Pran RFL Report
Short Description
Pran RFL Report...
Description
Contents 1 Introduction..........................................................................................................1
2
Porter's Porter's National Diamond Model.............................. Model................................................. ................................... ........................ ........ 1
3
Applying Diamond Porter model On PRAN-R! PRAN-R! "roup.................................. "roup.................................. ........2 ........ 2 3.1
3.1.1
$raditional %actor o% production.................. production...................................... ..............................................3 ..........................3
3.1.2
Ad&anced resources............... resources................................... .................................................. .............................. ............... .............. . 3
3.2
,
actor #ondition.......................... #ondition.............................................. ........................................ ....................................... .......................... ....... 2
Demand condition....................... condition........................................... ........................................ ....................................... ........................... ........
3.2.1
(ome demand #onditions.................... #onditions................................................................. ............................................. ......
3.2.2
Demandsi)e and pattern o% gro*t+.......................... gro*t+...................................... .......................... ................... ....., ,
3.2.3
Internationali)ed Internationali)ed o% domestic demand..................................... demand..................................... ............... ,
3.2.
$+e interplay o% demand condition.......................... condition.......................................................... ................................ ,
3.3
Related Related and supporting industries......................... industries.......................................................... ........................................ .......
3.
irm strategy /tructure /tructure and ri&alry.......................... ri&alry............................................................... ..................................... 0
3.,
$+e role o% go&ernment.................. go&ernment..................................... ....................................... ........................................ ......................... .....
alanced /corecard /corecard Model............................... Model.................................................. ................................................ ............................. .... .1
acground acground and (istory........................ (istory............................................ ........................................ ..................................... .................
.2
Design.......................... Design.............................................. ........................................ ........................................ ........................................ .................... 14
.3
Perspecti&es.......... Perspecti&es.............................. ........................................ ........................................ ........................................ ........................... ....... 11
.3.1
$+e !earning !earning 5 "ro*t+ "ro*t+ Perspecti&e................... Perspecti&e....................................... .................................... ................11 11
.3.2
$+e usiness Process Perspecti&e.................. Perspecti&e........................................... ......................... .............. 12
.3.3
$+e #ustomer Perspecti&e............ Perspecti&e................................ ........................................ .................................... .................. 12
.3.
$+e inancial Perspecti&e.............. Perspecti&e.................................. ...................................... ................................ .................. .... 12
.
6ey Per%ormance Per%ormance Indicators 76PI8 in eac+ perspecti&e........................ perspecti&e........................ .........12 ......... 12
.,
/trategy Map................................ Map................................................... .................................................. ............................... ............. 13
.
/trategy Matri9......................... Matri9............................................. ........................................ ........................................ ........................... ....... 1,
.0
#riticism.................... #riticism........................................ ........................................ ........................................ ........................................... ....................... 1
#onclusion.................... #onclusion........................................ ....................................... ....................................... ........................................ ........................... ....... 1
1
Introduction
PRAN-RFL has started its operation in 1981 as a processors fruit and vegetable in Bangladesh. ver the !ears" the co#pan! has not onl! gro$n in stature but also contributed significantl! to the overall socio-econo#ic develop#ent of the countr!. Pran is currentl! one of the #ost ad#ired food % beverages brands a#ong the #illions of people of Bangladesh and other 1&' countries of the $orld $here PRAN-RFL products are regularl! being e(ported. PRAN RFL is currentl! producing #ore than )&& food products under 1& different categories i.e. *uices" drin+s" #ineral $ater" ba+er!" carbonated beverages" snac+s" culinar!" confectioner!" biscuits % dair!. ,he co#pan! has adopted 9&&1 as a guiding principle of its #anage#ent s!ste#. ,he co#pan! is co#plaint to /A00P % certified $ith halal $hich ensures that onl! the best ualit! products are reaches to the consu#ers table across the globe.
