Marketing for MOST Module 12

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Marketing for MOSTModule 12 Strategic
Management in the Asia-Pacific
??????????? ????? Ritsumeikan Asia Pacific
University ?? Takamoto, Akihiro ??? October, 2003
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Module 12 Strategic Management in the
Asia-Pacific

1. The Strategic Importance of the Asia Pacific
2. Managing Strategic Alliance
3. Portfolio Management
4. Game Theory
5. Value and Supply Chain Management
6. Balanced Scorecard

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The Strategic Importance of the Asia Pacific
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The Region
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• Profile of Asia Pacific Region
• The Asia Pacific region covers 25 countries from
  Mongolia in the north to New Zealand in the
  south, and from Pakistan in the west to Kiribati
  in the east.
• With 1835 million inhabitants, the region
  represents 32 percent of the worlds population
  and 25 percents of the worlds output.

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Status of Economy
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GDP Growth Rate in the AP
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Asia Pacific Market

• Widely diversified market
• Different status of economic development
• Expectation for quality and service varies
• Market price also varies
• Different cultures and customs
• Different approaches required
• - How to manage each market is a critical
  challenge

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Four Major Blocks

• Japan
• Newly Industrialized Economies (NIEs)(Korea,
  Taiwan, Hong Kong, and Singapore)
• Association of South East Asian Nations(ASEAN)
• China

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The Players in the Asia Pacific Arena

Global
Korean chaebol Taiwanese
Japan kaisha American MNCs European MNCs
Scope of Operation
Regional Overseas Chinese
Regional
Domestic Overseas Chinese
Local Small or Medium Sized Firms
Government Owned Firms
Local
Low Cost
Differentiation
Basis of Competitive Advantages
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The Simplest Way to View AP Groups of Countries
on a classic growth curve
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A Strategic Framework for the Asia Pacific
Ambition
Mission, Vision, Objectives
Strategy
Positioning
Investment
Businesses Segments Countries
Choice of
Choice of
Investment and
Priority for
Organization
Resource Development Assets Building Competence
Creation
Choice of
Way to Compete
Structure System Process
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The importance of the AP as a Resource Base
Sourcing
Cost
Customer Adaptation
Service
Technology
Market Intelligence Contact
Flexibility
Speed
New Materials
Raw Materials
Labor
Components
Logistics
Financing
New Processes
Korean
Singapore
Indonesia
China
Japan
Thailand
Malaysia
Hong Kong
Taiwan
Philippines
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Country Attractiveness in Asia Pacific Region
Philippines
Singapore
Hong Kong
Indonesia
Thailand
Malaysia
Japan
Taiwan
Korea
China
GDP size
Inflation
Unemployment
Political Stability
Investment Flow
Ease of Licenses
Management Control
Tax Law
Skilled Labor
Cost of Labor
Cost of Premises
Most Attractive
Least Attractive
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• Entry Modes in Asia Pacific Region

Established Markets
Integrate into global regional operations
Joint Venture
Expand
Japan
Maturing Markets
Taiwan Korea
Joint Venture Local Operation
Expand
Growth Markets
Initiate several business activities Multiple pres
ence
China Thailand Indonesia Malaysia India Philippine
s
Joint Venture
Local Subsidiary
Rationalization
Emerging Markets
Establish initial Investment through Joint
venture or Local subsidiary
Agents Representative offices
Vietnam Myanmar Laos,Cambodia
Platform
Establish a base to learn, collect Information
and set up contacts
Regional offices For administration of synergies
Singapore Hong Kong
Set up a regional Office to coordinate efforts
Entry
Development
Consolidation
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Strategic Capabilities in the AP Region
Mind Set Visibility support
Flexibility
Developing Regional Competences
Social, Cultural, Political know how
Markets Competitive Intelligence
Building Assets
Access to Resources
. Logistics . Distribution networks . Product
development . Brand reputation
. Local human resources . Suppliers and
sub-contractors . Contactors . Partners
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• How Did The Financial Crisis Affect
• Asia Pacific Strategies
• Strategies were revised but long-term goals of
  presence in the region were maintained
• Resources needed to be readjusted and expansion
  plans temporarily delayed, but not abandoned
• Flexibility and adaptability remained key
  competences and could be preserved or enhanced
• New opportunities offered by potential
  acquisitions had to be seriously considered

