The Strategic Management and Balanced Scorecard - Case Study Example

Strategic Management Student’s name Institution The Balanced Scorecard The Balance Scorecard is a strategic management tool that is employed in assessing and aligning the performance aspects of an organization into its mission statement. The Balanced Scorecard offers information on the effectiveness of the strategic plan and thus offers alternatives that may be used to make adjustments to the strategic plans. The balanced scorecard makes an analysis of the organization using four perspectives: financial, internal processes, customers, and learning and growth. The term scorecard refers to the quantification of performance while balanced refers to the instance of equilibrium between: long and short term objectives, fiscal and non fiscal measures, leading and lagging indicators, and external and internal performance measures (Pearce & Robinson, 2011). The balanced scorecard evolved from the traditional fiscal performance metrics which only offered information on past results but was unsuitable for influencing future performance policy. Since the balanced scorecard makes an analysis of the performance on several perspectives, it is more suitable for controlling performance and influencing future strategic plans. The Balanced Scorecard Framework The balanced scorecard framework makes use of the four frameworks which are analyzed according to four aspects: strategic objectives, measures, targets, and initiatives. Strategic objectives measure what the expected outcomes are. Measurement analyzes the achievement of objectives. Targets are specific goals set by the strategic plan. Initiatives are the specific measures taken towards the achievement of the said objectives. The financial perspective is an important measure of how the goals of the organization are aligned to fit the owner’s interests. The goals are typically hinged on the position that the company is in the business cycle (Pearce & Robinson, 2011). The customer perspective analyzes the business in terms of how well it is meeting client needs in the achievement of financial objectives. The internal processes perspective analyzes the balance of processes that would meet the needs of both owners and the clients. Learning and growth objectives analyze on how the organization may take lessons from information gathered in order to meet strategic objectives. The Balanced Scorecard and United Airlines A balanced scorecard analysis of United Airlines show certain areas of the company that ought to be improved and other that are aligned to the company’s strategic objectives. From the financial perspective, United Airlines is in the growth stage of the business cycle. The company is viewed by its shareholders as a company that has potential for growth if proper measures are put in place. United Airlines has an established market share, is heavily capitalized, and therefore it is a company that is of great potential value to the shareholder (United Airlines, 2012). From the customer perspective, United Airlines is viewed by customers as a company which is meeting its client needs in the offering of new products, responsive customer care systems, and better customer service systems in the area of after sales services such as flier miles and transport facilitation at the end of the flight (United Airlines, 2012). Clients view United Airlines favorably in terms of saving time, enhancing quality and cutting costs. The internal process perspective for United Airlines has identified the processes that are most critical for United Airlines to be an efficient organization. United Airlines has identified areas in which it needs to enter into strategic partnerships. Its membership in the Star Alliance is one such process which has resulted in the cutting of costs for the company while also offering improved benefits and convenience to both clients and shareholders of the company (United Airlines, 2012). United Airlines has learned a lot from the balanced scorecard objectives. United Airlines management has come to the realization of increased competition from other airlines which have informed its merger with continental that is intended at taking advantage of economies of scale by cutting costs. The knowledge of the complexities of the stiff competition in the airline industry is what has informed the changes in the strategic plan of the company. Generic Strategies The position of the organization in the industry is the key determinant of its fiscal performance relative to the industry average. In order for an organization to achieve sustainable profitability it has to attain a certain level of competitive advantage in the given industry. Competitive advantage may be attained through either differentiation or cost advantage. The application of these strengths of the company thus results into three generic strategies of focus, differentiation and cost leadership. These strategies are not hinged on internal or industry factors and hence the name generic strategies (Pearce & Robinson, 2011). Focus, Cost leadership, and Differentiation The cost leadership strategy entails the organization having lower costs for production for a given quality in the given industry. The instance of cost leadership is dependent on the organization having strengths that are not available to other players in the industry for instance access to capital, efficient distribution or superior inimitable technology. Differentiation strategy is the offering of a good or service that is unique and is deemed by customers to offer more utility than products of other competitors. This uniqueness is thus important to the firm in that it enables the firm to offer its product at prices which are higher than that of the competition. The focus strategy usually includes the organization concentrating on a market segment in order to achieve either differentiation or cost advantage. Focus on a particular segment of the market enables the firm to take advantage of customer loyalty and thus ward off competition. A differentiation based focus strategy enables the firm to pass on costs to its clients since there are no substitutes to what the firm is offering (Pearce & Robinson, 2011). Another aspect of generic strategies is being stuck in the middle. Being stuck in the middle entails the organization attempting a mix of all the strategies which results into zero competitive advantage. Generic Strategies and United Airlines United Airlines has adopted