Balanced Scorecard for the Bookshop - Case Study Example

Title: Balanced Scorecard for My Bookshop Student’s Name: Institutional Affiliation: Date of Submission: Balanced Scorecard for My Bookshop Introduction In a business environment that where competition is increasing at an alarming rate; it is highly imperative for any business to design strategies aimed at staying ahead of competitors. In a bid to make the bookshop competitive, a Balanced Scorecard has been designed to facilitate the achievement of the business’ mission and objectives. The Balanced Scorecard for the bookshop FINANCIAL PERSPECTIVE This perspective will set the goals for the business’ costs, sales and profitability Strategic objectives The main objective is to ensure the business’ profitability through increased sales and reduced costs. Measures Sales per month, sales growth per month, cash flow, costs per month, monthly and annual profitability. These measures are chosen because they define the financial performance of the business (Jeston & Nelis 2006, p.87) Targets To record profits ranging around $5,500 per month and $66,000 per annum To maintain minimum monthly sales at $14,500 per month To improve sales by at least 20 percent per annum To reduce acquisition and operational costs to $8,000 per month Initiatives The increase in sales levels is dependent on the number of customers that the business acquires (Wilson 2004, p.262). The initiative therefore will be to intensify marketing, such that the business reaches out to as many customers as possible. This will be enhanced through innovative ways of attracting customers such as the use of free gifts and vouchers. The bookshop will have gift vouchers for frequent shoppers, which will be given in a form of lottery. Participants will gain entries whenever they shop at the bookshop thus giving them a chance to win vouchers to purchase products at the bookshop. In order to reduce costs, the business will aim at acquiring goods in bulk in order to benefit from economies of scale. These are benefits that a business for purchasing many goods at once such as reduced prices, discounts and free transport thus saving costs (Jeston & Nelis 2006, p.106). Operational costs will also be minimised through outsourcing and minimising expenses such as unnecessary printing, using recycled packaging materials and preserving electricity. CUSTOMER The customers take a central place in business strategy because they are the major determinants of business success. Strategic objectives The major objective of the bookshop is to remain the preferred bookshop among customers in the area. The aim of the business will be to ensure that customers are satisfied and that their needs are met as efficiently as possible. Among the most important requirements is to provide quality goods at reasonable prices and provide exceptional service to encourage repeat business. Measures Measures to track the above objectives will include weekly sales, number of positive customer feedbacks and level of profitability as compared to competitors. These measures are chosen because they will help track the trend in the organisation’s market share and identify courses of action (Carver 2009, p.378). Targets To acquire and maintain a 30 percent market share in the area, thus hold the largest market share. To ensure that customers shopping at the bookshop get exceptional service. To be recognised as the bookshop with the most friendly prices. Initiatives One of the initiatives to be used will be the use of vouchers and free gifts. Frequent and new shoppers will be given different forms of gifts so as to encourage them to buy from the bookshop, thus increasing the market share. Customer centrism practiced at the bookshop will ensure that customer experience is exceptional through addressing all customer needs with courtesy and integrity (Mollick 2009, p.8). This will attract more customers to the bookshop. Cost cutting measures at the bookshop will ensure that profitability is improved through reduced operational costs (Wu & Olson 2009, p.363). One of the cost-cutting methods to be applied will be shopping in bulk in order to enjoy economics of sale. According to Wilson (2004, p.265), buying in bulk gives traders increased negotiation power such that goods are acquired at a lower price. INTERNAL BUSINESS PROCESS In this perspective we ask ourselves, ‘what can we excel in? This will involve enhancing efficiency and maximising results. Strategic objectives The main objective will be to streamline the business’ operations such that the costs are reduced and efficiency is enhanced. This will result in increased profitability levels for the business. The business will also aim at enhancing innovation within the business in order to promote faster services and enhance customer satisfaction. Measures These will include the number of new products, length of supply cycle, unit costs and yield and number of returns. These measures indicate the efficiency of the internal business process hence the reason they were chosen. Targets To introduce new books and stationery products every month in order to ensure that customers identify the bookshop with the most recent books. Seek to maintain internal operational costs at $2,000 per month. Maintain the yield of the business at $5,500 per month. Enhance timely delivery – same day for light shoppers and three days for bulk shoppers. Promote innovation that will keep the business above its competitors. Initiatives The employees will be required to conduct research and be up to date with the launch of new books. Costs will be minimised through reducing electricity consumption and outsourcing accounting services. In order to increase the yield, the bookshop will maintain a steady flow of customers through extensive advertising and also seek to cut procurement costs so as to improve the profit margin (Morrow, Johnson & Busenitz 2004, p.191). Given the importance of ensuring that the supply cycle is as short as possible in order to enhance timely delivery, orders will be made every first Monday of the month. Urgent unique orders will be addressed separately during the month. Innovation in