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Measure Performance Of Stagecoach Uk Marketing Essay

This report focuses mainly on analysis and measure performance of Stagecoach UK using Balance Score Card (BSC) originally developed by Kaplan & Norton, which is considered as one of the most valuable tools in the present management context. Concept of balance Score Card (BSC) has been designed to eliminate the weakness in pure financial performance measurement (Cobbold and Lawrie, 2002). Therefore, the ultimate financial objective of profit maximisation of this Transport Company achieve through the various financial and non-financial objectives. Identification of the appropriate performance measurements related to the financial and non-financial objectives under various perspectives and the direct link with the vision and objectives of the Stagecoach Group.

A Strategic map which is considered as developed version of the Balance Score Card also developed through identifying the links of each and every strategic objectives of BSC and explained how strategic map is leading to accomplish the Stagecoach’s ultimate achievements. Through strong and well-cleared recommendations they are able to make expected performances in the organisation.

Introduction

Stagecoach Group plc is a transport group working internationally operating buses, express coaches, trains, ferries and trams. Stagecoach group is in transport business from last three decades since it was founded in 1980 by Sir Brian Souter, the current Chairman and his family members Ann Gloag, and Robin. The head office of this group is based in Scotland (Perth) and operates in the United Kingdom and North America. Stagecoach group is a public transport organisation which operates mainly in Bus and Transportation services. This company is working efficiently from last three decades and earning high revenues every year. Stagecoach is one of the leading public transport company working internationally mainly in Europe especially in United Kingdom and North America. The company consists of more than 35000 employees as the largest man power in United Kingdom’s bus transport industry, making it overall in of three buses Service Company in this country.

Stagecoach with bus market (16%) and rail market (25%), along with a large stake in Virgin Trains (49%) making this company the light rail’s largest operator, second largest U.K.’s transport firm just behind First Group. Stagecoach operates in 90 major cities and towns with a fleet of 8,100 vehicles facilitate around 2.5 million passengers in a single day, by the efficient effort by 18000 employees alone in UK. A total of 35000 employees of stagecoach worldwide operate 11000 buses and 2500 trains every day. In North America, this works as Coach USA and Coach Canada, also it has sold the units of Western and South Central to private equity firms.Stagecoach is listed on London Stock Exchange with FTSE 250 Index.

(Figure: CW1 M02LOOON SHUNSHINE)

Vision and strategy of Stagecoach

To attain profitable growth, while trailing international expansion in the spirit of achievement and creativity " Stagecoach, 2003".innovative technology

To continue to strengthen its management as a global luxury brand by reinforcing its positioning in historical and new markets and focusing on its core businesses

Ensure the growth in revenue as well as profitability of the group and oversee the special roles for each brand in order to maintain the consistency of the brands in the market and the product categories.

Continuous improvement in the product quality.

Creativity maintenance using the talented and creative workforce in the world.

Making the products of Stagecoach in Italy (except for watches, which are made in Switzerland) (Stagecoach, 2003).

(Source: Ansoff Matrix .com 2009)

Current strategy

Development of Balanced Score Card

Balanced Scorecard is a strategic planning and management tool, which was introduced by Kaplan and Norton in order to make the performance of the companies be evaluated effectively and aimed to measure the company’s performances against the vision, mission and objectives. It has four perspectives and these are financial perspectives, customer perspectives, internal business perspectives and learning and growth perspectives Thus, there should be a clear strategy in articulating the four aspects. Experts should combine vision into the four perspectives.Vision should be translated into the four perspectives by the experts. (Dunnaway, 2009).

Financial Perspective - financial performance against the past and monitoring for the future

Customer Perspective - customer service, perception of the customers.

Internal Business Perspective - how the internal processes are working?

Learning And Growth Perspective – aspects that should be developed for long-term benefits.

Balanced Scorecard of Stagecoach

(Kaplan, R. S and .Norton, D. P. 2007)

Learning and Innovation/Growth Perspective

Objectives/Measures

KPI’s

Target

New Eco drive

Increase the no of shopping outlets

Add 5 new shopping outlets for each state (Province).

Market Development

Online fashion facility for new countries

3 new online facilitated markets entered annually

Ticket payment though Bank cards

Increased cost for R &D

Increase up to 1% for R &D from total revenue.

Employee Development

Increase in specialised training programmes

Rotating employees from tasks and over the divisions

Source: (Stagecoach, 2012)

Internal Business Perspective

Objectives/measures

KPI’s

Target

World no 1 fashion producer

Number of repeat and new online customer transactions in a week

Increase monthly orders by 5% next month onwards.

Introduce new fashions to the customers

No of comments published through online campaign.

Enhance the no of sponsoring fashion shows.

Satisfied Employees

Employee turnover ratio

Less than 5% a year

Best quality assurance products

Certification quality assurance institutions

Enhance no of quality certifications.

Source: (Stagecoach, 2012)

Customer Perspective

Objectives/Measures

KPI’s

Target

Addition of new customers

No of customers hold

Increase new customers by 5% each financial year.

