Balanced Scorecard - Case Study Example

Balanced Scorecard Yunnan Lucky Air is one of the most promising domestic airlines in China which operates between Dali to Kunming to Xishuangbanna. Though main base of the aviation company is the Dali Airport but due to its rapid success since its inception, it is currently planning to expand its business across the nation. In this paper we are aimed at understanding the possible advantages and disadvantages of the aviation company through the balanced scorecard. A balanced scorecard or BSC is “a methodology to solve challenges in balancing the theories of a strategy with its execution.” (Nair, 2004, p. 13) Through this balanced scorecard reflection over the Yunnan Lucky Air’s advantages and disadvantages would be comprehensive. Balanced Scorecard: The balanced scorecard of Yunnan Lucky Air may be illustrated as follows: Financial perspective Customer service Internal processes Learning perspective (Balanced Scorecard Institute 2008) The following tables will explain the strategies that may be adopted in order to reach these above objectives The Customer Perspective Strategic Objective Measure Target Providing service to customers in an easier way To focus more over the e commence to reach more number of customers and enable them to avail the service of Lucky Air in a better manner Compared to Lucky Air’s service providing capacity to 1.2 million travelers visiting Yunnan region in the year 2007, by the end of 2010, the company is required to aim at providing service to total 3.2 million travelers. More number of services at a chaprer cost compared to the other airlines In the context of passenger comfort, in-flight entertainment options and helping the willing travelers to avail tickets will create a good impression among people about the company. By 2010 total service providing infrastructure is required to be modified in such manner that it would attract more number of people and at he same time that would not affect neither financial stability of the company nor cost planning of customers To come under collaboration with reputed logistic depatments of the Yunnan region to facilitate the customers to receive more benefits The Lucky Air can come into collaboration with different logistic department of the Yunnan region to cater better service to travelers in and across China. Due to such collaboration it can also offer its service receivers with greater number of facilities as well as offer to pass their vacation in a more financially planned manner. Such collaborations would help the company to retain its customer base and at the same time, attract more number of customers. The Financial Stakeholder Perspective Strategic Objective Measure Target Increase in revenue margin It is important to increase the revenue margin for the company mainly due to two reasons, a) to rejuvenate the total service providing infrastructure of the whole nation and b) to claim a remarkable position in the domestic aviation market scenario. In this context it needs to be kept in mind that Lucky Air already has more than 11 competitors in the market. Thus, to compete against all these and at the same time to provide proper service t customers it is important to maintain as well as increase the revenue margin of the company at a harmonious rate. Despite providing best range of services to customers, the company cannot afford to compromise over its revenue rate. Since its inception in 2004, by the end of 2007 the Luck Air has established itself as a US$104.3 million company. Keeping in mind the growth rate and increasing number of customers and total expenditure that the company has to bear the revenue margin needs to be raised almost to US $300.0 million. Less amount of policy distribution among agents One of the major reasons for overt financial burden of the Lucky Air has been the distribution of huge rate of profit margin among the agents. Estimate shows that the company has to distribute profit ranging from 2%-15%. Lessen the rate of commission among the agents immediately at least to the rate of 5%. Once it is done revenue margin of the company will rise. Consequently, there will be problem regarding collection of tickets by customers. To solve this problem the company has to make its e commerce facilities more simplified so that customers can easily collect their tickets online. Maintain a balance in product pride There are several factors, alteration of which can change the situation of the company in the market. But if the flow of customers remains same, it will not affect the company to carry on with its business. Thus, the price margin of the products or services or offering of the industry must not change dynamically. Maintain a balance in different price range of different services provided by the company. At the same time providing certain discount on services can also attract customers to avail service from the Lucky Air. Investment in different other business to benefit the customers and enhance the brand image As the company keeps on growing, it can also invest in different other types of business so that it draws more attention of common people, enhance its profit range and develop its own fund that would help the company to overcome the crisis situation. Collaboration with other hospitality departments is important as the company receives a chance to enhance its business, on the other hand it also helps the company to reach more number of people and promote its products as well as services in a better manner. The Internal Business Perspective Strategic Objective Measure Target Compare and contrast with policies of other companies and evaluate our chance of improvement The other competiting companies are launching new policies. Lucky Air needs to observe the advantages and disadvantages of the other companies closely but and at the same time revaluate our internal policies in such manner that it contributes to the growth of the company. Despite major airlines of China are holding more than 83.7% of the total market share but there is enough opportunity for the small scale companies to grow properly at an annual rate of 20%. Main target of Lucky Air must be to occupy the market though the method of internal evaluation. Internal cost cutting and evaluation Internal evaluation will open up lacunas showing unnecessary expenditure of money or certain other aspects that if those are properly planned, revenue of the company will receive a greater boost. Required cost cutting measures must be taken to solve these problems. To correct or alter all those unnecessary