a mix of differentiation and cost leadership strategy in an endeavor to attain competitive advantage. A mix of the different generic strategies is in many instances a reason for non achievement of competitive advantage United Airlines offers one of the cheapest costs in the industry both in terms of passenger and cargo charges. The size of United Airlines fleet and its spread in the domestic and global front make it possible for United Airlines to offer discounted prices (United Airlines, 2012). Cost leadership is however not the best strategy for United Airlines since it is not the largest airline in terms of fleet size or destinations. Airlines such as Delta and Southwest are larger and therefore they offer lower costs than United. United Airlines also employs product differentiation as competitive advantage strategy. United offers differentiated services in personalized customer care services, arrangement of connecting flights, transport arrangements at the airport and even tour agency services. United Airlines has a reputation for the quality of its after sales service and also its sales services. While United offers a lot of differentiated products such as better flier miles due to its membership in the Star Alliance, this is increasingly being eroded by mergers in the airline industry which is making the differentiation strategy of United Airlines less effective. United has however entered into a merger with Continental which would make it the largest Airline in the United States and would thus result into more resources which would enable it to continue to offer differentiated products at low costs. In the long run it will be prudent that United Airlines adopt the generic strategy of cost leadership since with the economic recession people prefer lower costs as opposed to differentiation of products as has been seen by the increasing popularity of no frills airlines (United Airlines, 2012). Grand Strategies A grand strategy is a term that is used to refer to a broad base statement of planned action of an organization and how it will be implemented. There are several grand strategies which may be customized by an organization to fit its strategic objectives. The different types of strategies are; concentrated growth, market development, product development, innovation, horizontal integration, vertical integration, concentric diversification, conglomerate diversification, turnaround, divestiture, liquidation, strategic alliance, and joint venture. Concentrated growth refers to the strategic action of focusing on spiking sales of what the company offers via the current channels of distribution. This strategy focuses on the improvement of quality price and utility for the clients. Product development concentrates on the development of new services for existing clients. It concentrates on the improvement of products that are currently on offer. It may entail coming up with variations of the product such as differences in packaging or the addition or subtraction of certain aspects (Pearce & Robinson, 2011). Horizontal integration concentrates on the acquisition of other companies in the industry or in another industry. The strategy is intended to increase the market share or to acquire strategic technological competence that the acquired firm possesses. Vertical integration refers to the acquisition of clients or suppliers. A turnaround strategy refers to the reduction of both costs and assets due to unfavorable fiscal performance (Pearce & Robinson, 2011). The reduction of costs is attained by retrenching of staff rather than purchasing of new equipment. The sale of assets results into extra cash which can then be used to try out new initiatives to return the organization to profitability. Strategic alliance is a grand strategy that refers to the collaboration of firms in an industry in areas \such as marketing and pricing in order to be competitive or to increase efficiency through economies of scale. Grand Strategies in United Airlines United Airlines has made use of several grand strategies in order to make the company acquire an edge over the competition in the airline industry. United Airlines has opted for a concentrated growth approach in attaining sustainable competitive advantage. United Airlines has done this by concentrating on the low income market by keeping its prices low in order to increase its market share in the hard economic times (United Airlines, 2012). The airline is also involved in product development strategy of competitive advantage. In this regard the airline has added a range of after sales services such as transport facilitation at the airport and discounted baggage charges. United has applied horizontal integration strategy in its strategic acquisition of car rental services which offer additional services to its clients at airports. This strategy is important for United Airlines in gaining market share since the modern traveler has been shown to have a liking for increased convenience which United Airlines provides. United Airlines has been experiencing a series of losses since 2001 and hence it has issues of cash flow. United Airlines has thus applied the grand strategy of turnaround in order to improve its financial fortunes. United has adopted the policy of leasing equipment instead of buying it until the company is financially stable. Plans are also at hand to reduce its workforce through retrenchment in order to cut costs. The company is also in the process of implementing a joint venture arrangement with Continental Airlines. The merger with Continental is expected to expand the market share of the company while also cutting cost by taking advantage of economies of scale (United Airlines, 2012). United Airlines has also made use of the Star Strategic Alliance to bolster its competitive advantage. Its membership in the Star Alliance makes it access passengers connecting flights to destinations where it does not fly hence improving convenience and ultimately customer loyalty (United Airlines, 2012). The Alliance also helps the company reduce costs related to litigation to which members of the alliance are exempt. The alliance also offers efficiency through arrangements such as bulk purchases which leads to increased efficiency. Reference Pearce, J.A. II & Robinson, R.B. (2011). Strategic management: Formulation, implementation, & control, 12th Edition, Chicago, IL: McGraw-Hill Irwin. United Airlines. (2012). United.com. Retrieved from http://www.united.com/ Read More