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• Prospects for Asia Pacific
• (Beyond The Crisis)
• The regional market growth is still prominent
• The regional trade liberalization and the gradual
  reduction of investment restrictions that started
  well before the crisis and that are all expected
  to prevail in the long-term.
• With increased regionalization and increased
  number of countries competing for FDI

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• Economic Cooperation in the Asia Pacific Region
• Several regional integration programs
  sub-regional, regional, bilateral and
  multilateral approach.
• Regional integration schemes of East Asia, mainly
  Asia-Pacific Economic Cooperation (APEC), the
  Association of South-East Asia Nations (ASEAN),
  ASEAN3, ASEAN Regional Forum (ARF), and other
  bilateral cooperation, have strongly impact on
  recent economic position.
• With the Impact of single European Union (EU) and
  NAFTA concept of trade liberalization, Asia
  Pacific Economic Cooperation (APEC) was
  established in 1989 and United States is
  supporting the APEC initiatives.
• The prospect of APEC Common Currency Unit is the
  next challenge of Asia Pacific Region for the
  21st century.

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2. Managing Strategic Alliance
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• Strategic Alliance
• Partnership between two or more entities that
  allow an
• exchange of resources for mutual benefit

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• Why Form Strategic Alliance
• Open new market and territories
• Gain greater speed to market
• Enhance companys creditability and value
• Increase revenue opportunity
• Maintain focus on core strengths
• Access new products and technologies

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• Strategic Alliances

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Strategic Alliance
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• Types of Strategic Alliances
• Equity Strategic Alliance
• Equal Partners (50 50 )
• Not Equal Partners (30 70 )
• Multiple Partners (More Than Two)
• Non-Equity Strategic Alliance
• Contract is given to supply, produce or
  distribute a firms goods or services
• (without equity sharing)

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Types of Alliances
STRATEGIC IMPORTANCE
Acquisition
Minority Interest
High
Joint Venture
Joint Marketing
Joint Development Projects
Medium
Licensing Agreements

Commercial Contract
Low
Technology Trials
Low
High
LEVEL OF COMMITMENT
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• Reasons for Alliances by Market Type

Slow Cycle Market
Standard Cycle Market
Fast Cycle Market
Speed-up product, service or market entry
Maintain market leadership
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Types of Strategic Alliances
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Complementary Strategic Alliances
Partnerships that build on the complementarities
among firms that make each more competitive
Include distribution, supplier or outsourcing
alliances where firms rely on upstream partners
or downstream partners
to build competitive advantage
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Complementary Strategic Alliances
Used to increase the strategic competitiveness of
the partners
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Types of Business-Level Strategic Alliances
OPEC petroleum cartel
Many of the airline alliances
Yahoos 50 interest in the Overture
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Types of Corporate-Level Strategic Alliances
Samsung Groups moves into a range of industries
Sony shares development with many small firms
McDonalds or KFC
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International Cooperative Strategies

• Cross-border strategic alliance
• an international cooperative strategy in which
  firms with headquarters in different nations
  combine some of their resources and capabilities
  to create a competitive advantage
• a firm may form cross-border strategic alliances
  to leverage core competencies that are the
  foundation of its domestic success to expand into
  international markets

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International Cooperative Strategies

• Allows risk sharing by reducing financial
  investment
• Host partner knows local market and customs
• International alliances can be difficult to
  manage due to differences in management styles,
  cultures or regulatory constraints
• Must gauge partners strategic intent so they do
  not gain access to important technology and
  become a competitor

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• Alliance Success Factors
• Have a clear strategic purpose
• Find a fitting partner
• Allocate task and responsibility
• Create incentive for cooperation
• Minimize conflicts between partners
• Share information
• Exchange personnel
• Operate with long time horizon
• Develop multiple joint projects
• Be flexible

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• References
• Hitt Michael. A (1995). Strategic Management
  Competitiveness and Globalization, West
  Publishing Company.
• Ramu Shiva. S (1997). Strategic Alliances
  Building Network Relationships For Mutual Gain,
  A Division of Sage Publications.
• Harvard Business Review (2002). Strategic
  Alliances, Harvard Business School Press.

