INTRODUCTION

According to the report “Perú: Estructura Empresarial, 2016” by ^{Instituto Nacional de Estadística e Informática (2017}), 94% of the total number of companies in Peru are micro-enterprises and 4% are small enterprises. All these companies face an increasingly competitive and dynamic business environment. Business management systems, business models, emergence of new local and/or external competitors, changes in customer preferences, technological effects on the supply chain and production processes, etc., are some of the factors that determine the level of productivity and the ability of companies to compete successfully in the market. Most companies that fail to adapt to these changes are forced out of the market or experience reduced profitability levels that hinder their growth.

Operating in this new competitive and dynamic environment, business owners and managers must implement an adequate business management system that provides direction to the company in the short, medium and long term. An understanding of the ultimate goal of the company makes it possible to determine objectives, develop strategies, seek the best human talent available in the market, and set up an effective system for measuring performance and economic and financial results. As ^{Suárez-Espinar (2018}) states:

La gestión empresarial es un rasgo principal que debe tener todo hombre de negocios. La misma dentro del sistema empresarial es un instrumento fundamental para su progreso económico, ya que representa la dinámica de una economía de mercado, que es la que garantiza que la oferta cubra a la demanda en distintas actividades productivas, creando conjuntamente procedimientos que hacen que los costos bajen continuamente y beneficien al consumidor [Business management is a key feature that every businessman is expected to master. Within the business system, it is a fundamental instrument for economic progress as it represents the dynamics of a market economy, which guarantees that supply meets demand in different productive activities, jointly creating procedures that constantly lower costs and benefit the consumer]. (p. 45)

Similarly, ^{Aguilar (2018}) emphasizes that “Los sistemas de gestión permiten a las empresas desarrollar sus actividades de una forma coherente y estructurada que se orienta al logro de la mejora continua que beneficia a la organización en términos competitivos [Management systems allow companies to carry out their operations in a coherent and structured way, focused on achieving continuous improvement that benefits the organization in competitive terms]” (p. 26).

A common characteristic that many small-size Peruvian enterprises share is the lack of a business management model that allows them to improve their productivity and competitiveness. The Balanced Scorecard (BSC) is a modern and effective tool for improving the business management of any profit and non-profit company, so its study is relevant for the improvement of business management and production lines. According to ^{Córdova (2008}):

El Balanced Scorecard proporciona una serie de medidas diseñadas para unir la brecha entre la gran visión de la empresa y las acciones del día a día de los empleados. Ayuda a asegurar que los sistemas internos y los procesos estén orientados hacia la satisfacción del cliente y el desempeño financiero [The Balanced Scorecard offers a series of measures designed to bridge the gap between the company’s grand vision and employees’ everyday actions. It helps ensure that internal systems and processes are oriented toward customer satisfaction and financial performance]. (p.89)

This study was carried out in a small-size family business with more than 10 years of experience as a supplier of ink for the Peruvian graphic industry. This company had no business management system in place; in recent years, it experienced serious problems increasing its sales volumes and achieving economic and financial sustainability. Considering the problematic situation of the company, to what extent will the implementation of the BSC improve the management of the company under study?

The objective of this study is to improve business management, which would be reflected mainly in the increase in sales and profitability of the company in the short and medium term. The following general hypothesis was formulated based on the above: The design and implementation of the BSC improves the business management of the company under study. The following specific hypotheses were also proposed:

HE₁: The design and implementation of the BSC improves business management in terms of sales growth of the company under study.

HE₂: The design and implementation of the BSC improves business management in terms of profitability of the company under study.

This research provides new knowledge through the methodology used and the results obtained from the design and application of the BSC in the company under study. Specifically, in the field of strategy and management of small industrial companies, such knowledge is novel and can be replicated in companies with similar characteristics.

This research is justified in a pragmatic way as its main beneficiaries are the company in general and its owners and workers in particular. It is also justified in a theoretical way as it delves into the field of management and the various management tools, such as the strategic plan, the analysis of the macro and micro business environment, the structure and strategic management of companies, and the BSC, among others. The methodology used, and the findings, conclusions and recommendations obtained may have a positive impact on the company under study in the short and medium term. It may also serve as a benchmark for other research with similar characteristics, and/or may be replicated in other Peruvian companies of equal, smaller or larger size in either the same or a different economic sector.

The study, design and implementation of the BSC were supported by the owners and collaborators of the company; nevertheless, the company’s name will not be disclosed for reasons of confidentiality.

THEORETICAL FRAMEWORK

To address the BSC, the emergence of management theory within the history of social disciplines must be reviewed. In this regard, there are several definitions of management, one of which is that of ^{Fayol (1916}), who states that “Management is to forecast, to organize, to command, to co-ordinate and to control” (p. 7). ^{Koontz, Weihrich and Cannice (2012}) define it as “the process of designing and maintaining an environment in which individuals, working in groups, efficiently accomplish selected aims” (p. 4).

