29-07-2021

Strategic Management - II
SESSION 8

The Balance Score Card

 Sources of competitive advantage have shifted from firm’s
ability to manager physical assets
• To firm’s ability to exploit knowledge based or intangible assets

 Need for looking beyond traditional measures of financial

performance

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The Balance Score Card

Traditional financial reports look backward
 Reflect only the past: spending incurred and revenues earned
 Do not measure creation or destruction of future economic value
The Balanced Scorecard (Kaplan & Norton, 1992) identifies the factors that create
long-term economic value in an organization, for example:
 Customer Focus: satisfy, retain and acquire customers in targeted segments
 Business Processes: how to deliver the value proposition to targeted customers
• innovative products and services
• high-quality, flexible, and responsive operating processes
• excellent post-sales support
 Organizational Learning & Growth:
• develop skilled, motivated employees;
• provide access to strategic information
• align individuals and teams to business unit objectives

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Translating Vision and Strategy: Four

Perspectives FINANCIAL
“To succeed Objectives Measures Targets Initiatives
financially, how
should we
appear to our
shareholders?”

CUSTOMER INTERNAL BUSINESS PROCESS

“To achieve our Objectives Measures Targets Initiatives “To satisfy our Objectives Measures Targets Initiatives
vision, how Vision and shareholders
should we and customers,
appear to our Strategy what business
customers?” processes must
we excel at?”

LEARNING AND GROWTH

“To achieve our Objectives Measures Targets Initiatives
vision, how will
we sustain our
ability to
change and
improve?”

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Balance Scorecard – Financial

Perspective
Financial

Balance revenue growth and productivity improvement.

 Revenue Growth -> Revenue from new markets, new products, and new customers;
and increase value to existing customers by deepening relationships with them
through expanded sales—for example, cross-selling products or offering bundled
products instead of single products.
 Productivity Improvement -> Improve the company’s cost structure and use assets
more efficiently

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Balance Scorecard – Customer

Perspective
Customer

Differentiate your firm from competitors -> Choose operational excellence,

customer intimacy, or product leadership
 Operational excellence -> Excel at competitive pricing, product quality and selection,
speedy order fulfillment, and on-time delivery.
 Customer intimacy -> Quality of relationships with customers, exceptional service and
the completeness of the solutions
 Product leadership strategy -> Functionality, features, and overall performance of
products or services

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Balance Scorecard – Internal Process

Perspective
Internal Processes

Identify operational, customer-relationship, and innovation processes to

support customer and financial goals
 Build the franchise by innovating with new products and services and by penetrating
new markets and customer segments
 Increase customer value by deepening relationships with existing customers
 Achieve operational excellence by improving supply chain management, the cost,
quality, and cycle time of internal processes, asset utilization, and capacity
management
 Become a good corporate citizen by establishing effective relationships with external
stakeholders

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Balance Scorecard – Learning and

Growth Perspective
Learning and Growth

Define the skills, technologies, and corporate culture needed to support the
strategy
 Align human resource strategy -> recruitments, compensation, trainings
 Align IT systems

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Managing Four Strategy Processes

Translating the Vision
 Clarifying the Vision
 Gaining Consensus

Communicating and Linking

 Communicating and educating Feedback and Learning
Balance
 Setting goals  Articulating the shared vision
Scorecard
 Linking rewards to performance  Supplying strategic feedback
measures

Business Planning
 Setting Targets
 Aligning Strategic Initiatives
 Allocating Resources
 Establishing Milestones

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Application – Low cost Carrier

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Thank You………..

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