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3. Portfolio Management
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Portfolio Models

• Portfolio Models History
• McKinsey sells GE on the idea of Strategic
  Business Units (SBUs)
• BCG attacks McKinsey with the Growth-Share Matrix
  and the Portfolio model
• McKinsey responds with its own Portfolio model,
  the Business Attractiveness Matrix

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Portfolio Models

• Boston Consulting Group Matrix
• (BCG Matrix)
• General Electric Grid
• GE Grid

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Strategic Business Units (SBUs)

• Most firms consist of multiple units producing
  numerous products.
• The mission, objectives, strategies, and tactics
  will be different for each unit.
• For efficiency, a multiproduct organization
  should be divided according to its major markets
  or products
• These divisions are called Strategic Business
  Units (SBUs)

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• Characteristics of a Strategic Business Unit
  (SBU)
• It is a single business or collection of related
  businesses that can be planned for separately
  from the rest of the company.
• It has its own set of competitors.
• It has a manager who is responsible for strategic
  planning and profit performance and who controls
  most of the factors affecting profits.

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• Assigning Resources to Each SBU
• Analytical tools are needed for classifying
  businesses by profit potential, for decisions on
  whether to build, maintain, harvest, or divest
  individual SBUs.
• Two well-known business portfolio evaluation
  models are the Boston Consulting Group (BCG)
  growth/share matrix and the General Electric
  multi-factor portfolio matrix

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Boston Consulting Group Matrix

• Business portfolio matrix that uses market
  growth rate and relative market share as the
  indicators of the firms strategic position
• Market growth rate
• A measure of the annual growth percentage of the
  market in which the business operates.
• Relative market share
• The firms market share divided by the market
  share of its largest competitor.

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• BCG Growth/Share Matrix
• This model classifies SBUs into either
• Question marks (high growth low market share).
• Stars (high growth high market share).
• Cash cows (low growth high market
  share).
• Dogs (low growth low market
  share).

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• BCG Growth/Share Matrix
• Once classified, four alternative objectives can
  be pursued for each SBU
• Build increase market share.
• Maintain/hold preserve market share.
• Harvest increase short-term cash flow.
• Divest sell or liquidate.

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BCG MATRIX COMPANYS MARKET SHARE
High
Low
High
Stars
Question marks
INDUSTRY GROWTH RATE
Low
Cash cows
Dogs
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Portfolio Planning Models The BCG Growth-Share
Matrix
HIGH
Earnings low, unstable, growing Cash flow
negative Strategy analyze to determine
whether business can be grown into a
star, or will
degenerate into a dog
Earnings high stable, growing Cash flow
neutral Strategy invest for growth
?
Annual real rate of market growth ()
Earnings high stable Cash flow high
stable Strategy milk
Earnings low, unstable Cash flow
neutral or negative Strategy divest

LOW
HIGH
LOW
Relative market share
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BCG Growth-Share Matrix
Source B. Hedley, Strategy and the Business
Portfolio, Long Range Planning (February 1997),
p. 12. Reprinted with permission.
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Boston Consulting Groups Four Cell Business
Portfolio Matrix

• Question Marks/Problem Children
• Rapid Market Growth
• Cash Needs are High (Cash Hog)
• Options
• Aggressive Grow-and-Build
• (Overall and Reposition) or
• Divest

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Characteristics of Cash Hogs

• A business is a cash hog when its internal cash
  flows are inadequate to fully fund its need for
  working capital and new capital investment
  the parent company has to continually pump in
  capital to feed the hog
• Strategic options
• Aggressively invest in attractive cash hogs
• Divest cash hogs lacking long-term potential

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Boston Consulting Groups Four Cell Business
Portfolio Matrix

• Stars
• Market Leaders in High Growth Industry
• Young Stars or Cash Hogs
• Mature Stars or Cash Cows
• Aggressive Growth

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Characteristics of Cash Cows

• A cash cow business generates cash surpluses over
  and above what is needed to sustain its present
  market position
• Such businesses are valuable because surplus cash
  can be used to
• Pay corporate dividends
• Finance new acquisitions
• Invest in promising cash hogs
• Strategic objective Aggressive Growth or
  Fortify and defend present market position--keep
  the business healthy!!!

