Measures of Organization Environment - Coursework Example

MEASURES OF ORGANIZATION ENVIROMENT al Affiliation) Key words: Tesco, Balanced scorecard The PESTLE Framework 2 Economic Factors 3 Technological Factors 4 Environmental Factors 4 The Financial Perspective 6 Learning and Innovation 6 Internal Business Processes 7 Advantages of the model 9 Disadvantages 9 References 10 The Balanced Scorecard Effectiveness of the Balanced Scorecard The balance scorecard framework aims at interpreting the strategy, aligning the organization goals to the strategy, and connecting the strategic goals to the yearly budget of the organization. In addition, it will enable Tesco to focus on the strategic areas within it environment, analyze its short-term outcomes from the four perspectives (Kaplan & Norton, 2001, p.103). The views include customer, financial, internal business processes, and learning and innovation perspectives. Scholars argue that the balanced scorecard results of greater economic outcome since it includes the measures of both tangible and intangible assets. A number of companies that have used the balanced scorecard have reported an improvement in their overall performance. For instance, a recent study showed that individual companies witnessed an improvement in logistics, and warehouse turnover after the balanced scorecard was introduced. However, the effectiveness of the balanced scorecard as a measure of performance depends primarily on the causal and strategic connection within the balanced scorecard. Scholars argue that the two features distinguish the balanced scorecard from other conventional measures of performance. The PESTLE Framework Political Factor Political factors may manifest in the form of tax policies, political stability, and the involvement of the state in trade agreements. Political factors are intertwined with legal factors such as mergers and monopolies regulations, protection of consumer welfare, and international trade barriers. The Tesco supermarket chain has been involved with a number of courts cases in which it accused of personal damages by its customer. In addition, former employees have sued Tescopoly for unfair dismissal from their jobs. Activists in the UK have called on the public to boycott the products of Tescopoly due to their highly publicized unethical behavior of the company. Tescopoly chains of the supermarket have widely accused of unfair competition tactics and bullying the farmers to lower the prices of their produce. There are allegations of the company attempt to evade tax by setting up offshore bank accounts. In addition, a number of senior level managers are faced with corruption charges (Banker, et al., 2003, p.21). For example, one of the managers was convicted to a jail term of 3 years for extorting bribes from one the company’s suppliers. Economic Factors Some of the economic factors analyzed in this section include the level of unemployment, the cost of raw material, the exchange rate, and the inflation rate. Economic factors are an issue of concern tour Tesco retail stores. The company should be more aware of the change in tax policies and other factors that would affect the company access to capital. It is imperative to note that although the business is expanding overseas, Tesco wellbeing is dependent on the UK market where it has a significant market share. Over the years, the company has focused primarily on diversification and internalization. As a result, these have been the primary reasons for the company’s success. In addition, the fall in disposable income of households has led to the shift of the company’s focus towards marketing its value brands rather than the lavish products (Norreklit, 2000, p.64). Social-cultural Factor On the other hand, the social-cultural factors relate to the cultural setting in which the organization operates within. Some of the social-cultural factors include the demographics, wealth distribution, literacy level, and population growth rate. U.K. consumers are slowly shifting their shopping behavior from bulk shopping to one-stop shopping partly due to social changes. As a result, Tesco has increased the stock of non-food items available for sale. The consumer demand for goods and services is influenced majorly by their social beliefs and norms that are influenced by the consumer social setting. In addition, there is an increased awareness of health benefits among UK consumers. As a result, it has affected the demand for particular food specifically fast foods. Tesco Company has put up measures to accommodate such changes by increasing the stock of healthy foods such as vegetables and fruits. Technological Factors Technology advancement has widened the scope of Tesco Company since a number of opportunities have cropped up. The emergence of online shopping and the development of self-service check out points are some of the latest technologies in the retail sector. Online shopping comes with home delivery services while the self-service checkpoints have ensured convenience and ease for the consumers. As a result, this has lowered the overall operation cost through reduced cost of labor. Tesco retail store have invested significantly in technologies that harness clean energy to reduce the amount of carbon emissions. Environmental Factors Environmental factors comprise issues such as depletion in natural resources, disposal of waste and recycling measures. There is increasing pressure on the companies to address the issue of environmental degradation. Tesco is committed to mitigating the problem of global warming by adopting the use of clean, renewable energy. In addition, Tesco has come up with ways of recycling their waste material. Advantages and Disadvantages of the Balanced Scorecard Advantages The balanced scorecard provides a balanced view of the organization performance since it involves the analysis of the four main aspects of an organization. Unlike other tools of measuring an organization performance, the balanced scorecard provides an overview of the company. A company might perform well financially; however, other organizational aspects such as the consumer satisfaction may need adjustment (Banker, Chang & Pizzini, p.20). The balanced scorecard allows the stakeholders to establish the short, medium, and long-term objectives of the organization. Other tools of analysis provide solution only for the immediate future while disregarding the long-term goals of the company. The balanced scorecard approach ensures that any strategic action taken by the organization matches the desired results. Increasing the prices of the product helps the company achieve its long-term objectives. However, this may come at the expense of the company’s short-term