2 Porter's National Diamond Model 2ichael Porter3s dia#ond #odel gives a ver! clear idea about co#petitiveness. ften there e(ist confusions about the co#petitiveness. o#eti#es co#petitiveness is seen and described fro# a fir#3s point of vie$ and so#eti#es co#petitiveness is also seen and described fro# a countr!3s point of vie$. /o$ever" 2ichael Porter sho$ed his e(cellence in the dia#ond #odel b! distinguishing the vie$ of seeing the co#petitiveness 4Brian" % 5eorge" . )&&'6. n addition" 2ichael Porter raises 7the relevance of the co#petitiveness of a countr! and concludes that the success of nations is largel! due to the sa#e circu#stances that support the develop#ent of the #ost appropriate strateg! for a particular sector. (plain that co#panies are in particular nations achieve international success since it is these that provide features to create and #aintain a co#petitive advantage 4:ega %/u#berto )&11" 11)-1;16 2ichael Porter3s dia#ond #odel has #ainl! four deter#inants and the deter#inants are interrelated to each other. ,he deter#inants are< firstl! factor conditions" secondl! de#and conditions" related and supporting industries is the third deter#inant and the last deter#inant a#ong the four is fir# strateg!" structure and rivalr!. /o$ever" the e(pansion of the #odel $as seen $hen there t$o e(tra deter#inants na#el! chance and the role of govern#ent.
1 :Page
FACTOR CONDITION
Firm strategy, tructure and ri!alry
Demand condition
Related and su""orting industries
#o!ernment
Figure 1: Porter Diamond's Model
3 Applying Diamond Porter model On PRAN-RF !roup PRAN has started its operation in 1981 as a processors fruit and vegetable in Bangladesh. ver the !ears" the co#pan! has not onl! gro$n in stature but also contributed significantl! to the overall socio-econo#ic develop#ent of the countr!. PRAN is currentl! one of the #ost ad#ired food % beverages brands a#ong the #illions of people of Bangladesh and other 1&' countries of the $orld $here PRAN products are regularl! being e(ported. =e tr! to appl! porter >ia#ond theor! to established their business. ,his anal!sis is the #ost i#portant factor of porter dia#ond. ,hese are Factor conditions" >e#and conditions" Related and supporti ng industries" Fir# strateg!" structure and rivalr!" 5overn#ent" 0hance. =hen the! are satisfied then the! are going to establish their ?.1
Factor Condition
Factor condition is the first and the #ost i#portant deter#inant a#ong the si( categories of deter#inants. Factor condition basicall! covers the fact of productions and the i#portance of production in an! production based industr!. ,hese factors can be grouped into hu#an resources" #aterial resources" capital resources and infrastructure. Porter further categori@ed t$o categories li+e< • •
,raditional factor of production Advances factor of production
2 :Page
3.1.1 $raditional %actor o% production
/u#an resources" ph!sical resources" cli#ate" geographic location "de#ographics are focus on basic factor. PRAN-RFL 5roup is ver! #uch selective in case of selecting ra$ #aterials. ,his group has been collective ra$ #aterial % ingredients fro# best sources around the globe li+e 0hina" apan" ndia" Ne$@ealand . n locall! PRAN is collecting ra$ #aterial for# Nator" 0hapinobabgon*" 0o#illa" Ra*shahi" Bandorban" Pabna through contract fra#ing.o"their ra$ #aterials cost as $ell as their labor cost is lo$. Bangladesh are blessed $ith a cli#ate ideall! suited to agriculture" speciall! fruits and vegetables-rich in taste and flavor< s$eet" #ello$ and *uic!.o" Pran RFL gets ualit! ra$ #aterials $ithin reasonable price. ,he! have factories in 5a@ipur" Rangpur" !lhet it is their another advantages of land. ,ransportation cost of ra$ #aterial fro# far#er to factories beca#e ver! lo$. ,his clearl! carries the indication that the cheap labor" land and ra$ #aterials $hich $ere the #ain advantage for Bangladesh to bloo# the industr! at the beginning probabl! in the near future it $ould not be an advantage an!#ore because the labor and ra$ #aterials cost in Bangladesh have also increased in recent !ears. ,herefore" to have a sustained superior fir# perfor#ance and be co#petitive in the $estern and eastern #ar+et the #ost i#portant issue is to transfor# all the necessar! general factor conditions into advanced factor condition. 3.1.2 Ad&anced resources
Cno$ledge resources" capital resources and infrastructure are advanced factor of endo$#ents$ PRAN RFL has also advanced technolog! to produce ualit! and standard product PRAN is continuousl! updating its technolog! because it is bringing ne$ product al#ost ever! da! according to their custo#er preferences. n order to #aintain ualit! $e focus on #ost advanced technolog!" high graded ra$ #aterials and regular test facilities $ith s+illed researchers in the factor! pre#ises. ,he! have an international standard chec+ list of ualit! in our factor!. ,hese advantages help the# to gain co#petitive advantage both in local and foreign #ar+et. PRAN RFL group has /alal" /accap" certification $hich ensure its ualit! ho#e % aboard. 1. uice % >rin+s it is using 0hina 2achine ). nac+s 0hina % DA #achine ?. ,oast % Biscuit apanese 2achine ;. 0and!- apanese 2achine
3 :Page
?.)