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Boston Consulting Groups Four Cell Business
Portfolio Matrix

• Dogs
• Low Growth Market with Low Market Share
• Weak Competitive Position and Low Profit
  Potential
• Strategy is to
• Harvesting - if profitable
• Divestiture
• Liquidation

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Portfolio Planning Models Applying the BCG
Matrix to BM Foods Inc.
Frozen food division
Health foods division
-2 0 2 4 6 8 10
Annual real rate of market growth ()
Fruit juices division
Bakery division
2 1.5 1 0.5 0.1
Relative market share
Current position Previous position. Area of
circle proportional to sales.
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GE Multi-factor Matrix

• Matrix uses business strength compared to
• market attractiveness
• Business strength (strong, average, or weak).
• Market attractiveness (high, medium, low).

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The GE Business Screen
BUSINESS POSITION
High
Low
Medium
High
INVEST
INVEST
PROTECT
Medium
MARKET ATTRACTIVENESS
INVEST
PROTECT
HARVEST
Low
PROTECT
HARVEST
DIVEST
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Market Attractiveness Matrix (GE)
BUSINESS POSITON
STRONG
MEDIUM
WEAK
HIGH
High Attractiveness
Medium Attractiveness
MARKET ATTRACTIVENESS
MEDIUM
Low Attractiveness
LOW
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GE Nine CellAttractiveness/Strength Matrix

• Use quantitative measures of industry
  attractiveness and business strength to plot
  location of each business in matrix
• Each business unit appears as a circle
• area of circle can represent relative size of
  industry with pie slice showing the companys
  market share

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• McKinsey GE Stoplight Matrix

Business Strength-Competitive Position Strong Ave
rage Weak
Winners
Winners
High Medium Low
Question marks
Average Business
Winners
Industry (Product-Market) Attractiveness
Losers
Profit Producers
Losers
Losers
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Industry Attractiveness Factors

• Market size and projected growth
• Intensity of competition
• Emerging opportunities and threats
• Seasonal and cyclical factors
• Resource requirements
• Strategic fits and resource fits with present
  businesses
• Industry profitability
• Social, political, regulatory, and environmental
  factors
• Degree of risk and uncertainty

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ExampleRating Industry Attractiveness
Rating Scale 1 Unattractive 10 Very
attractive
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Evaluate Each BusinessUnits Competitive
Strength
1 !

• Objectives
• Determine how well each business is positioned in
  its industry relative to rivals
• Evaluate whether it is or can be competitively
  strong enough to contend for market leadership

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Factors to Use in Evaluating Competitive
Strength

• Relative market share
• Ability to compete on cost
• Ability to match rivals on quality and/or service
• Ability to exercise bargaining leverage with key
  suppliers or customers
• Technology and innovation capabilities
• How well business units competitive assets and
  competencies match industry KSFs
• Brand name recognition and reputation
• Profitability relative to competitors

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Example Rating a Business Units
Competitive Strength
Bargaining leverage
Rating Scale 1 Weak 10 Strong
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Strategy Implications of GE Attractiveness/Stre
ngth Matrix

• Businesses in upper left corner
• Accorded top investment priority
• Strategic prescription is grow and build
• Businesses in three diagonal cells
• Given medium investment priority
• Invest to maintain position
• Businesses in lower right corner
• Candidates for harvesting or divestiture
• May be candidates for an overhaul and reposition
  strategy

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Advantages of Portfolio Analyses

• Encourages top management to evaluate each
  business individually to set objectives and
  consider resources.
• It stimulates use of external data to supplement
  managements judgment.
• Its graphic representation makes interpretation
  and communication easier.

