Case Study of Kellyâ
Case Study of Kelly’s Transport (International) plc.
The case study was about Kelly’s Transport (International) plc. On the first part, the topic discussed is on the possible strategies for Bill, in order for him to become flexible in responding to the present opportunities for the next two years. Next is on the key performance measures he could use and how this measure is linked with the possible strategies cited. And on the last part, are the strengths and weaknesses of these measures and the way they could be implemented at the management and operational levels of the said business.
Outline of Possible Strategies
No one strategy is generally superior to the other. On average, all of them perform economically. Their success depends more on how well each is executed and less on the market environment of the business. In other words, a well-executed product leadership strategy can be successful in both dynamic and stable markets, as can a well-executed customer intimacy or operational excellence strategy. Each strategy does have its own key characteristics, as well as its individual requirements for successful execution.
For Kelly’s present business situation, product leadership strategy is appropriate. Product leaders seek to identify emerging opportunities and continuously strive to develop and deliver new products that exceed existing performance boundaries. They look for first-mover advantages that accrue to pioneering businesses from the often short-lived monopoly position the product enjoys, from the resultant reputation for innovation, from preferential access to both suppliers and distributors, and from the potential for creation of customer loyalty or buyer switching costs. The key task for product leaders is to maintain an environment in which focused creativity can flourish.
This type of activity, however, requires a culture that encourages experimentation and risk-taking, one in which well-developed plans that fail are often celebrated rather than punished. Product leaders usually work in multifunctional teams so that communication among the key areas of marketing, R&D, and production is rapid, leading to shorter response times and development cycles, They recognize the importance not only of profitability, but also of developing platform technologies and products that become the foundation for future products.
This can be mixed with the customer intimacy strategy. Here, they focus their efforts on building strong relationships with a select group of customers whose needs they understand deeply and who are willing to pay a premium for the service or special attention they receive. Accompanying this orientation is a focus on the lifetime value of a relationship, not just the profit from an individual transaction. From the business’s perspective, it costs only about one-fifth as much to make an additional sale to an existing customer as it is does to attract and sell to a new one. Thus, the concepts of “customer equity” and “customer share” instead of market share are central to the customer-intimate business.
Operational excellence is another option. This is the discipline of businesses that offer the lowest total cost to their customers. In many cases, this may mean the lowest price. In other cases, though, it means identifying other critical costs to customers, reducing them, and avoiding price competition. For example, a company charges more than its competitors for rapid document delivery. However, that price premium is more than offset by the customer’s confidence that the package will be delivered on time and by company’s ability to provide real-time document tracking. So the total cost to the customer associated with the document and its delivery is lower, even though the price is higher, because of the company’s operational excellence.
Applying this to Kelly’s situation, this will now be the case. Since Bill can see a great future for them in the pharmaceutical industry, the company must exert efforts to remain competitive in this area. They should take advantage of this strength and for them to gain the confidence, not only of present and future customers, but as well as investors. This will erase all their doubts on the financial capability of the business. In case of future expansions, they will easily lend the company the needed amount since they have confidence that the company has the ability of paying them in the future. For the food manufacturing business as well as the UK operation, it needed much attention as to the control of the activities. First, they should conduct a thorough study of the activities in the said areas, as well as market research and surveys of their customers regarding their service. In here, they can now create plans for the future basing on the gathered information from the said study. They needed not only short-term plans, but also long-term plans. This is to address their weakness on having no long-term plan. They should also consider on researching on a number of possible suppliers instead of having only one source. This is to compare prices and to get the least cost of the best quality resources they needed.
On Performance Measurement
Business units with a performance measurement focus that complements their market strategy are generally perceived to be superior performers by senior management. This is not to say that only one of those perspectives should be recognized in a given strategic context. Instead, one perspective should dominate, with lesser attention being given to the other two.
Control systems are the significant connection between strategy execution and strategy adjustment. It is naive to believe a strategy can be successfully executed consistently without adjustments or corrections, both minor and major. Business managers must monitor customer needs and preferences, competitors’ actions, technology development, and the performance of internal processes, as well as the overall financial condition of the business. The fundamental reason we measure anything in a business is to determine when and how we should shift behavior.
A multidimensional performance measurement and analysis system is the heart of an effective strategic control system. It provides the basis for organizational learning from an analysis of the results of the firm’s actions. But a control system that only measures a single performance (example: financial performance) is not enough, even if it measures several dimensions of it. Financial performance is an outcome. By the time that information is available, the game, or at least the inning, is probably over. The multidimensional approach should include leading indicators so that there is an opportunity to influence the final results.
One of the most popular multidimensional approaches to performance measurement is the recent work by Robert Kaplan and David Norton on the “Balanced Scorecard”. It is also the most popular one among managers. The balanced scorecard presents managers with four different perspectives on performance from which to choose the strategy-specific measures that become the centerpiece of the strategic control system. They are the perspectives on financial, customer focused, internally analytical and innovative.