Demand condition
Porter3s de#and condition is basicall! based on do#estic #ar+et de#and $here he suggested four aspects that can contribute to co#pete globall!. ,he four aspects of de#and condition is given na#el! in the chart belo$.
n
& eo t ade n t adl aa o $a o in eo o t dr i o o e
e me tm s e i i l ny i # n t $ t d m no % c n m
d
r
ae
or # a d e s $ ae
e i t
a
i
Figure % :As"ects o& Diamond's Conditions 3.2.1 (ome demand #onditions
/o#e de#and co#position b! Porter 4199&6 is driven b! so#e #a*or issues such as ho$ #uch anticipation the do#estic bu!ers have" ho$ de#anding and sophisticated the bu!ers are and #an! #ore. Porter also added that ho#e de#and provides the idea ho$ the fir#s perceive to the de#and of the local bu!ers. n #an! cases" high anticipations and high de#and fro# the do#estic bu!er force the fir#s to be #ore innovative and co#petitive and this can $or+ as an advantage for an industr!. A countr! li+e apan has got #ore co#petitive advantage in technolog! than an! other countr! #ainl! because the high anticipation and de#anding nature of the do#estic bu!ers fro# the fir#s and this anticipation fro# the bu!ers insist co#panies to be #ore technologicall! advanced. n the contrar!" if the anticipation is lo$ and the local bu!er is not so de#anding then it is an obvious disadvantage for the countr!3s industries. PRAN RFL is able to e(ploit local de#and. 0ontinuous innovation helps PRAN to #eet local de#and and e(pand their business in internationall!. 3.2.2 Demandsi)e and pattern o% gro*t+ :Page
Factors such as si@e of ho#e de#and" gro$th rate of ho#e de#and co#prise the de#and si@e and pattern of gro$th $hich are also being called de#and related factors and the! also have great i#pact on national co#petitiveness 4Porter 199&6. i@e of the ho#e de#and is the decider of invest#ent" if the si@e of the ho#e de#and is large then it is probable to see aggressive invest#ent in the fir# but if the fir# si@e is s#all then it is probable that the investors of the fir# $ould be de#orali@ed to invest and as a result the productivit! i#prove#ent and technolog! develop#ent $ill not be po$ered. /e points out that a nation $ith a higher gro$th rate is tends to adapt to ne$ technolog! faster. Adding to the idea" he suggested" having a high gro$th rate of ho#e de#and $ould pla! an i#portant role in the circu#stances $here the ti#e of changing the technolog! is fast. ubseuentl!" Porter3s 4199&6 7dia#ond $ill hold true in the case of PRAN RFL co#pan! onl! if the industr! can +eep pace $ith the digital technological develop#ent results fro# the internet bloo#. PRAN RFL plastics achieve econo#ies of scale due to spreading advertising e(penditures overlarge #ar+ets. cono#ies of scope due to building a reputation of one product in the product line benefiting other products as $ell. For e(a#ple" RFL food and household plastic products effective #essage is $idel! available and its ads $ould thus have a higher i#pact on its furniture products. preading Advertising 0osts over larger #ar+ets. n global #ar+et" PRAN RFL trul! strive to e(ceed ourselves ever! !ear. ,herefore" PRAN RFL are gro$ing li+e an!thing in $hichever #ar+et the! operate. ,o accelerate continuous gro$th" the! alread! set up a production plant in ndia and production has alread! been started. 3.2.3 Internationali)ed o% domestic demand n regard of de#and conditions fro# Porter 4199&6" internationali@ation of do#estic de#and pla!s a +e! role in co#petitiveness. Porter 4199&6 e(plains brea+ing the barriers of culture and highlighting the local de#and to the foreign consu#ers. /ere suppliers can pla! a vital role. ,he! can present their product to the ne$ #ar+et b! highlighting the feature of it and also b! sho$ing the# the local de#and for the product as a reference. Another $a! to convert local de#and into foreign de#and is the one t!pical $a! through training of foreigners in the countr! in uestion. Another is through e(ports that disse#inate culture" such as fil# and television progra#s 4ohn +. )&&E";'6. 3.2. $+e interplay o% demand condition Porter 4199&6 $hile presenting the relationship of de#and conditions described the role of do#estic de#and at the initial stage and do#estic de#and at sustainable stage. /e e(pressed positivel! that de#and factors li+e si@e of do#estic de#and" gro$th rate of do#estic de#and are so#e of the de#and factors that are reuired at the initial stage of gaining co#petitive advantage. For instance" Bangladesh is the #ost densel! populated countr! and it has a ver! large population 4$orld fact boo+" )&1;6 so it is obvious that the de#and for food" beverage and plastic are ver! high and it is an i#portant aspect in gaining the co#petitive advantage at the initial stage. /o$ever" these initial do#estic de#ands later push the industr! to be #ore innovative in order to sustain the co#petitive advantage that the! gain initiall!. =hereas PRAN RFL is uite able to #eet up do#estic de#and that can interpla! to the initiall! given , :Page
co#petitive advantage in order to be co#petitive in the $estern $orld. >o#estic #ar+et si@e of food and beverage product is E1; #illion. n that situation RFL food and beverage e(tend its boundar! b! serving in urope" 5ulf" Asia and A#erica of around #ore than ?' countries in the globe. 0urrentl! the! are operating their o$n distribution channel in the belo$ countries< ndia Nepal Africa DA • • • •
?.?