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Limits of Portfolio Analysis

• All the portfolio models still remain a set of
  very primitive tools to deal with the real world
  of business which is very complex characterized
  by multi-dimensional variables.
• The portfolio model should be regarded as a tool
  to sharpen and deepen our strategic thinking
  rather than an executive summary of strategic
  analysis.

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4. A COGENT GAME THEORY
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A GAME

• A form of recreation constituted by a set of
  rules that specify an object to be attained and
  the permissible means of attaining it
• Win or Lose
• Business Win or Lose?
• Win-Win, Lose-Lose, Win-Lose
• Everything is fair in Love, War, and Business

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GAME THEORY

• Started by a book Theory of Games and Economic
  Behavior by John Von Neumann and Oskar
  Morgenstern
• Rule based games
• Free-wheeling games

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QUINTESSENCE OF GAME THEORY

• Added values
• Allocentrism focusing on others
• Look forward and reason backward
• Shape the game according to your strategies

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CO-OPETITION

• Cooperative competition
• Win-Win and Win-Lose strategies
• Lose-Lose scenario
• General Motors GM credit card (Win-Lose
  strategy)
• Imitation by Ford and Volkswagen
• Win-Win strategy Imitation by others is
  beneficial for you

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COMPANYS VALUE NET
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INTERACTIONS IN THE VALUE NET

• Resources flow from the suppliers to the company
  whereas, Products and services flow from the
  company to its customers
• Money flows from customers to the company and
  from the company to its suppliers
• Substitutors Coca-Cola and Pepsi
• Complementors Hardware and Software

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PARTS
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• Players are customers, suppliers, substitutors,
  and complementors
• Added values are what players bring to the game
• Rules give structure to the game
• Tactics are the ways to play the game
• Scope describes the boundaries of the game

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CHANGING PARTS

• P Its beneficial to change a player but find a
  strong player with branded and superior products
• As substitutors are usually seen only as enemies,
  complementors are seen only as friends
• A Raise your own added value or lower that of
  others (example Trans World Air-lines,
  Nintendo, and softsoap)
• Meet the customers demands, use your resources
  efficiently, implement ways to lower the costs

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• R One price to all and Look forward and
  reason backward rules make a new players entry
  profitable
• Judo economics stay small and turn the previous
  players larger size to your own benefit
• Meet-the-Competition Clause (MCC) A classic case
  of coopetition. A producer can capture more than
  its added value

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• T Changing perceptions
• Lifting the fog reducing misperceptions
• Thickening the fog creating uncertainty
• S A game in one place can affect games
  elsewhere, and a game today can influence games
  tomorrow

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Accept the game you find yourself in
THE TRAPS OF STRATEGY
Fail to think methodically about changing the game
Changing the game must come at the expense of
others
What you dont see, you cant change
You have to find something to do that others cant
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MIXED STRATEGY

• By randomize move, you can surprise the opponent
• Mixed Strategy Specifies that an actual move be
  chosen randomly from the set of pure strategies
  with some specific probabilities
• Nash Equilibrium in Mixed Strategies A
  probability distribution for each player
• The distributions are mutual best responses to
  one another in the sense of expectations

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PRISONERS DILEMMA

• Companies spend a large sum of money on publicity
  of their products
• To leave a long lasting impact on the viewers,
  you need to have something extraordinary
• Click on this link and have a look at this
  commercial ETrade
• Does it leave some impact on you?

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SONY VS. MICROSOFT
Microsoft (Xbox) Microsoft (Xbox)
No publicity Publicity
Sony (PS) No Publicity 5 , 5 2 , 6
Sony (PS) Publicity 6 , 2 3 , 3
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STRATEGIES AND PAYOFFS

• If Microsoft publicizes its Xbox, the best move
  for Sony is to publicize its PS
• If Microsoft does not publicize, still the best
  move for Sony is to publicize
• It means Sony has a dominant strategy of
  publicizing regardless of Microsoft's moves
• Microsoft has same dominant strategy to publicize
  regardless of Sonys moves

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• Nash equilibrium An outcome from which no player
  has an incentive to deviate unilaterally (John
  Nash Nobel prize, Economics 1994)
• Nash equilibriums are self-enforcing
• Involvement and commitment The difference
  between these two is like eggs and ham. The
  chicken is involved but the pig was committed.