Customer Satisfaction

Online &in-store customer surveys

95% customer retention and acquiring new customer base

Product Quality

No of complaints from customers

0.25% of the goods sold

Loyalty

Market ranking by customer

Customers No.1 preferred fashion items.

Source: (Stagecoach, 2012)

Financial Perspective

Objectives/Measures

KPI’s

Target

Profitability

Return on capital employed

Improve by 10 % over the financial year

Sales Growth

Sales Revenue

Increase to Recurring operating income 30% of Total income

Long term survival

Gearing ratio

Decrease the debt to equity from 51% to 45%

Asset Utilisation

Asset Turnover Ratio

Increase in Asset Turnover from 0.4 to 0.5

Source: (Stagecoach, 2012)

Evaluation of Balance Score Card

Balance Score Card provides more meaningful performance measurement beyond the traditional pure financial based performance measurement since it includes both financial as well as non-financial perspectives to measure the performances (Kaplan and Notion, 2001). The likelihood of efficiency and effectiveness of the Balanced Scorecard is achieved if it is created in collaboration with both top management and frontline staff (Proctor 2009).

The Balanced Scorecard helps in interpretation and realization of the organizations strategy and vision (Otley 2006) & (Proctor 2009).

It helps to gain consensus about the organization’s vision and strategy (Otley 2006).

The Balanced Scorecard mechanism helps monitor a broad range of performance indicators making it a flexible business tool that helps clarify strategy and turns it into action. (Kaplan & Norton 2001)

The Balanced Scorecard provokes performance improvement through setting of targets (Otley 2006).

It further acts as a communication medium for new strategies educating the employees (Otley 2006).

Employees strive to achieve their targets and be committed to performance improvement if they have incentive based personal Balanced Scorecard targets (Proctor 2009).

Also, Balanced Scorecard improves performance through optimum allocation of resources (Otley 2006).

The Balanced Scorecard facilitates strategic review and learning by supplying strategic feedback (Otley 2006).

Additionally the Balanced Scorecard formulates the shared vision contributing in establishing company’s milestones (Otley 2006).

(Source: Harvard Business Review, 1996)

Critical Evaluation

The Balanced Scorecard has four perspectives and they are used to identify and comprehend long term view on the strategy and an intimate understanding of the task at hand for the managers.

Customer Perspective: The main aim in this perspective is to achieve 100% customer satisfaction by the end of 2014 so that company can achieve its vision of being the logistics provider of choice as the results strategy 2015 implementation. Reliability has to be improved of the service so that the company receives fewer complaints which then translate into more revenue. Improving the customer service would help in making the company more profitable. Till now companies used customer satisfaction as an obligatory factor but it’s now a compulsory factor. BSC’s customer perspective helps us to measure it in financial and nonfinancial terms. Here because of the basic flaw in BSC we can’t really define how are we going to achieve the 100% satisfaction and so we use the strategy map to address that problem.

Financial Perspectives: This is the perspective for which strategies were drawn in the earlier days. In those days all the organizations cared about was money and hence there was no regard for the fact that who and how you get the money. BSC changed that school of thought gave a bit strong foundation to build and strategy and implement it. The KPI’s here are revenue (increase 7% yoy), profit (increase by €1100mn), market share (increase to16% overall) in US etc. More revenues mean more profit means better operating cash flow and more return on sales. Better customer service and satisfaction are linked with market share in US because it would generate more revenue and better share. Order processing and stock storage costs kept low means more profit. Going green means less cost per product increasing the profit again and higher efficiency a better cash flow.

Internal Business Process Perspective: This perspective is to get your own house in order. The aim here is that an organization’s internal processes should be lean and mean. Order processing costs, stock storage costs and transport damage costs, all of which kept low would give a huge boost to the profit. The security coefficient factor which if is higher then the customer complaints will be much lower which would improve revenues and ultimately profit. Transhipping frequency also needs to chip in to help its colleagues in this regard. All of the above mentioned KPI’s have to be reduced by of 3% baring storage location costs. All this reduction in cost improves the profitability and the cash flow of the company. Here since BSC doesn’t consider the employee’s contribution there is no real way to adjudge how efficient the internal processes are.

Learning and Innovation Perspective: This perspective basically tells us that what more needs to be done to sustain the growth and profitability that we intend to achieve in the future. STAGECOACH Express is doing research on the implementation of RFID and rolling out the 3D bar-coding in an effort to change how logistics are tracked. There is also usage of ERP and automated transhipping. Now since these two are computerised or automated processes BSC doesn’t provide any way to measure their performance which in turn makes this perspective resultant performance ambiguous.

Strategy Map

Strategic map shows how the company's four perspectives are linked. Four perspectives should be inter-connected in order to gain the maximum benefit from it. At the top should be the ultimate objective(Kaplan & Norton,1992) and as such maximization of the shareholders wealth occupies the primary place. It should be achieved through profit maximization, increase in sales and growth of the profit margins.

Evaluation Strategy map

Strategic map is developed to show the linking or relationships of strategic objectives of each perspective to form a visual presentation of strategies and measures (Proctor 2009). It will demonstrate how each and every BSC measures are related with the strategic objectives of Stagecoach and finally to the business vision. It is an effective mode of communication within the business and also for maintaining strategic purpose (Proctor 2009).

