Operations Management and Balanced Scorecard
Discuss about the Operations Management in Three Sectors for Macroeconomic Factors.
Balance score card in a strategic tool used to measure the performance of business organisations by judging their internal factors in the light of the macroeconomic factors. The senior managers of business organisations use balance score card as a tool to present the operational activities and the rate of efficiency achieved in those activities. The attributes of a balance score card are that it concentrates on the business objectives of the organisations and select a specific data sets to measure the operational efficiency like revenue generated. The balance score card usually contain both financial and non-financial data. The use of balance score card started as a general strategic tool but today it has emerged into a very crucial strategic performance tool. Multinational companies across industries use balance score card to achieve efficient operations management (Valmohammadi. and Ahmadi 2015). The paper would study this use of balance score card in operations management in three diverse industries. The first article would revolve around article titled ‘E-commerce at Yunnan Lucky Air’ which pertains to the low cost airline, a niche market within the airline market. The second article titled ‘EU bureaucracy could INCREASE money laundering and terrorist financing, say experts’ revolves around the increasing money laundering, one of the glaring threats the global financial sector is reeling under. The third article ‘Sustainability for consumer business companies A story of growth’ which throws light on a brighter aspect-sustainability compared to the second article.
Operations management refers to the management of overall designing and controlling of productivity in business organisations including production and business operations. The operation managers integrate the entire business process to ensure that the products stand up before the customer expectations. Operations management finds use in both goods manufacturing companies like consumer goods and service providing companies like banking. The operations managers aim to produce goods with high quality according to the expectations of customers which leads to generation of immense revenue. The operations manager use balance score cards having four main components namely, financial, internal business processes, learning and growth and customers. These divisions revolve around vision and strategy of the business organisations concerned (Shen, Chen and Wang 2016).
The first article ‘E-commerce at Yunnan Lucky Air’ revolves around the booming airline sector in China. The airline sector is China is booming due to favourable market conditions like increase in the per capita income which means consumers in China would have more disposable income to afford airline travel. The Civil Aviation Administration of China predicts a growth of 15 percent in the industry by 2020 as far as passenger population is concerned. The consumer base of China consists of mainly two segments of consumers. The first group prefers premium and expensive flight services while the second group prefers low cost flights. The growth in the number of second group consumers have led to growth of low cost airline companies like Lucky Air. These low cost airline companies are already giving the premium airline companies a run for revenue in the highly competitive Chinese market. The operations of these low cost private airlines are still very much regulated by the government. The operational costs of these companies mainly consist of fuel, landing fees, aircraft leasing and taxes. However, the operations of these low cost airline companies were not smooth and they had to face challenges in every sphere of business be it obtaining fuel supply or selling tickets (Shafiee, Lotfi and Saleh 2014). The low cost airlines in China were burdened by the high tax rates which the Chinese Government imposed on the airline companies. The financially strong premium cost airline companies could bear this tax burden but the low cost airline companies found financially challenging (Berenguer et al. 2008). These market challenges stimulated them to use operations management to increase their revenue generation to take more advantage of the growing Chinese aviation industry.
Using E-commerce to Boost Revenue Generation in Low Cost Airlines
The apex management of low cost companies like Lucky Air used e-commerce to sell its tickets. The apex management bodies of these low costs airline companies concentrated on developing their technological strength. The operations managers collaborated with the financial experts and technical experts to build an online ticketing system which was very advanced. The ticketing system enabled the users to verify their credit cards which allowed the company to ensure security of the payments made for purchasing its tickets. The operations managers aligned this ticketing system which was ideally comes within the purview of the finance department with the marketing of the airline company (Bhattacharya et al. 2014). The customers could create blogs to share their experiences with other customers which actually enabled the company to promote its low cost airline services. The ticketing system allowed multiple services of purchasing tickets, paying for them, verifying the payments and seek customer care support. These operations enabled Lucky Air create customer satisfaction. The customers felt related to the company and were able to communicate their service experiences on the blogs. The low cost airline companies were able to gain information regarding future customer demands and travel plans. The operations managers can incorporate the customer expectations in the future travel offers of the companies to ensure customer satisfaction. This high level of customer satisfaction ensured by these low cost airline companies boosted their revenue generation, thus improving their competitive strength and market goodwill (Hoque 2014).
