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Tuesday, April 2, 2019

A Report on the Balanced Scorecard for Yunnan Lucky Air

A Report on the equilibrate batting order for Yunnan well-off line of creditThe Chinese air passage perseverance is a heavily regulated industry which provides limiting flexibility to both fresh as well as growing airline businesss. In the recent years many a(prenominal) low-priced airlines view as mushroomed, thriving air being one of them. fortunate Air was founded in July 2004 with an initial capitalisation of US$2.2 million. The ownership of the airline is with Hainan Airlines, Shanxi Airlines and Yunnan Shilin Tourism Aviation.The airline exists in a crowded field of around 15 affordable Chinese airlines. The airline, though growing, anticipates a potential squeeze in its business. The precaution of Yunnan well-off Air, hereinafter referred to as aureate Air, approached us to advice them on supervise their performance closely so as to achieve their make-upal mission and objectives. after(prenominal) initial discussions with the management of the airlines, my team has recommended the use of a fit bill to monitor its performance. I present in this report a equilibrize card for well-disposed Air that translates the airlines mission and outline into a countrywide set of performance measures.Recent Trends in comfortable AirLucky Air is currently based in Kunming in Peoples Republic of China. The airline has its main base in Dali airport and runs its escapes between Dali to Kunming and Xishuangbanna. The way of lifes in this shargon have greatly contributed to most of its profits. It is slowly r each(prenominal)ing out to opposite(a) regions in China.The over every last(predicate) maturement of the airline has been drived by the limited route licensing policy of the Chinese government that has given Lucky Air a near monopoly status within Yunnan. The number of passengers carried by the airline has grownup from 500,000 passengers over 5,746 flight hours in 2006 to 1.2 million over 17,875 total flight hours. During the same peri od, its in operation(p) revenue tripled from US$31.2 million to US$104.3 million. over the recent years, Lucky Air has overly grown in scathe of flights to and from destinations out perspective the Yunnan province. As in early 2008, the additional routes represented approximately 87 of its 150 weekly flights by the airline.Lucky Air schemaLucky Air operates as a low-cost, juicy-efficiency airline. This is the basis of its key scheme. The low-cost and high efficiency is maintained doneUsing single typewrite of aircraft leading to reduced maintenance and operational costs.Having unaccompanied one menage of seat class, thereby simplifying pricing.Having no seat assignments or in-flight entertainment.Increasing on- age freeing and arrival by having short haul point-to-point routes.Operating mostly in secondary cities to avoid congestion and reduce landing costs.As a part of its expansion outline, in recent times Lucky Air has tried to build its competitive advantage by focu sing on e-commerce. guests spate buy and refund tickets online by paying 5% to 20% less than anywhere else. The airline has created an online community for its passengers and hopes to reach more nodes immediately via its website and build more brand recognition and a loyal customer base. In addition, Lucky Air has invested in own call centres to facilitate ticket booking.Balance Scorecard for Lucky AirLucky affectation strategy rests around it being a low-cost, high-efficiency airline. A add-in arouse measure the airlines performance across four different but link perspectives that are derived from its vision, strategy and objectives. These perspectives accommodate Financial, Customer, Internal and Learning Growth.The left-hand side of the diagram represents the cause-and-effect relationships across the four perspectives that describe low cost and high-efficiency strategy. (Refer appendix A for an explanation of the Lucky Air Scorecard and Appendix B for Cause and Relatio nship between perspectives)Benefits and Limitations of the ScorecardLike any other performance measurement putz, a Balanced Scorecard is not foolproof. in the first place the carte du jour that has been casted for Lucky Air is implemented, the benefits and limitations of the scorecard need to be examined and understood.Benefits of Lucky Air ScorecardBalance Scorecard has led companies to give away a variety of corporate scorecards suggesting a process approach to innovations in performance measurements. (Source Epstein and Birchard, 2000 and Hoque and James 1997). The benefits that clear be obtained from a Balanced Scorecard depend on not just its design but also what it is used for and how it is applied.In general, a Balanced Scorecard will economic aid Lucky AirEnhance traditional pecuniary accounting measures of Lucky Air by including certain non-financial measures. Thus, Lucky Air, through a Balanced Scorecard, can examine the drivers of financial performance by focusing at least three other perspectives customers, internal business processes, and learning and growth. (Source Kaplan and Norton, 1992, 1996). win an effective means for understandably translating a firms vision and strategy into pricking for communicating the firms strategy to the heterogeneous sections of the organisation. In the case of Lucky Air, the Balanced Scorecard can show how focusing on the customer and the operate can lead to increased profits. (Source Chow, 1997 Source Kaplan, 1992)Motivate performance against naturalized strategic goals. A handful of critical measures have been identified for each perspective and the corresponding targets have been outlined. The performance measures force managers to focus on the measures that are most critical. The targets provide managers with a framework to manage the various activities in line with the corporate objectives. For example, a manager can clearly see that managing on aim time is critical and it take to be kept below 2 0 minutes.Ensure that its employees understand the long-term strategy of the organisation and also the association between the employees actions and the chosen strategic goals. It can provide strategic feedback and promote learning within the airline through the monitoring of short-term strategic results.Allocate resources and set priorities based on the enterprisingnesss contribution to long-term strategic objectives. (Source Kaplan and Norton, 1996).Evaluate and judge the decisions, policies, plans of the airline. For example, the advantage or otherwise of the