Concerns on the identification of the key financial drivers in creating shareholder wealth are what the financial perspective is all about. Shareholder wealth is created when the business earns a rate of return on invested capital that exceeds its cost of capital. Growth amplifies this effect. A common analytical approach is to decompose return on equity, a common representation of return on capital, into its component ratios. The major component ratios are profit margin, asset turnover, and leverage; these should be the core of the financial perspective. Other important measures may be concerned with cash flow or working capital management.
The customer perspective covers measures regarding corporate or brand awareness and image, customer satisfaction, customer retention, and customer profitability. They may be leading indicators of what the financial measures will subsequently reveal. This is despite of the fact that these measures lack mathematically precise relationship with creating shareholder value, unlike the financial measures. For example, increases in brand awareness typically precede increases in preference, which leads to sales growth.
The internal perspective, on the other hand, is primarily concerned with the efficiency of the entire business system. It will be most effective when it views the firm as a system of business processes, all of which must be coordinated for the purpose of creating customer value. Compared to focusing narrowly on a metric such as inventory level, it may be more informative to analyze manufacturing cycle time with its implications for cost and reliability. Even if inventory level is critical, other internal processes or external demands may likely have influence on it. Order-to-delivery cycle time, response time for dealing with customer complaints, and total labor content are among the probable business processes considered to be important. Time is a key influence on many of these internal processes.
And lastly, concerns on the adaptation effectiveness of the business to changing conditions are the primary interest of the innovation perspective. In other words, it tells you how well the firm can learn to create customer value more effectively with new products and services, and more efficiently based on new internal processes. Whereas the internal perspective focuses on continuous improvement exemplified by the learning curve or experience effects, and the customer perspective on learning about the business’ competitive position directly from the market, the innovation perspective requires a willingness to learn through experimentation and exploration. The key here is to learn from those experiences and improve on the central innovation processes. Important metrics include time from concept to market introduction, design for manufacturability, and value as a platform for future offerings.
Performance measures define the limits placed on vehicle configurations and loadings. These limits provide the set of constraints under which vehicle designers/ manufacturers and transport operators will seek to maximize the fleet productivity involved in any particular task. Generally, this can be done by increasing the mass of goods carried per trip and/or the volume of goods carried per trip. It can also be done by decreasing the average travel time per trip, the average travel distance per trip, the number of trips required to complete the task, the average rate of fuel consumption of the vehicles and/or the vehicle loading and unloading times.
Implementation of Performance Measures
Organizations seem to be settling on a blend of the two, in which there is the balance between the customers’ expectation for outcome-related performance information with the company’s need for useful output data that has meaning to managers and decision-makers. While outcome measures may reflect what the customer sees and expects in the way of performance in a more precise manner, the role of government institutions such as Department of Transportation (DOT), as a long-term conservator and owner of the system demands a broad range of measure types. In addition to system outcome expressed in terms with which the customer can readily identify, DOTs need to measure the efficiency of their programs as well as their progress on fronts that are not readily visible to the public. Customers are perceived to be focused on programs with near-term, visible impact and to under-value long-term investments in underlying system integrity and maintenance. Whether this is true in a certain state or region should be confirmed through surveys, but regardless, planners and engineers do recognize the importance of balancing the customer imperatives with longer-term system preservation requirements.
Use of performance data requires an evolutionary approach to the process. There appears to be a natural progression or trend within some agencies using performance data to proceed from detailed, technical or system management applications to more strategic, business-planning applications.
Several DOTs with significant experience in application of performance measures are moving towards true multimodal applications. This created added challenges to data collection and maintenance, since different owners and operators are involved than just the state DOT.
Performance targets are the ones becoming more dominant. It is the identification of a desired level of achievement on a specific performance measure by a particular date or period of time elapsed. The use of performance targets helps to identify “performance gaps” which can then be linked to business planning and budgeting. Unlike the use of continuous but non-specific improvement goals over time, it does exactly the opposite.
In terms of the measures of mobility, there is particular interest here. Also, there exists a more limited hands-on experience in developing and using such measures. For instance, organizations need to be sure on defining what mobility means to their managers, decision-makers, and/or customers. They report that mobility takes on many different connotations depending upon the audience. It may even incorporate different characteristics which are extra optional. It may include characteristics such as accessibility and reliability. Since the DOT is often not be the direct operator of some of the modes, and thus will not be the owner of the data, further difficulties will arise on both the questions and the answers. This happens when mobility is to be measured across multiple modes.
There is also considerable interest in mobility indices. That is, aggregated measures that considers several different components of mobility rolled-up into a single measure or index. In spite of this, opinions were divided, as to whether single indices are appropriate for describing mobility, and perhaps for other system focus areas as well. Mobility may be particularly resistant to meaningful indexing, because it is a complex concept and one that is measured in such a wide variety of ways in different states. More states seem to have pursued development of indexes in other system areas such as safety, system condition, and maintenance, than in mobility.
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