the business will take the form of online sales which will enable customers to make orders from the bookshop’s website. LEARNING AND GROWTH This perspective seeks to answer the questions: how can we create value? How can we continue to improve? Strategic objectives The bookshop will aim at improving the value of the business through designing innovative business processes and improving the employees’ skills and knowledge. Employee motivation will also be a major objective. Measures Measures include new innovations at the bookshop per year, output per employee, skills and knowledge possessed and growth of the business in terms of sales and profitability. These measures will indicate how value has been created through indicating improvements in the business hence my choice for these measures. Targets To develop the business into a high-tech bookshop and hence stay ahead of competition To enhance employee development and acquisition of knowledge and skills To promote employee motivation Initiatives The management will promote the bookshop into a high-tech business through providing innovative ways for shoppers to enjoy services. Firstly, the bookshop will accept all major credit cards for the payment of goods; a technology that is highly popular among customers because they do not have to carry cash (Wang & Yang 2008, p.394-395). The bookshop will also have an online shopping experience where customers can sample books and other products available at the bookshop and then make their orders online. This will not only save time and resources for the business but also make the bookshop more accessible to customers, given the remarkable growth in internet use (Wang & Yang 2008, p.397). Employees remain one of the major assets in the business and therefore need to be motivated in order to enhance performance (Trautman 2005, p.22). Motivation will be done through promotions, performance tokens, verbal praise and fringe benefits. Employee training through organising for training sessions and short courses will enhance the employees’ business knowledge and thus improve their ability to handle the business (Jeston & Nelis 2006, p.41). THE MOST DIFFICULT PERSPECTIVE TO CONTROL I believe that the financial perspective will be the most difficult to control. This is because the market is highly fragile and changes in the economy are bound to affect the market for books and other stationery in a significant manner. According to Wu and Olson (2009, p.364), financial outcomes are highly influenced by economic factors which the business has no control over. These may include fluctuations in the market prices and other economic fluctuations such, changes in tastes and preferences, technological changes, political factors and legal factors; all which may have a significant impact on profitability and sales levels at the business. Accordingly, the business’ sales, cash flow and profitability may not be predictable. Wilson (2004, p. 265) notes that the predictions made are only provisional figures and that the end result may be higher or lower than the set target. This insinuates that the targets set during the preparation of the scorecard may not necessarily be met. It may therefore prove challenging to explain to the stakeholder why the set goals have not been achieved. In a bid to meet the set standards, there may be need to take other strategies such as increased marketing in order to meet sales levels, which would ultimately lead to unplanned costs. Notably, the financial perspective is the most significant among the four because it is only through realising sales revenue and profits that a business’ continuity can be enhanced. Irregularities that affect the profitability are however likely to occur. It would therefore be unfortunate if the financial aspect is compromised through misappropriation of funds or employee theft (Jeston & Nelis 2006, p.211). These would affect profitability significantly thus impacting on the future success of the business and failure of the scorecard. Controlling employee theft would require tight controls aimed at ensuring accountability. Even then, these controls may not be entirely effective and losses may still occur. References Carver, M 2009, Powers of Persuasion: the Inside Story of British Advertising, Contemporary Review, Vol. 291, No 1694, pp. 377-379. Jeston, J & Nelis, J 2006, Business process management: practical guidelines to successful implementations, Butterworth-Heinemann, Cambridge, UK. Mollick, JS 2009, Determinants of Perceived Customer-Centrism in Managing Information About Customers, Journal of American Academy of Business, Vol. 15, No 1, pp. 9-16 Morrow, JL, Johnson, RA & Busenitz, LW 2004, The Effects of Cost and Asset Retrenchment on Firm Performance: The Overlooked Role of a Firm's Competitive Environment, Journal of Management, Vol. 30, No. 2; pp. 189-208. Trautman, JP 2005, My Top 10 Practices for Leading And Motivating a Workforce, Evaluation Engineering, Vol. 44, No. 8, pp. 22-25. Wang, C & Yang, H 2008, Passion for online shopping: the influence of personality and compulsive buying, Social Behavior & Personality. An International Journal, Vol. 36, No. 5, pp. 693-706. Wilson, A 2004, Professional practice: How process defines performance management, International Journal of Productivity and Performance Management, Vol. 53, No. 3/4, pp. 261-267. Wu, DD & Olson, DL 2009, Enterprise risk management: small business scorecard analysis, Production Planning & Control, Vol. 20, No. 4, p. 362-369. Appendices Appendix 1: A model of the Balanced Scorecard as developed by Robert Kaplan and David Norton Appendix 2: Balanced Scorecard guide for the bookshop - Generic Measures Perspective Measures Financial Cash flow, Sales growth, Profitability, Costs, Economic value added Customer Customer satisfaction, Customer acquisition, Customer retention, Market share, Pricing, Quality Internal Business Process Operations (Costs, cycle time, quality measurement), Innovation, Post sales procedures e.g. defects and returns Learning and growth Innovation, information, Learning systems, employee training (skills and knowledge) improvement, employee motivation. Read More