Related and su""orting industries
,he third deter#inant of Porter3s 4199&6 7dia#ond theor! is related and supporting industries $here he stated the i#portance of the related and supporting industries and ho$ the! contribute to the national co#petitiveness. /e also asserted that 7the presence of supplier and related industries $ithin a nation that are internationall! co#petitive provides benefits such as innovation" upgrading" infor#ation flo$" and shared technolog! develop#ent $hich create advantages in do$nstrea# industries. n Bangladesh" PRAN-RFL 5roup is ver! #uch selective in case of selecting ra$ #aterials. ,his group has been collective ra$ #aterial % ingredients fro# best sources around the globe li+e 0hina" apan" ndia" Ne$@ealand . n locall! PRAN is collecting ra$ #aterial for# Nator" 0hapinobabgon*" 0o#illa" Ra*shahi" Bandorban" Pabna through contract fra#ing. o ualit! is hundred percent ensured here .Bangladesh are blessed $ith a cli#ate ideall! suited to agriculture" speciall! fruits and vegetables-rich in taste and flavor< s$eet" #ello$ and *uic!. ,heir native far#er is our supplier. ,he! collect #a*or portions of our ra$ #aterials fro# the#. ,he! give values to their activities. 2ost of Gfar#ers $ere deprived of proper price for their produces. ,he! have been helping the# to overco#e this situation b! practicing contract far#ing. For their #achiner! support the! collaborate $ith 0hina" 5er#an!" 2ala!sia etc. ,heir trade partners are our great support. ,hrough the#" the! reach to their ulti#ate consu#ers. ,he! provide support to their entire our pro#otional activities and #erchandising progra#. ,he! care for our trade partner. No$" ,he! have a custo#er care $ing to listen to the#. ,heir ai# to build a strong long ter# business relationship b! ta+ing the# through the *ourne! of relationship disposition funnel and e(pect the# to beco#e our advocates in our Business ,he! are proudl! covering '; districts in Bangladesh. ,he! are acting local-being global" serving thousands of co#panies and countries $orld$ide through strategic geographic distribution. n >ha+a PRAN RFL collaborates $ith fa#ous distribution depart#ent li+e Al#as" Agora" Nandon" 2eena Ba@ar etc. n #an! countries" especiall! DA 4NH6" Australia" DA" audi-Arabia" Iatar" ndia" #an" 2ala!sia" ingapore" o#alia $e have got our o$n sales and distribution net$or+ euipped $ith full fledged office. =ith office" $arehouse" distribution vehicles" sales force" % other :Page
sophisticated supports" $e are e(tre#el! aggressive to be the #ar+et leader in each and ever! categor! $e operate. Last but not the leastJ along $ith e(isting presence in African" Asian % uropean #ar+ets" $e eagerl! loo+ for$ard to having a stronger and #ore vibrant presence in ever! corners of global #ar+et ?.;
Firm strategy, tructure and ri!alry
,he fourth deter#inant of Porter in gaining co#petitiveness in the national level focuses on organi@ational strateg!" structure" and rivalr!. t is also undeniable ho$ i#portant these co#ponents are do#esticall!. n addition"7the conditions in the nation governing ho$ co#panies are created" organi@ed" and #anaged" as $ell as the nature of do#estic rivalr!4Porter" 1998" 1&E6. /o$ever" according to the 7dia#ond theor! there is a sharp difference bet$een the e(isted fir# strateg! and Porter describes fir# strateg!. n order to achieve the co#petitive advantage" co#pan! goals and o$nership structure are given #ost priorit!. For the case of" PRAN RFL co##it#ent to$ards $or+ is $idel! visible and the! perceive an environ#ent $here people are closel! attached $ith their $or+ since the! get full o$nership of it. As a result each triu#ph