Management sciences have evolved under several approaches such as the classical approach, the humanistic approach and the neoclassical approach. Following the end of World War II, business managers began to stress the importance of factors they could not control and affected the company, such as uncertainty, risk, instability and the ever-changing environment. This led to the emergence of strategic planning. In the 1990s, strategic management emerged, based on the theoretical and academic sources of strategic planning. For ^{David (2008}), strategic management involves thinking about the future (strategic planning) and creating the future (responding quickly by being flexible, creative and innovative). The BSC emerged in the United States, within modern, strategically-managed organizations as a successful method of business management. Its creators were Robert Kaplan, a Harvard University accounting professor, and David Norton, a business consultant at Nolan Norton. In 1990, Kaplan and Norton became convinced that financial measures of business activity were becoming obsolete; this insight prompted them to conduct a study to analyze new methods for measuring performance and results. A dozen heavy industry and high-tech companies participated in this study called “Measuring Performance in the Organization of the Future: A Research Study”.

^{Kaplan and Norton (2000}) state that the BSC evolved from a system of indicators improved to measure performance, to become a central management system; they point out that “The balanced scorecard provides executives with a comprehensive framework that translates a company’s vision and strategy into a coherent set of performance measures” (p.37).

The BSC has been used by manufacturing, service, profit and non-profit, public and private companies both in developed and developing countries. As years passed by, the BSC evolved into a management tool. Initially, it was used for two purposes: measuring the work performed by the company and, later on, for implementing the company’s strategy.

According to ^{Niven (2003}), “The core elements of any effective Balanced Scorecard are mission, values, vision, and strategy” (p. 17). He adds that “The Balanced Scorecard translates our vision and strategy into a coherent set of measures in four balanced perspectives” (p. 44).

Kaplan and Norton (2000) add that, “Además de una visión compartida, el Cuadro de Mando Integral establece un modelo común de actuación y comunica un enfoque holístico a la vinculación de esfuerzos y logros individuales con los objetivos de la unidad de negocio [More than a shared vision, the Balanced Scorecard establishes a common pattern of performance and conveys a holistic approach to linking individual efforts and achievements to business unit goals] (p. 266), see Figure 1.

Source: Niven (2003).

Figure 1 The BSC Translates Mission, Values, Vision and Strategy. 

Definition: The BSC is a long-term strategic management system for all types of organizations, which links the organization’s strategy with operations and their respective managers through strategic maps, indicators, goals and strategic actions.

Perspectives of the BSC

The BSC comprises four perspectives which are applied to the company under study (^{Kaplan and Norton, 2000}):

• Financial Perspective. Financial performance measures indicate whether the implementation of strategy in a company contributes to its improvement through objectives, indicators and strategic actions. There are three strategic themes in the financial perspective: revenue growth and mix, cost reduction/productivity improvements, and asset utilization/investment strategy. The objectives and indicators are related to the company’s profitability, return on investment, return on assets, among others.

• Customer Perspective. It allows companies to compare their customers' key indicators (satisfaction, retention, acquisition and profitability) against the customer and market segments in which the company operates. Also, it allows the identification and measurement of customer value propositions. Core indicators include market share, customer acquisition, customer satisfaction and customer profitability.

• Internal-Business-Process Perspective. Company managers identify the most critical processes related to the achievement of shareholder and customer objectives. Objectives and indicators are thus translated into strategies aimed at satisfying shareholder and selected customer expectations. The indicators of this perspective include: brand, new products and services management, procurement leadership, post-sales service, etc.

• Learning and Growth Perspective (L & G). It develops objectives and indicators to drive the learning and growth of the organization and its employees. The objectives of this perspective provide the necessary infrastructure to achieve the objectives outlined in the previous three perspectives. The key indicators of this perspective are employee retention and productivity, which depend on employee satisfaction within the company. Companies use strategies to improve the work environment, enhance employee skills and develop the necessary technological infrastructure for this purpose.

Strategy Map: A strategy map is a graphic representation of the cause-and-effect relationships of the company’s strategies. The relationship between the objectives and indicators of the perspectives must be explained so that they can be managed and validated (^{Kaplan and Norton, 2000}), see Figure 2.

Source: Kaplan and Norton (2000).

Figure 2 Strategy Map. 

