A Survey on the Balanced Scorecard for Yunnan Lucky Air

The Chinese airline industry is a closely regulated industry which provides limiting flexibility to both new as well as growing airlines. Inside the modern times many low-cost airlines have mushroomed, Lucky Air being one of them. Lucky Air was founded in July 2004 with a short capitalisation of US$2. 2 million. The ownership of the airline is with Hainan Airlines, Shanxi Airlines and Yunnan Shilin Tourism Aviation. The air travel prevails in a congested field of around 15 low-cost Chinese language airlines. The air travel, though growing, anticipates a potential press in its business. The management of Yunnan Lucky Air, hereinafter known as Lucky Air, contacted us to advice them on monitoring their performance meticulously to be able to achieve their organisational mission and objectives. After initial discussions with the management of the airlines, my team has advised the use of a Balanced Scorecard to screen its performance. I present in this report balanced Scorecard for Lucky Air that translates the airline's quest and strategy into a thorough set of performance procedures.

Recent Tendencies in Blessed Air

Lucky Air happens to be based in Kunming in People's Republic of China. The airline has its main basic in Dali air-port and runs its plane tickets between Dali to Kunming and Xishuangbanna. The routes in this region have greatly contributed to most of its profits. It is slowly reaching out to other locations in China.

The overall growth of the flight has been facilitated by the limited course licensing insurance plan of the Chinese language administration that has given Lucky Air a close to monopoly status within Yunnan. The amount of passengers carried by the flight has grown from 500, 000 individuals over 5, 746 airline flight time in 2006 to at least one 1. 2 million over 17, 875 total journey hours. Through the same period, its operating revenue tripled from US$31. 2 million to US$104. 3 million.

Over the modern times, Lucky Air has also grown in terms of flights to and from areas outside the Yunnan province. As with early 2008, the excess routes displayed almost 87 of its 150 every week plane tickets by the air travel.

Lucky Air Strategy

Lucky Air works as a low-cost, high-efficiency air travel. This is the basis of its key strategy. The low-cost and high efficiency is managed through:

Using single kind of aircraft resulting in reduced maintenance and operational costs.

Having only one category of seats class, in doing so simplifying charges.

Having no couch projects or in-flight entertainment.

Increasing on-time departure and appearance by having short haul point-to-point routes.

Operating typically in secondary towns to avoid congestion and reduce getting costs.

As an integral part of its development strategy, recently Lucky Air has tried to build its competitive advantages by concentrating on e-commerce. Customers can buy and refund tickets online by paying 5% to 20% significantly less than somewhere else. The airline has created an network for its passengers and hopes to attain more customers straight via its website and build more brand recognition and a faithful customer base. In addition, Lucky Air has committed to own call centres to aid ticket arranging.

Balance Scorecard for Lucky Air

Lucky Air's strategy rests around it being a low-cost, high-efficiency flight. A scorecard can gauge the airline's performance across four different but associated perspectives that derive from its perspective, strategy and objectives. These perspectives include: Financial, Customer, Internal and Learning & Expansion.

The left-hand area of the diagram symbolizes the cause-and-effect interactions across the four perspectives that explain low cost and high-efficiency strategy. (Refer Appendix A for an explanation of the Lucky Air Scorecard and Appendix B for Cause and Marriage between perspectives)

Benefits and Limitations of the Scorecard

Like some other performance way of measuring tool, balanced Scorecard is not foolproof. Prior to the scorecard that is created for Lucky Air is integrated, the benefits and limitations of the scorecard have to be examined and comprehended.

Benefits of Lucky Air Scorecard

"Balance Scorecard has led companies to build up a number of corporate scorecards suggesting a process approach to improvements in performance measurements. " (Source: Epstein and Birchard, 2000 and Hoque and Adam 1997). The benefits that may be obtained from balanced Scorecard depend on not just its design but also what it is employed for and exactly how it is applied.

In general, a Balanced Scorecard can help Lucky Air:

Enhance traditional financial accounting actions of Lucky Air by including certain non-financial options. Thus, Lucky Air, by way of a Balanced Scorecard, can verify the individuals of financial performance by concentrating at least three other perspectives: customers, inside business techniques, and learning and development. (Source: Kaplan and Norton, 1992, 1996).

Acquire an efficient means for obviously translating a firm's eyesight and strategy into tool for interacting the firm's strategy to the various parts of the organisation. Regarding Lucky Air, the Balanced Scorecard can show how concentrating on the customer and the assistance can lead to increased income. (Source: Chow, 1997; Source: Kaplan, 1992)

Motivate performance against established strategic goals. A small number of critical actions have been determined for each point of view and the corresponding focuses on have been identified. The performance steps force managers to concentrate on the options that are most critical. The goals provide professionals with a construction to manage the many activities in line with the corporate objectives. For example, a director can clearly observe that managing on earth time is crucial and it needs to be held below 20 minutes.

Ensure that its employees understand the long-term strategy of the company and also the association between your employees' activities and the chosen strategic goals. It can provide strategic responses and promote learning within the airline through the monitoring of short-term tactical results.

Allocate resources and placed priorities predicated on the initiatives' contribution to long-term proper objectives. (Source: Kaplan and Norton, 1996).