decision of adopting e-commerce as an expansion strategy by Lucky Air can be examined in terms of the four perspectives and its strike on the profitability of the airline.Fosters organisational learning and continual improvement when it is used as a strategic management tool.Limitations of Lucky Air Scorecardthough Balanced Scorecard whitethorn be an effective tool for many organisations, it may not help in improvement of performance of all organisations. A Balanced Scorecard is only(prenominal) a tool and the deployment of the tool rests with the airline itself. It is not easy to provide practical guidance for deployment of the scorecard. nigh of the key limitations that can cause a Balanced Scorecard initiative at Lucky Air to fail are as follows strength of a symmetricalnessd scorecard depends on a well defined strategy and an understanding of the linkages between strategic objectives and metrics. (Source Howard Rohm pp.4). If this is lacking its deployment will be unsuccessful. The biggest limitation of the Lucky Air scorecard is that it has been designed by an international team of consultants who have been in discussion with some key players in the airline. It did not involve a cross-section of the airline in create the system. Thus if the scorecard of Lucky Air fails to link the correct drivers in the internal and learning and growth perspective to the desired outcomes in the financial and customer perspectives, it will not be effective.A scorecard may not be effective if it includes a few measures for each perspective. For example, success of Lucky Air is not only a result of the culture and motivation of the primer crew but the entire staff. Thus a scorecard with too few measures may not depict decent of Lucky Airs strategy and does not represent a proportionality between desired outcomes and performance drivers of the outcomes. Likewise if too many measures are included, the managers attention may get so diffused that he may pay insufficient attention to those measures that can make the maximum impact.No balanced scorecard can be flawless with respect to its design. The Lucky Air scorecard too may have certain design flaws which may not be visible now. These will only be detected when the scorecard is implemented. It is only over a period of time that a company will learn about the effective drivers of performance. (Source Norreklit, 2000)The scorecard on i ts own will not be effective if Lucky Airs top management is not committed to it. The top executives may end up looking at Balanced scorecard as a quick fix that can easily be installed in the airline. The scorecard may have its limitations if the top management simply uses it as a checklist for operational improvements or to expand the compensation system to include non-financial measures. (Source Atkinson, A. et al, 2004)The scorecard seems to have too much internal focus.The scorecard is only depicting incentives for desired behaviour changes in the ground crew and not focusing on other employees.Conclusion and RecommendationA scorecard balances traditional financial measures of success such as profits and overtake on capital with non-financial measures of the drivers of future financial performance. It can prove to be an effective tool for Lucky Air if it is appropriately deployed by the airline. entrance deployment will require complete commitment from all levels in the organ isation by making its implementation everyones job. Moreover, the initial Balanced Scorecard should only be taken as a starting point and needs to be looked upon on an ongoing basis. Frequent reviews of the scorecard are take and new performance measures identified as a Balanced Scorecard evolves over a period of time.Data on various measures or metrics needs to be collected on a fixture basis and the targets of the metrics should be sufficiently linked to rewards and incentives to motivate their accomplishment.cecal appendageAppendix A Explanation of the Lucky Air ScorecardThe classes which can be formed and the parameters which may be put in the balance scorecard areFinancial How is success measured by Lucky Airs owners, namely, Hainan Airlines, Shanxi Airlines and Yunnan Shilin Tourism Aviation? The financial parameter can be evaluated by assigning values to parameters like total revenue or increase in revenue from tickets, total amount refunded due to turned tickets etc. It i s also measured in changes in the plane leasing costs, maintaining and operating costs etc.Customers This is the customer perspective. It focuses on how the airline creates value for the customers. Customer perspective provides an insight into the perceptions customers hold for Lucky Air.Internal What internal processes should Lucky Air excel in to satisfy customers and shareholders? Internal Processes can be known from turnaround time, on-ground time, arrival and take time offure delays, number of ticketing errors, customer plow services etc. This would help in attaining an idea of the operations of the presidential term in question.Learning and growth What employee capabilities, information systems and Lucky Airs clime does the airline need to continually improve its internal processes and customer relationships? It focuses on the motivation and training of the crew members.Starting at the bottom of the diagram, the strategy has a learning and growth objective to train and mot ivate ground crew with the expectation that this will lead to better improved ground turnarounds, from arrivals to subsequent departures, for its planes. This internal objective enables Lucky Air to have its planes depart on time and to get better utilisation of its airplanes and flight crews, merely enabling it to earn profits even at prices that are low in the industry. It also focuses on improvement of internal processes to realise bigger revenue opportunities. The low prices and on-time departures attract more customers, improve customer fealty and lead to a growth in revenues. The combination of revenue growth and low costs finally results in high profits and high return on assets.The strategy is clearer through the cause and effect relationships among objectives in each of the four balanced scorecard perspectives. These can be give tongue to as followsIncrease revenues through increased sales to existing and new customers (financial)Grow to be service oriented ( customer p erspective)Excel in providing services through continuous process improvements ( internal)Bring into line employee incentives and rewards with the strategy (learning and growth)

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