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1. Kelly Transport started its operations
way back in 1945; it main services include the delivery of goods via road
transport. Over the years, the business has grown both in profit and in
market terms. It has implemented new strategies, acquired new markets and
serviced other business sectors. While the business is still operating
well, Bill Kelly, the present owner, believed that the demands of the
business and the opportunities in the industry require a more responsive
strategy for Kelly Transport. The main issue of the business is that its
activities were not working well in other parts of the continent. The
business used to deliver to other countries outside UK through ferry or
tunnels, but the volume was not as high as in UK.
Due to this, the most
effective strategy for the business is to expand its operations to other
parts of the continent. Through this strategy, the business will be able
to reach out to their customers more and promote its services. Moreover,
putting up additional branches in other countries will make transport
services easier and faster; this is an important aspect that the business
should maintain since this made them successful in UK. Putting up
additional branches can also benefit the business as it will be exposed to
other foreign sectors that are in need of transport services. For
instance, if the food sector of Kelly Transport is declining in UK, other
countries may offer greater opportunities in this sector. Most
importantly, expanding to other countries can help the business overcome
the growing competition in the transport industry. Business expansion
strategy helps in reducing the company’s dependence on fewer markets as
well as to spread out business risks (Hollensen, 1998).
In order to carry out this
strategy, a plan must be developed. Below is an outline of the activities
that will have to be carried out for the chosen strategy:
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Conduction of various business
researches
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Making of the necessary loans
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Development of business plans (location
of the branches, hiring of employees, designing of operational
procedures, marketing activities)
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Performance Measurement
The first section of the outline involves
the study of the different foreign environments and markets that could
serve as good starting points for Kelly Transport. The company can hire
market and business researchers for this purpose. Through this initial
step, the business will be able to identify different trends, needs and
preferences of the consumers as well as the demands of the new business
environment. These researches are important in identifying possible
problems that Kelly Transport may encounter in its expansion plan; the
researches will then help the company to be prepared for these risks.
Aside from conducting a whole new
research, the company may also use the market data obtained from its
services in other countries; these data will give them an idea, which
foreign market offers more chances of growth and opportunities.
Considering that the company is still trying to see the effects of this
strategy, it can start by selecting a single foreign location for
expansion. In this way, the business has greater control should business
problems arise.
The business will naturally need the
financial support to carry out its expansion strategy. In order to obtain
more accurate estimations, the business can consult financial and
accounting experts. The findings of the research and the selected location
of the new business branch can also be used for determining the expense of
the strategy. The third part of the outline requires the determination of
the essential components of the new business branch. These should be
determined so as to ensure the smooth operations of the new business.
Finally, the impact or outcomes of the
strategy needs to be assessed. By means of evaluating various performance
measures, Kelly Transport can easily determine whether the strategy is
opening new opportunities for the business and allowing market as well as
profit growth. The use of a performance measurement system will also help
the business identify areas of improvement and changes for better
strategic outcomes (Neely et al., 1996).
2.
As the company will need to measure the
outcome of its chosen strategy, Kelly Transport must identify the specific
measures it will have to evaluate. Neely and associates (2000) have in
fact stated that the performance measurement process goes through four
major stages. The first stage will be the selection of the performance
measures; the second step will be the design of the system. Here, the
process of collecting and reporting the results of the performance
measurement system will be determined. After these two stages, the system
can now be applied to the business. The final stage will involve the
redesigning of the system based on the future changes that the
organization will undergo.
In Kelly Transport’s case,
the main strategy is the expansion of the business in another country
within the continent. It is important that this strategy is efficiently
doing its purpose considering the resources allotted for its
implementation. Moreover, the future success of the business is largely
dependent on the strategy’s efficacy. It is then imperative that the
performance of the strategy is assessed. There are actually two major
measures of performance: the financial and non-financial measures. Both of
these measure types will be used for Kelly Transport.
Under the financial measure,
two indicators will be used. These include the sales and the operational
costs of the new business branch. As the company intends to become
flexible in handling various opportunities in the transport business, the
positive outcome of its sales can indicate that Kelly Transport is indeed
becoming more responsive to various business demands. The determination of
the operational expense on the other hand can be of use to the strategic
evaluation as it can suggest the efficacy of the new business’ cost
control. If the business can maintain low operational costs, this would
mean that the business have more chance to cover other new opportunities.
For the non-financial
measure, three indicators will be used. These include customer
satisfaction, leaders and employees appraisal, and innovation. Naturally,
if more and more customers are using the new business’ services, this
suggests that the expansion strategy has effectively increased the
company’s market and made it more flexible to a new opportunity; this
indicator is also equivalent to higher profit. The company greatly depends
on the performance of its workforce for its success. Hence, the evaluation
of its new strategy should include the performance appraisal of both its
business managers and employees.