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USE OF THE GAME THEORY
When you are increasing the size of the pie
Co-operate When you are dividing the pie Compete
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CONCLUSION

• Game theory will keep on growing because of the
  importance of added values in business
• Firms should stop thinking that business is a
  war and they must beat the competition

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5. Value and Supply Chain Management
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Value Chain Analysis
helps to identify which resources and
capabilities can add value
Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Service
Inbound Logistics
Outbound Logistics
Marketing Sales
MARGIN
Operations
Primary Activities
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Value Chain Analysis
Firm Infrastructure

Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement

• Primary and
• Support Activities
• in the Value Chain

MARGIN
Marketing and Sales
Outbound Logistics
Inbound Logistics
Operations
Service

Primary Activities
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Value Chain Analysis
Assessing the PRIMARY
Activities in the Value Chain
Inbound Logistics

Materials control system Inventory control
system Raw material handling and warehousing
Operations

Equipment comparison to competitors Plant
layout Production control system Level of
automation in production processes
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Value Chain Analysis
Assessing the PRIMARY Activities
in the Value Chain
Outbound Logistics

Timeliness and efficiency of finished products
delivery Warehousing of finished products
Marketing and Sales

Marketing research Sales promotions and
advertising Alternative distribution
channels Competency and motivation of sales
force Organizations image of
quality Organizations reputation Brand
loyalty of customers Domination of various
market segments
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Value Chain Analysis
Assessing the PRIMARY
Activities in the Value Chain
Customer Service
Customer input for product improvements Handli
ng of customer complaints Warranty and
guarantee policies Employee training in
customer education service issues Replacement
parts and services

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Value Chain Analysis
Assessing the SUPPORT
Activities in the Value Chain
Procurement

Alternate sources for obtaining needed
resources Timeliness of resources
procurement Procurement of large capital
expenditure resources Lease-versus-purchase
decisions Long-term relationships with reliable
suppliers
Technological Development

RD activities in product and process
innovations Relationship between RD and other
departments Meeting deadlines in technological
development activities Quality of labs and
other research facilities Qualifications of lab
technicians and scientists Creativity and
innovation in organizational culture
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Value Chain Analysis
Assessing the SUPPORT
Activities in the Value Chain
Human Resource Management

Recruiting, selecting, orienting, and training
employees Employee promotion policies Reward
systems to motivate and challenge
employees Absenteeism and turnover Union-organ
ization relations Employee participation in
professional organizations Employee motivation,
job commitment, and satisfaction
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Value Chain Analysis
Assessing the SUPPORT
Activities in the Value Chain
Firm Infrastructure

Identification of external opportunities and
threats Accomplishing goals with strategic
planning system Coordination and integration of
value chain activities Low-cost capital
expenditures working capital funds IS support
for strategic and operational decisions Relation
ships with stakeholders Public image as a
responsible corporate citizen
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Value Chain Analysis A Pizza Restaurant

• PRIMARY ACTIVITIES
• Inbound Logistics
• Transport foodstuffs (e.g. dough, cheese, etc)
  from suppliers to restaurant
• Operations
• Cook pizzas, salads, wings, other menu items

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Value Chain Analysis A Pizza Restaurant

• Outbound Logistics
• No distribution channels just customers
• Marketing/Sales
• Develop advertising
• Customer Service
• Serve food to restaurant customers
• (on-site or logistics with delivery)

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Value Chain Analysis A Pizza Restaurant

• SUPPORT ACTIVITIES
• Procurement
• Inbound Logistics Buy trucks lease warehouse
  space (identify supplier offerings/negotiate
  terms)
• Operations Buy dough, cheese, ovens, and other
  supplies
• Marketing/Sales Buy TV time, promotional
  materials/ mailings, etc.
• Service Buy/maintain tables, chairs, silverware
  to equip restaurant buy/maintain
  automobiles/insurance, etc. for delivery