One can point out the customers satisfaction corresponds to the ‘customer’ component of balance score card, the information operations managers gained about future cusromer requirements corresponds to the ‘learning and growth’ component while the revenue earned related to the ‘financial’ component of the card. The integration of departments like finance and marketing corresponds to the ‘internal business process’ component. This analysis shows that operations managers can use balance score cards to boost revenue generation of the companies.
Money laundering is one of the biggest threats which the multinational companies today face. Money laundering refers to conceal the illegal sources of incomes and transform them into legally admissible assets. The illegal groups around the world use the banking systems to ‘clean’ their illegally earned money. The laundering groups are connected with terrorism and evasion of international agreements. These groups often break the immense amount of money into smaller divisions which they channelize through multiple banks, thus avoiding suspicion of bank officials. The money laundering groups also indulge into cash smuggling by smuggling cash into offshore banks in countries having relatively relaxed anti-money laundering laws. They also operate ‘legitimate’ businesses to channelize the illegally sourced money into economies. The money laundering rackets are often connected with data theft rackets which drain bank accounts of both individual customers and business organizations (McIntosh 2016). This analysis clearly points out that operations managers in the multinational banks are faced great challenges to check money laundering and maintain customer trusts. One can also point that though banks play important roles in checking money laundering. However, one single bank cannot control the entire process and requires intervention of international bodies like the European Union. One can point out that some of the largest banks are based in Europe and thus come within the European Union. The European Union legal framework on anti-money laundering and counter-terrorism financing requires banks and other financial organizations act as ‘gate keepers’ to prevent misuse of the European financial system for money laundering (ec.europa.eu 2018). The banks are directed to identify their customers and their sources of income before entering into financial transactions with them. The new directives of the European Commission in this regard require the banks to pay more importance to complying with bureaucratic norms rather than carrying out investigation to know about the identities of the customers (express.co.uk 2018).
The Threat of Money Laundering in Multinational Companies
The article presents a perfect example where the operations managers are under challenges due to intervention of a superior body, the EC in this case. The operations managers on the multinational banks should ensure customer satisfaction. They should provide accurate information and guidance to customers while selling financial products. This would create customers satisfaction and allow the operations managers to gain references from those customers. The banks as a result would be able to open accounts to customers they know. This would save them from opening accounts of unknown customers which would reduce the chances of money laundering (Bryans 2014).
The customer satisfaction corresponds to the ‘customer’ segment of the balance score card while the references correspond to the ‘learning and growth’ segment. The offering of appropriate banking products to customers by the bank staff members correspond to the ‘internal business process’ while the revenue correspond to the ‘financial’ component of the balance score card. This analysis shows that operations can use balance score card as a strategic tool to deal with challenges (Harvey 2015).
The third article presents sustainability in the consumer goods companies. The article points out that the leading consumer companies are adopting innovation as a powerful tool to bring about sustainability in their operations. These steps towards sustainable operations are supported by the consumers who prefer buying goods from sustainable producers. Today consumers are not ready to buy products from any producers. They are concerned about the sources of raw materials and want assurances that consumption of the product would not harm the planet. The consumers not only consumer products, they voice their opinion on the digital platforms. The companies today hold these views of the consumers important and incorporate them in future strategic planning. Business organizations which cannot satisfy consumer demands lose their competitive advantage in the market.
The article provides a situation which is contrast to the previous article. The article shows that the operations managers encouraged by the consumers to adopt sustainability in the operations of the companies. The operations managers today require to incorporate the demands and views of the consumers while forming future business strategies. The article shows that from mere users of the products consumers have evolved into drivers of productivity and operations managers today have to consider the needs in their business plans (deloitte.com. 2018)
The analysis of this article clearly point out once again that operation managers can use balance score card as parameters of measuring productivity. One can point out that customers correspond to the ‘customer’ component while their views correspond to the ‘learning and growth’ component. The business planning correspond to the ‘internal business processes’ while the revenue generation correspond to the ‘financial’ component. This analysis once again shows that balance score card can be used by operations managers to operate in situation when they have backing of external factors like customers (Customers correspond to social component of PEST)
The following are the recommendations which can made in the light of the above discussions:
The operations managers of Lucky Air should aim to expand into new markets to increase the customer base. This would allow the company to generate more revenue and as a result provide better services at low costs. This wold enable the company to give tougher competition to the premium airline companies (Gabriel and Lang 2015).