is being purel! cherished b! our people.,he! ensure a sound and health! environ#ent a#ong our e#plo!ees and aspire to build strong tea#s in order to achieve success through their $or+. ,his large operation around the $orld toda! is onl! being possible for intensive hard $or+ of their people. trong #otivation for $or+" clear vision to$ards success" true desire to be the best #a+e us different fro# others and the! cherish this in our $or+ process. ,heir e#plo!ees are their best resource. RAN RFL give values to their e#plo!ees3 creativit! and innovation. ,heir culture begins $ith their four values that drive ever!thing the! do< ntegrit!" 0ontinuous nnovation" nvolve#ent and elf-respect. ,he! help their e#plo!ees3 gro$th. ,he! give their e#plo!ee proper training and develop#ent. ,he! encourage e#plo!ees to as+ uestions and #a+e suggestions that the! thin+ better.
,he! are the one a#ongst the fe$ in Bangladesh $ho has a culture of profit sharing #anage#ent. ,heir e#plo!ees are dedicated to the success of our business. ,he! treat their e#plo!ees as a core resource and fa#il! #e#ber. ,he #anaging director of PRAN group decided to go for P for several reasons< to raise funds for e(pansion of operations to secure an easier access on future capital on #ore favorable ter#s to enhance co#pan!Ks reputation and credibilit! to increase #ar+et a$areness of the co#pan! and itKs product to attract and retain e#plo!ees to obtain #ar+et valuation of the co#pan! going public is one +ind of pro#otion of a co#pan! and itKs product to obtain #ore favorable loan ter# fro# lenders • • • • • • • •
0 :Page
•
to i#prove co#pan!Ks debt to euit! ratio
Com"etitor Pro&iling
Na#e
0hoice
share
Pran- food ,he PRAN foods factor! has e(panded ;& ltd. substantiall! over the !ears in all spheres of food processing e.g. bottling" canning" pulping" pic+ling" concentrating" deh!drating as $ell as installation of Bangladesh first ,etra -Pa+ facilit! Ah#ed ,he #ost popular na#e for food products 1& food in Bangladesh is probabl! Ah#ed Food products Products ltd. ,he! are e(clusivel! +no$n ltd. for their pic+ling sauce.
8&.? billion
?8
'&.'
1&
Fu$ang ltd.
,he! produce a co#prehensive range of 1M foods" beverage and cera#ic tiles $ith high ualit! and standards. =e constantl! innovate b! freuentl! introducing ne$ foods and beverage creations Aftab Aftab foods ltd has started his *ourne! in 1M foods corporate $orld in the #iddle of august bangladesh )&1&"$ith a pro#ise to serve ualit! food products for the nation
'M.?
1;
E&.?
1&
Ala#in group
;&.'
1&
ne of the largest group of co#panies in &M Bangladesh. Pri#aril! producing food products" bread" biscuits phar#aceuticals" beverage etc.
All above these helps PRAN RFL to gain sustainable co#petitive advantages. ?.M
Te role o& go!ernment
0o#petitive advantages do not ta+e place si#ultaneousl!J so#eone #ust be there to influence the co#petitiveness" and according to Porter the influential role in pla!ed b! govern#ent. /e added that it is not the govern#ent $ho is responsible for creating co#petitive advantage for the fir#s" it is rather the fir#s $ho $ill create it but the govern#ent $ill onl! influence it. Basicall!" the role of govern#ent here is to #a+e sure the other four deter#inants are $or+ing properl! ; :Page
leading gain the co#petitive advantage. n fact" the ta( polic! of the govern#ent" enforce#ent of antitrust la$s" regulations of capital #ar+et are so#e of the policies that can lead co#panies to$ards co#petitive advantage. PRAN- RFL get so#e sort of ta( rebate to e(pand in locall!. ,o encourage the# in e(porting their product in foreign #ar+et govt. i#pose lo$ vat and reduce so#e barriers.