costs that will reduce total expenditure of the company and at the same time help in maintaining the growth rate of the company’s total revenue. The learning and innovative perspective: Strategic Objective Measure Target Training of staffs and crews for providing proper range of service to the customers Though Lucky Air is providing satisfactory level of service to the passengers but there is always further scope of development. Small but effective training session can be introduced for further scope development of the staffs. More efficient people can also be hired but this step must be taken keeping in mind the total fund allocation of the company. Main reason for adopting this step is to enhance goodwill of the company and providing better service to the customers so a strong customer base can be developed. Motivate the stuffs to cater better service and evaluate over all those areas that can be improved Providing proper hospitality service and individual level of attention to the customers is one important area that can make a difference between us and other aviation companies. Stuffs need to be ready to provide all sorts of benefit, services and facilities to the passengers To crate an encouraging impression so that it not only leads to development of better customer base but at the same time positive impression of the company can also be catered among larger number of travelers so that they also feel encouraged to avail to service of Lucky Air Yunnan Lucky Air Advantages: Emergence of the Yunnan Lucky Air as one of the major domestic companies of the nation has not been an easy journey and the main reason was huge competition in the field of domestic aviation. However, due to its excellent service providing capacity in the Yunnan region of China it has attracted total 1.5 million passengers to avail its service within three years since the time of its inception. One of the greatest advantages of the domestic aviation company of China has been its remarkable service to the Yunnan region. This place, being one of the most important Chinese regions to attract a great number of customers across the world, has provided the Lucky Air to promote its service to a great extent. (Berenguer, Shijun, Liang, Jing and Wang, 2008, p. 1) Another important reason for its growth is the prevailing high level of healthy completion among the existing aviation companies. According to the 2007 estimation there were already eleven existing domestic airlines and two more were awaiting official recommendation to join the market. Thus, in order to retain its business amidst such a competitive environment the Lucky Air has to come up with new policies on a regular basis. (Berenguer, Shijun, Liang, Jing and Wang, 2008, p. 1) Brand Image of Lucky Air has also contributed to a great extent in spreading its business. As the company came to the market with support from Hainan Airlines (Berenguer, Shijun, Liang, Jing and Wang, 2008, p. 1) it did not have to undergo much trouble in developing its customer base. The balanced scorecard of the Lucky Air focuses over “various aspects of the organization to achieve overall success” (FAA Logistics Center Strategic Plan 2003 - 2007) and at the same time it also shows what are the main points of the success of Lucky Air. The Balanced Scorecard focuses over tow major aspects of a business namely, “…the problem of effective organizational performance measurement and the critical issue of successful strategy implementation.” (Niven, 2002, p. 4) In case of Lucky Air we see that its collaboration with the Hainan Airlines has been highly effective as it has helped the budding aviation company to develop its e-commerce division. One of the major strengths of the Lucky Air has been its IT potential. At the same time, keeping in mind the growing acceptance of Internet facility in China, annual growth rate 8%, (Trippon, 2008, p. 121) it can be said that the Lucky Air would be able to cater its services properly to the citizens of China as well as to tourists coming from different parts of the world. It is also one of the important functions of the balance scorecard to point at the “cause and effect relationship between current activities and long term success.” (Olve, Sjöstrand, and Petri, 2006, p. 1) Looking at the balanced scorecard of the Lucky Air it becomes clear that how cause and effect are dependent over each other and if the company is providing sufficient stress over certain aspects that would surely add to the overall benefit of the organization. Looking at the section of “The learning and innovative perspective” and “The Financial Stakeholder Perspective” we understand that the company has enough scope to ponder over its cost maintenance, better service providing capacity as well as reflecting over service of stuffs to the passengers. These are certain basic aspects that a budding organization, if, does focus over these properly, it can lead it to collapse. These are certain disadvantages that the company needs to encounter and make the situation better for the sake of their own development. At the same time a balanced scorecard also reflects whether an organization has properly used its human as well as financial resources or not. Thus, proper evaluation of a balanced scorecard will finally help in the development of the company (Kaplan and Norton, 1996, p. 294) and for this reason, if management of the Lucky Air is properly following the implications from its balanced scorecard, it will be able to heighten its rate of growth in a balanced manner. References 1. Wang, N, Jing, L., Liang, L., Shijun, C., Berenguer, I., (2008), E-commerce at Yunnan Lucky Air, Cambridge: MIT Sloan Management 2. FAA Logistics Center Strategic Plan 2003 – 2007, available at: http://www.balancedscorecard.org/Portals/0/PDF/FAALC_SP_2003.pdf, retrieved on: 28th June, 2009 3. Nair, M., (2004), Essentials of balanced scorecard, New York: John Wiley and Sons 4. Petri, Carl-J., Sjöstrand, A., Olve, Nils-G., (2006), Balanced scorecard, New Delhi: Wiley-India 5. Norton, D.P., Kaplan, R.S., (1996), The balanced scorecard: translating strategy into action, Boston: Harvard Business Press 6. Niven, P.R., (2002), Balanced scorecard step by step: maximizing performance and maintaining results, New York: John Wiley and Sons 7. Niven, , P.R., (2003), Balanced scorecard step-by-step for government and nonprofit agencies, New York: John Wiley and Sons 8. Trippon. J., (2008), Becoming Your Own China Stock Guru: The Ultimate Investors Guide to Profiting from Chinas Economic Boom, New York: John Wiley and Sons Read More