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Value Chain Analysis A Pizza Restaurant

• Technology Development
• Inbound Logistics Improve truck routing and
  warehouse methods
• Operations Develop new menu items improve
  oven/kitchen design
• Marketing/Sales Discover new promotional
  materials/methods
• Service Improve restaurant layout / routing of
  deliveries

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Value Chain Analysis A Pizza Restaurant

• Human Resource Management
• Inbound logistics Supervise drivers and
  warehouse personnel
• Operations Supervise/train kitchen personnel
• Marketing Supervise advertising personnel
• Service Supervise waiters and drivers

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Value Chain Analysis A Pizza Restaurant

• Infrastructure
• Obtain funds, carry out accounting and payroll
  functions, and perform other administrative tasks
  for each primary activity area

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Supply Chain Management

• Supply-chain is a term that describes how
  organizations (suppliers, manufacturers,
  distributors, and customers) are linked together.
• Supply-chain management is a total system
  approach managing the entire flow of information,
  materials, and services from raw-material
  suppliers through factories and warehouses to the
  end customer.

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Supply Chain Management

• Apply a total systems approach to managing the
  entire flow of
• Materials
• Services
• Information

Raw material suppliers
3
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Supply Chain Management
Supply Chain management Sophistication
???
Competition
Competition through IT
Competition through Quality
Competition through Cost
Logistics as
1960
1970
1980
1990
2000
Time
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Supply Chain Management
Supplier
Customer
Supply
Supply Management
Manufacturing Management
Customer Satisfaction
Management
Decision Processes And Systems
Demand
Procurement Planning
Production Planning
Demand Planning
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6. Balanced Scorecard
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What is a Balanced Scorecard?

• "Corporate Dashboard" for a balanced presentation
  of both financial and operational measures for
  making decisions.
• Developed in the early 1990's by Drs. Robert
  Kaplan (Harvard Business School) and David
  Norton.
• The balanced scorecard is a management system
  (not only a measurement system) that enables
  organizations to clarify their vision and
  strategy and translate them into action.

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What the innovators thought.

• "The balanced scorecard retains traditional
  financial measures. But financial measures tell
  the story of past events, an adequate story for
  industrial age companies for which investments in
  long-term capabilities and customer relationships
  were not critical for success. These financial
  measures are inadequate, however, for guiding and
  evaluating the journey that information age
  companies must make to create future value
  through investment in customers, suppliers,
  employees, processes, technology, and
  innovation. -Kaplan and Norton.

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Why do we really need a Balanced Scorecard?

• To Succeed in business it is important to measure
  what you manage.
• The Balanced Scorecard helps us to measure what
  cant be measured in business.
• It provides us with feedback and measurements of
  both internal processes and external outcomes.
• It helps us to continuously update our management
  strategies and strategic performance.

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Source thebalancedscorecard.org
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Four Perspectives

• The customer perspective
• Uses measures of the value delivered to
  customers.
• These measures are evaluated in four different
  areas namely time, quality, performance and
  service, and cost.
• The internal perspective
• Measuring companys satisfaction of customer
  needs through internal processes.

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Four Perspectives

• 3. The innovation and learning perspective
• the growth perspective
• Measuring continuous improvement through new
  product innovation and gradual innovation of
  existing products.
• 4. The financial perspective
• Measure of finances. Income, Share value,
• growth of sales, etc.

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Scorecard Benefits

• Obtain information to update its strategy on a
  continuous basis.
• Balance long-term and short-term measures and
  evaluate every part of the firm and how each
  contributes toward accomplishing selected goals.
• It helps firms emphasize their relationship
  between internal and external partners.
• Creates a long-term perspective for company
  sustainability.

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Scorecard Benefits

• A great communication tool between employees as
  they can use the scorecard as a guide to
  coordinate their efforts.
• Support employee evaluation in that individual
  performance can be tied to successful outcomes on
  the metrics.
• A way to measure the value of the company apart
  from measuring its tangible assets.