( )alanced *corecard Model ,he balanced scorecard is a strategic planning and #anage#ent s!ste# that is used e(tensivel! in business and industr!" govern#ent" and nonprofit organi@ations $orld$ide to align business activities to the vision and strateg! of the organi@ation" i#prove internal and e(ternal co##unications" and #onitor organi@ation perfor#ance against strategic goals. ;.1
(ac)ground and *istory
,he Balanced corecard ca#e into being in the late 198&s and earl! 199&s as a #ethod to help co#panies #anage their increasingl! co#ple( and #ulti-faceted business environ#ents. 0orporations then $ere faced $ith a nu#ber of challenges. 2ar+et share in #an! industries $as vanishing at an alar#ing rate due to globali@ation" liberali@ation of trade" technolog! innovation" and do#estic ualit! issues. ,he econo#! $as in transition fro# product-driven to servicedriven. ,he co#position of the $or+force $as changing" and co#panies3 $or+force needs $ere changing. n spite of all these changes" #ost businesses still relied on traditional #easures of perfor#ance based on a centuries-old accounting #odel" $hich failed to accuratel! reflect the true health 4and future prospects6 of an organi@ation. ,he need for better infor#ation to respond to rapidl! changing #ar+et conditions $as obvious. n response to these stresses" and the shortco#ings of traditional financial perfor#ance #easures" Professor Robert Caplan and >avid Norton began to shape the concept of the Balanced corecard during a research pro*ect $ith 1) co#panies in the late 198&s. ,he! understood the li#itations of rel!ing too #uch on purel! financial #easures. ,he! reali@ed that #an! of the $a!s to i#prove short-ter# financial perfor#ancesuch as reducing headcount" and cutting e(penses for training" R%>" #ar+eting" and custo#er service#ight be detri#ental to the future financial health of the co#pan!. 0onversel!" co#panies #ight appear to be doing poorl! fro# a financial perspective because the! $ere investing in the core capabilities that could drive superior future perfor#ance. Further#ore" the! perceived the li#itation of reliance on lagging indicators that conve! past perfor#ance results" but do not generall! provide a reliable indication of future perfor#ance. Caplan and Norton also perceived that e#plo!ees throughout a co#pan! often did not understand ho$ their role related to strateg! and financial #easures" leading e#plo!ees to feel po$erless to i#pact the things that $ere being #easured.
:Page
o" Caplan and Norton introduced the Balanced corecard as a $a! for co#panies to #easure and report perfor#ance in a $a! that balanced< •
2ultiple perspectives.
•
Both leading and lagging indicators.
•
n$ard-facing #easures" li+e productivit!" and also out$ard-facing #easures" li+e custo#er lo!alt!.
,he results of their initial research $or+ $ith 1) co#panies $ere published in 199) in the /arvard Business Revie$. Fueled b! the positive response to their initial article and successful consulting $or+" Caplan and Norton continued to develop the concept of the Balanced corecard" and published the boo+" ,he Balanced corecard in 199'. ;.)
Design
>esign of a balanced scorecard is about the identification of a s#all nu#ber of financial and non-financial #easures and attaching targets to the#" so that $hen the! are revie$ed it is possible to deter#ine $hether current perfor#ance K#eets e(pectationsK. B! alerting #anagers to areas $here perfor#ance deviates fro# e(pectations" the! can be encouraged to focus their attention on these areas" and hopefull! as a result trigger i#proved perfor#ance $ithin the part of the organi@ation the! lead. ,he original thin+ing behind a balanced scorecard $as for it to be focused on infor#ation relating to the i#ple#entation of a strateg!" and over ti#e there has been a blurring of the boundaries bet$een conventional strategic planning and control activities and those reuired to design a balanced scorecard. ,his is illustrated $ell b! the four steps reuired to design a balanced scorecard included in Caplan % NortonKs $riting on the sub*ect in the late 199&s< 1. ,ranslating the vision into operational goalsJ ). 0o##unicating the vision and lin+ it to individual perfor#anceJ ?. Business planningJ inde( setting ;. Feedbac+ and learning" and ad*usting the strateg! accordingl!. ,hese steps go far be!ond the si#ple tas+ of identif!ing a s#all nu#ber of financial and nonfinancial #easures" but illustrate the reuire#ent for $hatever design process is used to fit $ithin broader thin+ing about ho$ the resulting balanced scorecard $ill integrate $ith the $ider business #anage#ent process.