Evaluate and assess the decisions, procedures, programs of the air travel. For example, the success or elsewhere of the decision of implementing e-commerce as an enlargement strategy by Lucky Air can be examined in terms of the four perspectives and its impact on the profitability of the airline.

Fosters organisational learning and continual improvement when it is employed as a tactical management tool.

Limitations of Lucky Air Scorecard

Though Balanced Scorecard may be an effective tool for many organisations, it may not help in improvement of performance of most organisations. A WELL-BALANCED Scorecard is merely a tool and the deployment of the tool rests with the flight itself. It is not easy to provide functional assistance for deployment of the scorecard. A number of the key restrictions that can cause a Balanced Scorecard effort at Lucky Air to are unsuccessful are as follows:

Effectiveness of the balanced scorecard depends on a well identified strategy and a knowledge of the linkages between tactical objectives and metrics. (Source: Howard Rohm pp. 4). If this is missing its deployment will be unsuccessful. The largest restriction of the Lucky Air scorecard is the fact that it's been designed by an exterior team of consultants who have been in dialogue with some key players in the flight. It didn't involve a cross-section of the air travel in developing the system. Thus if the scorecard of Lucky Air fails to link the correct drivers in the inner and learning and expansion perspective to the required results in the financial and customer perspectives, it will not be effective.

A scorecard might not succeed if it includes a few procedures for each perspective. For example, success of Lucky Air isn't just due to working out and desire of the bottom crew but the complete personnel. Thus a scorecard with too few measures may not depict enough of Lucky Air's strategy and will not signify a balance between desired outcomes and performance drivers of the outcomes. Likewise if too many measures are included, the manager's attention gets so diffused that he may pay insufficient focus on those procedures that can make the utmost impact.

No well-balanced scorecard can be flawless regarding its design. The Lucky Air scorecard too may have certain design flaws which may not be noticeable now. These will only be diagnosed when the scorecard is applied. It is merely over a period of time a company will find out about the effective drivers of performance. (Source: Norreklit, 2000)

The scorecard alone will never be effective if Lucky Air's top management is not committed to it. The very best executives may end up taking a look at Balanced scorecard as a "quick fix" that can easily be installed in the flight. The scorecard may have its restrictions if the top management simply uses it as a checklist for operational improvements or to expand the reimbursement system to add non-financial methods. (Source: Atkinson, A. et al, 2004)

The scorecard seems to have too much inside focus.

The scorecard is only depicting incentives for desired behaviour changes in the ground crew rather than focusing on other employees.

Conclusion and Recommendation

A scorecard balances traditional financial procedures of success such as income and gain on capital with non-financial methods of the individuals of future financial performance. It could prove to be a powerful tool for Lucky Air if it's correctly deployed by the airline. Appropriate deployment will require complete dedication from all levels in the company by making its execution everyone's job. Additionally, the original Balanced Scorecard should only be taken as a starting place and must be looked upon on an ongoing basis. Recurrent reviews of the scorecard will be required and new performance procedures identified as a well-balanced Scorecard evolves over a period.

Data on various procedures or metrics needs to be collected on a regular basis and the goals of the metrics should be sufficiently associated with rewards and incentives to stimulate their achievement.


Appendix A: Description of the Lucky Air Scorecard

The classes which can be formed and the variables which might be put in the total amount scorecard are:

Financial: How is success assessed by Lucky Air's owners, specifically, Hainan Airlines, Shanxi Airlines and Yunnan Shilin Tourism Aviation? The financial parameter can be evaluated by assigning principles to variables like total earnings or increase in revenue from tickets, total amount refunded scheduled to cancelled seat tickets etc. It is also measured in changes in the airplane leasing costs, preserving and working costs etc.

Customers: This is the customer perspective. It focuses how the airline creates value for the customers. Customer perspective provides an insight in to the perceptions customers carry for Lucky Air.

Internal: What interior operations should Lucky Air stand out in to fulfill customers and shareholders? Internal Operations can be known from turnaround time, on-ground time, entrance and departure delays, volume of ticketing errors, customer care services etc. This might assist in attaining a concept of the operations of the business involved.

Learning and development: What worker capacities, information systems and Lucky Air's weather does the flight need to constantly improve its interior functions and customer associations? It targets the inspiration and training of the team members.

Starting at the bottom of the diagram, the strategy has a learning and expansion objective to teach and motivate surface team with the expectation that this will lead to better improved earth turnarounds, from arrivals to subsequent departures, because of its planes. This inside objective permits Lucky Air to have its planes depart promptly and to progress utilisation of its airplanes and journey crews, further enabling it to earn income even at prices that are minimum on the market. It also targets improvement of internal processes to appreciate bigger revenue opportunities. The low prices and on-time departures attract more customers, improve customer loyalty and business lead to a rise in earnings. The blend of revenue growth and low costs finally results high profits and high go back on resources.

The strategy is clearer through the cause and effect interactions among aims in each one of the four healthy scorecard perspectives. These can be stated as follows:

Increase earnings through more sales to existing and clients (financial)

Grow to be service focused ( customer perspective)

Excel in providing services through ongoing process improvements ( inside)

Bring into brand employee bonuses and rewards with the strategy (learning and expansion)

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