By assessing the performance of the
employees, the company can determine their abilities and how these
abilities can help future business endeavors. If the employees and
business are exhibiting exemplary performance, the business will be more
flexible in servicing its new foreign market as well as future
opportunities. Finally, the ability of the employees to adapt to business
challenges by implementing innovative strategies should also be assessed.
It is expected that future years of operations for Kelly Transport will
involve several challenges and risks; if the business’ innovativeness is
high, this will suggest that the new business branch is flexible in
handling present and future business problems and strategies.
3.
In order to apply these performance
measures, specific implementation plan must be laid out. For the financial
indicators, the company can design a computer software that will monitor
sales and costs of the new business. Aside from obtaining a faster and
more accurate outcome, storing and securing these valuable company
information will be easier as well. A regular meeting will be help to
report the results of these indicators. In the presentation, it is useful
to compare the sales with the costs as well as comparing present finding
to past financial outcomes. In this way, the company can easily detect
whether the strategy is working as planned.
For the non-financial measures, the
company can develop an appraisal checklist for the business managers and
employees. The checklist should cover factors that could be of use to the
business (e.g. ability to handle different tasks, quality and quantity of
output, work attitude). A similar strategy may be applied for the
innovation indicator; here, the focus will be on the assessment of the
strategies used and their impact to the business goals. The customer
satisfaction on the other hand can be assessed in several ways; this could
either be through a short emailed questionnaire or the development of an
online feature where customers can send in their feedbacks about the
business’ service.
While the performance measure may be of
use to Kelly Transport, each measure has its own strengths and
limitations. For instance, the financial indicators involve accounting
information that goes through a number of audits and internal controls,
which in turn increase the measures’ reliability. As this measure involve
numerical figures, an objective assessment of performance can be achieved.
As most contemporary businesses are able to track
monthly as well as quarterly accounting information, linking the existing
accounting system to compensation and incentive schemes is relatively easy
for the management. Moreover, measuring performance based on financial
indicators provides a more direct and clearer impact of a particular
strategy. This in turn, results to a better and easier evaluation for the
senior management (Schiehll & André, 2003).
Though effective and
practical, using financial indicators for performance measurement also has
certain weaknesses. Since financial measures only assess numerical
outcomes on a certain period of time,
these are often perceived as
backward-looking and focused only on developing short term plans. The
financial returns may be an effective tool to measure the abilities of the
executives in managing the existing assets of the company. However, this
indicator does not precisely show the executive performance in aspects
with late returns. In other words, financial indicators are incapable of
showing how well a company performs in terms of strategic planning,
product development as well as its capabilities for growth and development
(Schiehll & André, 2003).
Because of the changing
practices and trends in business, various companies have realized the
purpose of measuring performance other than through financial measures.
Although, financial indicators are still significant factors for
performance measurement, particularly in the intense competitive business
environment, these indicators are no longer the main determinant of
profitability. Customer satisfaction, employee output, product quality and
business operations, collectively known as non-financial indicators, have
become important measures of performance as well.
By means of non-financial indicators,
maximization of profit has been achieved through the identification and
elimination of waste in the operations rather than in mere controlling of
the sales input and costs (Daroca & Nourayi, 2002).
As non-financial indicators are more
forward-looking, less aggregate and closely related to the business
operations, they are able to modify the focus of the manager as well as
aid directors in making better job evaluations of the management’s
outputs. According to Pedersen and Lidgerding (1995), non-financial
indicators of performance measurement is heavily based on common sense,
intelligence, creativity as well as the participants’ personal values. Due
to the decentralized nature of these factors, internal controls are
required for the new system, which in turn increases the integrity of the
organization. Moreover, this system promotes consistent, meaningful,
reliable and relevant measuring mechanism that is vital to business
success.
Nonetheless, this performance measures
are weak in terms of clarity and accuracy. As several factors could affect
a non-financial indicator, it is difficult to identify whether it can
truly contribute to the business. Moreover, measures like customer
satisfaction or employee performance are subjective factors that are
difficult to evaluate and analyze since they cannot be computed or
compared to any specific standards.
Considering that the performance measures
have their own distinct strengths and weakness, integrating both measures
can be an effective strategy to overcome their limitations. Moreover,
assessing both financial and non-financial measures will allows Kelly
Transport to see its business’ various sides. This will also help it in
identifying different factors that could contribute to its success or
failure. In conclusion, adapting two types of performance measures will
not only enable Kelly Transport to achieve success, but this will also
make it more flexible in designing more business strategies in the future.
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