flourishes, and its financial prospects are better which can be seen from its financial statements Further production quality is also as essential as its production because this is the area where we can compete with other companies of same industry As the business grow its production line face tough time because production increases with same resources which is difficult task. Therefor production line has to be overhauled so that it’s able to run production orders on time. (HomeRetailGroup, 2015) Customers: To assess the Homebase image in the market it should conduct a market survey of it brands in the market where it would become aware of its product loyalty in the market, and further it would enable Homebase that whether it should go for new brands or not. And it would also enable Homebase to understand about customers need, so that Homebase could align their activities according to customers need Time taken by a sales order to process is also a matter of quality in our services so in order to improve this side it should hire consultants to improve this side of business, fig from I/S show decrease in net profits 32.9m£ that is a considerable amount, this decrease in profit can only be converted into by TQM Customer satisfaction is the essence of any profitable organization therefor proper attention should be given to this side of business, as a strategy Homebase should try to be more customer oriented then before and reduce the customers grievances to by some tangible amount not just as plan without action. In order to be more competitive the price of the product that company want to sell should justify the cost paid by customer otherwise no brand or product of a company could excel in market, therefor to attain market leadership position Homebase should maintain their prices at an optimum level. (HomeRetailGoup, 2015) : Employee motivation is much essential as they are only one that uphold the company integrity there for proper attention should be given to them there should be proper training arrangement for employees so that their motivation can better utilized by the company, further employee satisfaction reduces many other cost of the company like turnover cost new employees training etc. Innovation and learning R&D function of an organization determine the future of an organization, and it also decide that who would be the market leader, because this is function from where (BUSINESS, 2015)new and improved products came into the market, where new brands are introduced, as a strategy of Homebase 3 new brands at least, within some more specific time period that sound a good approach but R&D is something without time restraints. In order to improve sales for achievement of financial objectives Homebase is going for more channel sales as the product list of Homebase cover almost each and every item that is of daily use in home, so if company is able to reach customer 1st and provide our goods and services at their door steps then definitely it would result in increase in sales, so the introduction of online sale strategy would a much good idea, as when a customer need goods and he is willing to then Homebase should be at their door steps. Finance: As Homebase is going to implement different strategies so for effective implementation of these strategies it is necessary for them to improve their liquidity ratio so that there is no restraint in such implementation. The current ratio is not good enough where debtor turnover period is increases from 43 to 47 days, which should decrease in situation like this where company is going to launch different strategies. Optimum utilization of resources means efficiency in operations that means more output at same level of production line, this strategy is good enough and an example of TQM, as it result in increased output. Revenue increase is aim of every organization as like Homebase for which it is going for more channel of sales of which E sales is a part. As per this strategy Homebase is reaching out to the domestic end users which is a better idea and at the same time it is going for new brands and services Shareholders are the owners of the company so their concerns is top most EPS from F/S is much discouraging for as it show a down ward trend from 45.7 to just 7.7% on average, if interest of shareholders shaken then it would be much difficult for Homebase to materialize it objectives.. References BUSINESS, R. O. T., 2015. REVIEW OF THE BUSINESS. [Online] Available at: https://www.homeretailgroup.com/ar/2013/_downloads/Business%20review.pdf Homebase, 2015. Homebase. [Online] Available at: http://www.homebase.co.uk/en/static/customer-services/about-homebase HomeRetailGoup, 2015. HomeRetailGoup. [Online] Available at: https://www.homeretailgroup.com/ar/2013/introduction/whoweare/ HomeRetailGroup, 2015. HomeRetailGroup. [Online] Available at: https://www.homeretailgroup.com/ members, I. a. r. t. t., 2015. Independent auditors’ report to the members. [Online] Available at: https://www.homeretailgroup.com/ar/2013/_downloads/Financial%20statements.pdf Paper4u.com, 2015. Paper4u.com. [Online] Available at: http://www.coursework4you.co.uk/essays-and-dissertations/balanced-scorecard.php Timbery, 2015. Bplan. [Online] Available at: http://articles.bplans.com/writing-an-executive-summary/ Yourdictionary, 2015. Yourdictionary. [Online] Available at: http://examples.yourdictionary.com/best-examples-of-a-vision-statement.html Read More