Any new business venture has the probability of plunging into myriad financial hurdles emanating from poor performance. Putting a clear business strategy in place is a key ingredient for the business success. A good business strategy aims at putting in place clear objectives and goals in finalizing business decisions to avoid business failure. To achieve a balanced business perspective, it is essential to consider using a Balance Scorecard as an integral part of your business planning initiative. The Balanced Scorecard is a business approach used in aligning your business to the mission, vision, core values and strategy of the organization. Like other organizations and businesses, the benefits of Balanced Scorecard will be brought into my bookshop. The emphasis of this performance tool is to turn strategy into forward thinking actions that the senior management team can implement against key performance indicators. Regarding a Balanced Scorecard, a business must have a vision and mission and know their financials, the present structure and levels of employee expertise. Additionally, they must have knowledge on the level of customer satisfaction. This paper aims at describing how this strategic management tool will apply to the new bookshop.
Key elements of a Balanced Scorecard
The first element of a balanced scorecard is learning and growth, which most businesses overlook (Schermerhorn, J. et al. 2012). By cultivating a culture of continuing learning and growth that extends from the top of the company down to the floor-level business employees, firms can ensure they always find more effective and efficient means of achieving their goals in other areas, providing both direct and indirect advancements to the business (Schermerhorn, J. et al. 2012). Ensuring that every bookshop employee has at least an area of expertise that enables him or her show awareness of the new books published is one initiative that would help achieve and measure the wider objective of ensuring that all the various categories of books in the shelves can be well represented and explained to customers. Ensuring continuous learning and growth among employees at the store will ensure customer satisfaction as well enable the business to realize its goals of gaining profits. Employee satisfaction is very important to the bookstore since those employees interact directly with customers usually receive the lowest compensation. However, the firm will ensure that employees receive recognition for their efforts and encourage them to be active and creative in the workplace.
The second element of a balanced scorecard is the customer. Research indicates that the key ingredient to success of any business is by having a customer-centric view focused on satisfaction (Schermerhorn, J. et al. 2012). While most if not all businesses are conscious on this aspect of their business, it is difficult to view customers as a practical perspective in business strategy (Schermerhorn, J. et al. 2012). Like financial security, lack of customer satisfaction in any venture will eventually crumble as they opt for competitors to meet their unfulfilled needs (Schermerhorn, J. et al. 2012). For the bookshop, this entails knowing the values as defined by the customer and possessing precise understanding of what your customer is willing to pay. This element of the balanced scorecard will help the business focus on markets and customers. The customer business for the bookstore will include local and regional students, parents and scholars in town. The firm will also try to widen its customer base to include customers from other towns and set up an online store where customers can access books from the store. In order to offer extensive service to its customers, the firm will collaborate with publishers to design content that suit the needs of specific customers.
The third component of the balanced scorecard is internal business processes. The metrics based on this element allows business managers to know how well their business is running, and whether the offerings conform to the requirements of the customer (the mission). The management teams should know what is working and what is not working in relation to the needs of the customers and the business mission (Schermerhorn, J. et al. 2012). Having a better understanding of the business processes allows for a focus an effective future working state that will produce positive, measurable results for the store. Efficiency is the main aspect of the internal business processes, which in most cases not fine-tuned enough to achieve real financial success (Schermerhorn, J. et al. 2012). Ensuring that the books are shelved in an easily navigable manner and those adequate quantities of individual book titles are ordered from suppliers and that the store maintains a proper diverse collection of titles within each category. It will help improve cost efficiency and help provide better measures for the store and better service to customers. A clear objective in this area will include enhancing the order-to-purchase ratio as measured by the time taken to sell the original purchased amount of any given title. To ensure efficiency, the management should put a target of a one-month maximum for most titles, and introduce initiatives to reduce lower selling titles match the products and services to the wants of customers.
Kaplan and Norton acknowledge the importance of the traditional need for financial data. Having the right data along with timely and accurate information is a key priority, and managers must strive to provide it (Schermerhorn, J. et al. 2012). For most businesses, just having a return on investment data might not offer any help. With the implementation of corporate database, there is hope that the processing can take place centrally. However, the current emphasis of financials leads to the “unbalanced” situation in light to other elements (Schermerhorn, J. et al. 2012). There is a need to include additional financial-related information, such as cost-benefit data and risk assessment in this category. Since this is a new business, there is a need to consider competitors because the location in the heart of a small town. Additional areas that require consideration include customer satisfaction, assess utilization of resources, increase net revenue, decrease units cost, minimize store production costs and increase annual operating cash flow.
The financial objectives of the bookstore are to ensure lower operating cost and efficiency, capacity utilization, and promote brand image. This will involve monthly monitoring to ensure the unit per cost efficiency. The store will secure supplies from distributors who charge their products at considerably lower prices to enable the store earn a modest profit margin. The store will build a franchise with suppliers to secure new sources of revenue. Additionally, to increase the profits, the store will ensure customer value in order to increase the customer base to the store. Purchasing of new books must consider the appropriate titles that customers buy most. Many businesses select suppliers solely based on cost. Purchases for new books will consider the pricing of suppliers as this will affect the profitability of the business. To ensure that the business makes profits, the store will employ a considerable number of employees that will ensure customer satisfaction without putting much strain on business resources.
Without surprise, the implementation and control of a balanced scorecard is a difficult and lengthy process that requires considerable investment in money, time, and human resources. From the four perspectives of the balanced scorecard, the one that I found most difficult to control is the customer perspective. According to the balanced scorecard, a company selects market and customer segments where it can compete. However, the goal remains the same, achieving financial objective. The financial perspective affects the key customer metrics, including retention, loyalty, profitability and acquisition. Delivering value to the customers has become the number one goals of most companies. However, the major challenge is that the taste and preferences of customers keep changing, which requires businesses to spend much on marketing and understanding the external environment. Reaching long-term financial goals of the company requires offering products and services valued by customers. The challenge is that many competitors have netter offering and customers can easily move to competitors who offer better services.
As the saying goes, “the customer is always right.” As a new business selling books, it is difficult to know the values as defined by the customer and possessing the precise understanding of what the customer wants. In addition, the needs of customers keep changing, which makes it difficult to settle on the right model of business to satisfy the needs of all customers. Each customer has varying taste and preference, which makes it difficult to satisfy the need of every customer. The nature of customers will make it difficult to control quality and satisfy the need of every customer. However, the bookstore will try to meet the need of every customer as most of the store attendants have worked in various bookshops in the region and they understand the preference and needs of most customers in the area. Ensuring the quality and offering competitive prices to customers may not succeed because some of the books are not something that customers need at the time. Lack of understanding of the needs of the customer gives advantage to a competitor who can offer customers products that meet their needs.
The balanced scorecard suggests that managers view businesses from four perspectives, and develop metrics, collect data and analyze data in relation to those perspectives. This management tool enables business to evade various financial failures that confront new businesses because of poor performance. The balanced scorecard developed for my bookshop will help address some of the hurdles that I will face as the business grows. In addition, as a new business, one perspective of the business scorecard that I found most difficult to implement was the customer perspective. This is because customer taste and preference keep changing it is difficult to conduct market research in order to address these changes. Additionally, there are many established competitors, which make it hard to satisfy the need of every customer. However, the balanced scorecard that I developed for the business will be essential in achieving the business objectives and goals within a period of two years.
Schermerhorn, J. et al 2012, Management, 4th Asia Pacific Edition, John Wiley & Sons Australia Ltd.