From the above Strategy Map of Stagecoach, it can be evaluated that:

Employee development leads to enhance the customer satisfaction, product quality, satisfied employees and those will also influence to increase the profitability of the Stagecoach which is part of its strategic objectives.

Emerge to Stagecoach brand loyal customers as a customer’s perspective helps to satisfy customers as expected under the internal business perspective hence increase the sales figures and profitability of the firm as expected under the financial perspective.

Satisfied employees objective are set under the internal business perspective is helping to satisfied customers, quality products as per the customer’s perspective and then it will help to enhance revenue as well as profitability of the Stagecoach and also ensure the long term survival of the business.

Induction new factions items objective developed to measure the internal business perspective and achieve it helps to satisfied customers as indicate in the customer’s perspective and sales growth objective of the financial perspective.

To become world’s number 1 fashion brand, producer will improve brand image Stagecoach is leading in sales growth and increase in profitability.

New shopping outlet objective also leading to achieve sales growth, long-term survival and sales increase objective under financial perspective as well as customer perspective.

Recommendations

Stagecoach brand is well-established brand in the North America, Europe and few Asian countries and Africa. As reflected through the BSC of Stagecoach it can develop and expand to new markets that are still not operating. By developing new online facilities, ensuring quality they can penetrate those markets. This will support to improve their performances through the sales growth and profitability.

Cope with the Stagecoach vision of focus on the environment and their aim to produce goods under sustainable development aim can be applied through a proper R & D programme and can be developed to cope with other financial objectives.

The impact of competitive environment of Stagecoach for their fashionable items could be minimised through the customer satisfaction, focus on the product quality and developing innovative items by continuously investing on the R & D.

Stagecoach’s main competitive advantage as per their CEO is the quality not the price. They should continuously develop through quality concern short and long term programmes while making plans for the sustainable development.

Improve the revenues and volumes on the Time Definite Domestic and Day Definite Domestic products as they are witnessing negative growth.

STAGECOACH Express needs to increase their market share in US from the current 4.5% to atleast 10% to have a chance of giving any fight to leaders like FedEx and UPS.

Get into the partnerships with other small and local firms to gain that knowledge and leverage that with the STAGECOACH brand as done in Canada.

Take new routes from US to the rest of the world to deliver goods faster.

Keep up with the GoGreen program and reduce carbon emissions every year increasingly.

Complete the implementation of 3D barcoding as soon as possible.

Use technology(ERP, Automoated Trans shipping) to reduce the stock time at the hubs and increase efficiency of the company.

Speed up the research on the impelementation of RFID and revolutinize the way logistics can be tracked.

Use of Balanced Scorecard

Limitations

BSC as a measurement tool is relatively rigid one. Its notion of putting indicators in one of the 4 perspectives limits the view of the company and doesn’t allow for to be looked from an external point of view (Voelpel et all, 2005).

Balanced scorecard can never be balanced because factors are not equal and have linear relationships so trying to balance them would lead to confusion and chaos (iim-edu.org.com, d).

BSC is static in nature which doesn’t bode well with today’s dynamic and unpredictable world. All the activities and tasks are based on the central objective and so anything rather than that is left behind which is not desirable given the need of innovation in this age. Central targets will be met but what about things around these targets (Voelpel et all, 2005).

BSC does not take into consideration the role of employees and suppliers or distributors i.e. the extended value chain who are important stakeholders in today’s organizations (Mooraj et all, 1999).

In BSC the cause and effect is happening in the same time and there is no way to account for any time lag developed between the cause and effect of the activity (Norreklit, 2003).

There is no provision for maintaining or validating the adopted measures. Managers don’t have a problem in identifying the measure but with how to keep those measures at a manageable level (systemdynamics.com, 2012).

High implementation cost – The introduction of Balanced Scorecard within an organization is a challenging task demanding high costs (Proctor 2009).

Choice of strategy – The BSC’s are vulnerable in two areas: one is choosing the right strategy with maximum potential and effectively executing them and the second is choosing the right indicators that provide summarized, accurate and timely information (Proctor 2009).

Quality of information system – It need to be flexible, appropriate, accurate, up-to-date and user-friendly (Proctor 2009).

Cause and effect relationship – Between the financial and non-financial indicators has never been proved; they are based on correlation rather than causation (Proctor 2009).

Time lags – The four different perspectives on a single Balanced Scorecard relate to the same time period despite having different targets (Proctor 2009).

Conclusion

The above analysis of STAGECOACH Express has shown that the company has clear vision and strategy to meet the need and requirements of the customer and itself as a growing organization. It is pretty evident from the company’s strategy 2015 that innovative methods, high reliability and efficiency are the main reasons that will keep its no1 position in all operating markets and bring itself one step closer to that goal in US. The Balance Scorecard should allow it to achieve its vision and also allows it to meet its long term financial and nonfinancial targets. The Strategy map shows clear and precise relationships between the different perspectives and how it is going to affect the company in the near future. Critical Discussion and evaluation of BSC from STAGECOACH Expresses perspective has resulted in a better understanding of the organization and its strategy which will help in achieving its goals.


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