The operations managers at the banks in European should seek customer support to counteract the challenges of money laundering and bureaucracy. The operations managers should concentrate on building strong relationship with customers by offering them appropriate financial products. They should then obtain references from these customers and approach these customers to expand business (Le Blanc 2015).
Finally one can recommend that operations managers at the consumer goods companies should seek higher degree of customer support to achieve higher degree of sustainability. The companies should involve customers to a higher degree while forming product strategies (Ben-Akiva, McFadden and Train 2015).
Conclusion:
One can conclude that operations managers can use balance score cards as strategic tools. The fact applies across industries which is proven by the articles chosen, the first article is from airline industry, the second from consumer goods industry while the third one correspond to the consumer goods industry. The operations managers should gain consumer support to tackle different types of situations. The companies irrespective of their sizes and industry should consider opinions of consumers important while forming policies.
References:
Battle, G. 2018. [online] Www2.deloitte.com. Available at: https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Consumer-Business/dttl_cb_Sustainability_Global%20CB%20POV.pdf [Accessed 29 Apr. 2018].
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Berenguer, I., Shijun, C., Liang, L., Jing, L. and Wang, N., 2008. E-commerce at yunnan lucky air. Case study. Massachusetts Institute of Technology https://mitsloan. mit. edu/LearningEdge/strategy/EcommerceYunnan/Pages/default. aspx. Zugegriffen am, 1, p.2014.
Bhattacharya, A., Mohapatra, P., Kumar, V., Dey, P.K., Brady, M., Tiwari, M.K. and Nudurupati, S.S., 2014. Green supply chain performance measurement using fuzzy ANP-based balanced scorecard: a collaborative decision-making approach. Production Planning & Control, 25(8), pp.698-714.
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Clements, L. 2018. EU bureaucracy could INCREASE money laundering and terrorist financing, say experts. [online] Express.co.uk. Available at: https://www.express.co.uk/finance/city/624363/EU-bureaucracy-increase-money-laundering-terrorist-financing-say-experts [Accessed 29 Apr. 2018].
European Commission – European Commission. 2018. Anti-money laundering and counter terrorist financing. [online] Available at: https://ec.europa.eu/info/strategy/justice-and-fundamental-rights/criminal-justice/financial-crime_en [Accessed 29 Apr. 2018].
Gabriel, Y. and Lang, T., 2015. The unmanageable consumer. Sage.
Harvey, J., 2015. A Critical and practical evaluation of the efficacy and cost benefit of anti-money laundering laws.
Hoque, Z., 2014. 20 years of studies on the balanced scorecard: trends, accomplishments, gaps and opportunities for future research. The British accounting review, 46(1), pp.33-59.
Le Blanc, D., 2015. Towards integration at last? The sustainable development goals as a network of targets. Sustainable Development, 23(3), pp.176-187.
McIntosh, D., 2016. The Costs of Anti-Money Laundering Enforcements to Noncompliant Banks. Journal of Finance, 4(1), pp.01-14.
Shafiee, M., Lotfi, F.H. and Saleh, H., 2014. Supply chain performance evaluation with data envelopment analysis and balanced scorecard approach. Applied Mathematical Modelling, 38(21-22), pp.5092-5112.
Shen, Y.C., Chen, P.S. and Wang, C.H., 2016. A study of enterprise resource planning (ERP) system performance measurement using the quantitative balanced scorecard approach. Computers in Industry, 75, pp.127-139.
Valmohammadi, C. and Ahmadi, M., 2015. The impact of knowledge management practices on organizational performance: A balanced scorecard approach. Journal of Enterprise Information Management, 28(1), pp.131-159.
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