goals of maximizing consumer satisfaction. Disadvantages Analysis of the four components of the balanced scorecard does not provide an overview of the entire company. The balanced scorecard provides a limited view of the financial status of the organization. For its effectiveness, it should encompass elaborate accounting devices. The balanced scorecard does not take into account the competition or technological development within the industry. As a result, it fails to ascertain the inherent risk involved in the actions that can inhibit the strategy. The balanced scorecard is a complex process since it requires adequate planning prior to its initiation. It is recommended that a meeting with the stakeholders must first be held to deliberate on the short term and long term objectives of the company. Recommendation Based on the Balanced Scorecard The Financial Perspective The financial measure analyzes the past actions of the organization rather than the future possibilities. The primary focus of this perspective is the profitability and the market share of the company. Recently, Tesco Holding has been experiencing a significant decline in revenue and to a fall in its market share. The organization objectives analyzed in this measure focuses on enhancing the profitability of the company both in the short and long term and maximizing the value of the shareholders. The most common measure of this perspective includes the computation of the return on assets and the earning per share (Norreklit, 2000, p. 66). The tests provide misleading interpretation when taken independently. However, they provide valuable information to the management team when incorporated in the balanced scorecard. Failure to follow up the information provided with adequate strategic action is a common mistake made by managers. As a result, the improvement process of the company’s operation may not bear fruits. Learning and Innovation The ability of the company to learn, innovate, and improve is directly proportional to the overall business value. The company can only achieve this by launching new products, expanding the consumer value, and enhancing the efficiency of its operations. As a result, Tescopoly Holding will be able to penetrate new markets, increase its profit margin, and maximize the shareholder’s value (Kaplan & Norton, 2001, p.100). Under this perspective, the managers determine the organization objectives related to learning and innovation and then transform the goals into definitive measures. Internal Business Processes The internal processes are related directly to customer satisfaction since an exceptional customer performance is derived from these processes. The management team of Tescopoly should focus on vital internal operations in order to retain its customers. The underlying question under this perspective is ‘what should the company excel at?’ the answer to this question lie in product quality, company’s productivity, and employees skills. Based on these processes, the objective of the company should then be transformed into measures that can be affected by the action of the employees. Customer Satisfaction Most successful companies prioritize the needs of the consumers by providing quality customer services. The balanced scorecard framework allows the management team to transform its objective to specific measures that reflect the issues significant to the customers. The four areas that the management should consider under this section include time, cost, performance, and quality. The management team of Tesco should come up with an objective for each of the areas and then transform them into concrete measures (Lipe & Salterio, 2000, p. 285). Change Management Framework The framework focuses on the employees people‘s perspective of change and the leadership within the organization including, executives, supervisors, and middle-level managers (Banker, et al., 2004, p.3). When the change management process is carried out in an appropriate manner, the employees feel engaged in the process and work jointly to achieve a common objective. Successful Change Management Strategies The management team should promote teamwork among the employees in order for the organization to achieve a common goal. The employees should not appear as if they are competing among themselves. In fact, they should work collectively and help each other out to complete particular tasks. The management team should communicate the objectives company’s goals and emphasize the benefits of changes. As a result, there is less resistance to change among the employees. A number of the change management models exist; however, the Kotter’s eight-step change model is the most appropriate for Tesco Kotter’s eight-change model Under this model, the employees adopt the change based on the manager convincing power. The senior level managers should explain the need and benefits that come with the change. Under this model, there are eight stages involved 1. First, the manager should emphasize the need for urgent change 2. The manager should encourage teamwork among the employees. The teams should be entirely dedicated to organization change 3. The manager should set the objectives and goals of the organization change 4. It important for the management to communicate the need for change 5. The manager should empower the employees with the ability to change 6. The managers should create the short-term objectives 7. The entire should remain persistent 8. The change should be permanent Advantages of the model 1. The steps provided in this model are easy to follow and adopt 2. The model focuses on preparation and acceptance of change rather the adoption of the actual change 3. The model makes the process of transition smooth Disadvantages 1. At times, the steps should not be skipped since skipping even a single step compromises the entire process of change 2. Lastly, the process is time-consuming. The process might a couple of months hence slowing the adoption process. References Banker, R. D., Chang, H., & Pizzini, M. J. 2004. The balanced scorecard: Judgmental effects of performance measures linked to strategy. The Accounting Review, 79(1), 1-23. Huczynski, A., & Buchanan, D. A. 2013. Organizational behaviour. Pearson. Kaplan, R. S., & Norton, D. P. 2001. Transforming the balanced scorecard from performance measurement to strategic management: Part I. Accounting horizons, 15(1), 87-104. Lipe, M. G., & Salterio, S. E. 2000. The balanced scorecard: Judgmental effects of common and unique performance measures. The Accounting Review, 75(3), 283-298. Norreklit, H. 2000. The balance on the balanced scorecard a critical analysis of some of its assumptions. Management accounting research, 11(1), 65-88. Read More