14 : P a g e
Although it helps focus #anagersK attention on strategic issues and the #anage#ent of the i#ple#entation of strateg!" it is i#portant to re#e#ber that the balanced scorecard itself has no role in the for#ation of strateg!. n fact" balanced scorecards can co-e(ist $ith strategic planning s!ste#s and other tools. ;.?
Pers"ecti!es
,he balanced scorecard suggests that $e vie$ the organi@ation fro# four perspectives" and to develop #etrics" collect data and anal!@e it relative to each of these perspectives<
Figure+: (alanced corecard Model (+3+, &e earning !ro%t& Perspecti.e
,his perspective includes e#plo!ee training and corporate cultural attitudes related to both individual and corporate self-i#prove#ent. n a +no$ledge-$or+er organi@ation" people -- the onl! repositor! of +no$ledge -- are the #ain resource. n the current cli#ate of rapid technological change" it is beco#ing necessar! for +no$ledge $or+ers to be in a continuous learning #ode. 2etrics can be put into place to guide #anagers in focusing training funds $here the! can help the #ost. n an! case" learning and gro$th constitute the essential foundation for success of an! +no$ledge-$or+er organi@ation.
11 : P a g e
Caplan and Norton e#phasi@e that KlearningK is #ore than KtrainingKJ it also includes things li+e #entors and tutors $ithin the organi@ation" as $ell as that ease of co##unication a#ong $or+ers that allo$s the# to readil! get help on a proble# $hen it is needed. t also includes technological toolsJ $hat the Baldrige criteria call Ohigh perfor#ance $o r+ s!ste#s.O (+3+2 &e )usiness Process Perspecti.e
,his perspective refers to internal business processes. 2etrics based on this perspective allo$ the #anagers to +no$ ho$ $ell their business is running" and $hether its products and services confor# to custo#er reuire#ents 4the #ission6. ,hese #etrics have to be carefull! designed b! those $ho +no$ these processes #ost inti#atel!J $ith our uniue #issions these are not so#ething that can be developed b! outside consultants. .3.3 &e Customer Perspecti.e
Recent #anage#ent philosoph! has sho$n an increasing reali@ation of the i#portance of custo#er focus and custo#er satisfaction in an! business. ,hese are leading indicators< if custo#ers are not satisfied" the! $ill eventuall! find other suppliers that $ill #eet their needs. Poor perfor#ance fro# this perspective is thus a leading indicator of future decline" even though the current financial picture #a! loo+ good. n developing #etrics for satisfaction" custo#ers should be anal!@ed in ter#s of +inds of custo#ers and the +inds of processes for $hich $e are providing a product or service to those custo#er groups. (+3+( &e Financial Perspecti.e
Caplan and Norton do not disregard the traditional need for financial data. ,i#el! and accurate funding data $ill al$a!s be a priorit!" and #anagers $ill do $hatever necessar! to provide it. n fact" often there is #ore than enough handling and processing of financial data. =ith the i#ple#entation of a corporate database" it is hoped that #ore of the processing can be centrali@ed and auto#ated. But the point is that the current e#phasis on financials leads to the OunbalancedO situation $ith regard to other perspectives. ,here is perhaps a need to include additional financial-related data" such as ris+ assess#ent and cost-benefit data" in this categor!. ;.;
ey Per&ormance Indicators -PI. in eac "ers"ecti!e
,he follo$ing CPs are the available e(a#ples - each co#pan! can decide $hich CPs to choose. Financial "ers"ecti!e
12 : P a g e
•
Return n nvest#ent 4R6
•
Financial Results
•
0ash Flo$
Customer "ers"ecti!e •
0usto#er satisfaction rate
•
0usto#er percentage of #ar+et
Internal (usiness Process "ers"ecti!e •
Nu#ber of activities per function
•
>uplicate activities across functions
•
Process auto#ation
/earning and gro0t "ers"ecti!e •
ncidence rate
•
,urnover of e#plo!ees
•
,rainingLearning opportunities
;.M
trategy Ma"
2apping a strateg! is an i#portant $a! to evaluate and #a+e visuall! e(plicit an organi@ation3s perspectives" ob*ectives" and #easures" and the causal lin+ages bet$een the#. rgani@ing ob*ectives in each defined perspective" and #apping the strategic relationships a#ong the#" serves as a $a! to evaluate ob*ectives to #a+e sure the! are consistent and co#prehensive in delivering the strateg!. ,he strateg! #ap is a visual $a! to co##unicate to different parts of the organi@ation ho$ the! fit into the overall strateg!. t facilitates cascading a balanced scorecard through an organi@ation" because it can be created at different levels of an organi@ation" and each level3s #ap can be vie$ed for align#ent $ith the overall strateg! #ap. As for e(a#ple a strateg! #ap for Pran foods is given $here financial perspective is lin+ed to the custo#er perspective" custo#er perspective is lin+ed to the business process perspective" 13 : P a g e
business process perspective is lin+ed to the learning and gro$th perspective. And all the four perspectives are connected to the #ission and vision of the co#pan!.
ision: #proving Livelihood
Mission: ,o generate e#plo!#ent and earn dignit! % self-respect for our co#patriots through profitable enterprises.
Financial Pers"ecti!es
ncrease total revenue
R23/T IN
Customer Pers"ecti!e
Achieve custo#er satisfaction
R23/T IN
Internal Process Pers"ecti!e
Add ne$ products to the product line
R23/T IN
1 : P a g e
/earning and #ro0t Pers"ecti!e nnovating and i#ple#enting ne$ business ideas
;.'
trategy Matri4
,he strateg! #atri( is an useful visuali@ation and su##ari@ation tool. t displa!s ob*ectives" #easures" targets" and initiatives in one table. ,he strateg! #atri( can point to areas $here scorecard ele#ents #ight be out of balance. b*ectives are desired outco#es. ,he progress to$ard attaining an ob*ective is gauged b! one or #ore #easures. As $ith perspectives" there are causal relationships bet$een ob*ectives. n fact" the causal relationship is defined b! dependencies a#ong ob*ectives. o" it is critical to set #easurable" strategicall! relevant" consistent" ti#e-delineated ob*ectives. 2easures are the indicators of ho$ a business is perfor#ing relative to its strategic ob*ectives. 2easures" or #etrics" are uantifiable perfor#ance state#ents. An initiative is a change process or activit! designed to achieve one or #ore ob*ectives. ,he initiative is $hat $ill #ove a #easure to$ard its target value. nitiatives #a! be large or s#all in scope. ,he! generall! are o$ned b! a person or group" and are #anaged li+e pro*ects. For e(a#ple" for Pran foods there is an initiative around one ob*ective" there is a realistic #easure and there is supporting nu#erical target for each of the Financial perspective" 0usto#er perspective" nternal business process perspective and Learning and gro$th perspective. O56ecti!e
Financial
Custome r
ncrease revenue
total
Measure
Target
Revenue fro# stores throughout the countr!
1& increase in 2ar+eting to ne$ target revenue fro# #ar+ets to all re#ote the previous villages of the countr! !ear
Achieve custo#er ncrease the no. Average no. of satisfaction b! M than the dail! custo#ers previous !ear No. of custo#ers
repeat
Initiati!e
Local ca#paigns
,o hold at least 0usto#er 8& of the progra# present custo#ers
#ar+eting
lo!alt!
1, : P a g e
ncrease the Avg. a#ount of a#ount b! M custo#er purchase than the previous !ear
Process
Add ne$ products 0usto#er to the product line preferences
nnovation
/earning 7 #ro0t
;.E
2otivate" recogni@e retain staff
,o serve custo#er seg#ents
0oupon progra# n-store pro#otions % classes
all 2ar+et surve!
,otal no. of #ple#ent the generated ideas ne$ ideas
Bonus for the successful idea generator
Achieve the ascertained target
Better environ#ent" ,raining progra#s
#plo!ee and perfor#ance
Criticism
,he balanced scorecard has attracted criticis# fro# a variet! of sources. 2ost have co#e fro# the acade#ic co##unit!" $ho disli+e the e#pirical nature of the fra#e$or+< Caplan and Norton notoriousl! failed to include an! citation of earlier articles in their initial papers on the topic. o#e of this criticis# focuses on technical fla$s in the #ethods and design of the original balanced scorecard proposed b! Caplan and Norton" ther acade#ics have si#pl! focused on the lac+ of citation support. A second +ind of criticis# is that the balanced scorecard does not provide a botto# line score or a unified vie$ $ith clear reco##endations< it is si#pl! a list of #etrics. ,hese critics usuall! include in their criticis# suggestions about ho$ the Kunans$eredK uestion postulated could be ans$ered" but t!picall! the unans$ered uestion relate to things outside the scope of balanced scorecard itself 4such as developing strategies6. A third +ind of criticis# is that the #odel fails to full! reflect the needs of sta+eholders - putting bias on financial sta+eholders over others.
/ Conclusion
1 : P a g e
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