In the Ibero-American context, ^{Rodríguez (2003}) states that:

La integración de los diferentes procesos en la empresa facilita la visión de la misma como un todo; esta visión global permite llevar a cabo la estructuración de los cuadros de mando, así como la coordinación de las actividades desarrolladas por los diferentes estamentos de la empresa. [The integration of the different processes in the company facilitates the vision of the company as a whole. This global vision allows the structuring of the scorecards, as well as the coordination of the activities undertaken by the different company area] (p.180)

Nonetheless, in spite of the advantages of implementing a management system such as the BSC, ^{Saldias, Seguel, and Torres (2007}) mention that:

La sola incorporación de las prescripciones de un modelo no es garantía de un mejor desempeño. Se requiere “internalizar” un sistema de trabajo diferente y más completo, donde se tome en cuenta gran parte de los factores que son decisivos para el éxito [The sole incorporation of a model’s specifications does not guarantee an improvement in performance. A different and more complete work system, where a large part of the factors that are decisive for success are taken into account, must be “internalized”]. (p.65)

METHODOLOGY

This is a non-experimental study. A descriptive methodology is used, as it seeks to specify the properties, characteristics and profile of the company under study by analyzing the four perspectives that make up the BSC (^{Hernández, Fernández, & Baptista, 2010}).

The design and subsequent implementation of the BSC as a business management system takes several months and years to complete in any given company. For this case study, the research consisted of three stages:

Stage 1: Analysis of the company’s competitive position. The external factors that influence the company were identified and analyzed (EFE Matrix) either as opportunities or threats. Next, the microenvironment was analyzed using the five competitive forces methodology (^{Porter, 2017}). Based on the score obtained, the ink manufacturing industry has low attractiveness. A new business management model must therefore be implemented to enable the company to address each competitive force.

During the company’s internal analysis, the key factors classified as strengths or weaknesses were identified using the EFI matrix. The cross SWOT analysis summarizes the key indicators of the business environment and the strategic capabilities of a company that may affect the development of the strategy. Based on the current capabilities of the company under study, four types of strategies are proposed: SO, WO, ST and WT strategies (see Table 1).

The ^{Ansoff matrix (1957}) was used to determine that the growth strategy to be implemented would be “Market Development”, based on the fact that the product (inks for the graphic advertising industry) already existed, and therefore was not considered a new product.

Data was gathered via surveys, information analysis, direct observation and documentation of the company.

Stage 2: Design of the four components that make up the BSC. Based on the information collected in the previous phase, the BSC was designed (see Table 2).

Table 2 Design of the BSC for the period 2019-2021. 

N/A: Not Available.

Source: Prepared by the author.

In addition to establishing the strategic objectives, the team responsible for the implementation of the BSC was organized and led by the general manager and owner of the company. During this stage, the project received favorable feedback from management and the commitment of the collaborators to the proposed mission, vision, values, objectives and strategies. In accordance with ^{Nogueira, Medina, Hernández, Nogueira and Hernández (2009}):

Hasta hace pocos años, la alternativa utilizada para medir la eficiencia de la empresa se basaba en el análisis exhaustivo de su información financiera. Las empresas ya no se gestionan solamente a través de sistemas de control de gestión construidos en torno a indicadores y metas financieras que tienen una reducida relación con el progreso en el logro de los objetivos estratégicos de medio y largo plazo. Se requiere de una visión holística de los negocios, de la necesidad de establecer medidas no financieras orientadas hacia el futuro de la organización, como la satisfacción de los recursos humanos o la innovación de nuevos productos y procesos [Up until recently, company efficiency was measured on the basis of an exhaustive analysis of their financial information. Companies are no longer managed solely through management control systems built around financial indicators and goals that have little relation with the achievement of medium- and long-term strategic objectives. Instead, a holistic view of the business is required, as well as the need to establish non-financial measures oriented towards the future of the organization, such as human resource satisfaction or innovation of new products and processes]. (p. 223)

Data was gathered via brainstorming, development of process flow charts, design of the indicator matrix and the strategy map.

Stage 3: Implementation period of the BSC. The final implementation and assimilation of the BSC throughout the organization was estimated to take place in 2019, 2020 and 2021. The first stage of the BSC implementation period took place between January and September 2019. In this stage, the mechanism for measuring progress in meeting the strategic objectives was established. If the achieved target is lower than expected, an alarm is triggered and the dashboard turns red. If the objective achieved is within the expected parameters, the dashboard turns yellow for evaluation and follow-up. If the objective achieved is higher than expected, the dashboard turns green. The dashboard is shown in Table 3.

Table 3 Evaluation Criteria for the implementation of the BSC.  

Source: Prepared by the author.

Data was gathered in this phase from awareness-raising workshops, work meetings and feedback activities.

RESULTS

Table 4 shows the results of the implementation of the BSC. The strategic initiatives (SI) implemented to achieve the objectives of the Financial Perspective are shown below.

For strategic objective “Growth sales of 10 % in 2019, 2020 and 2021”

IE1: Sales capabilities of the commercial area staff were strengthened.

IE2: New sales and distribution channels were developed nationwide.

IE3: Established alliances with distributors and authorized representatives.

IE4: New products of greater value to the client were launched.

IE5: Measures to attract new customers were implemented.

For the strategic objective “Achieve a net income of 5% of annual sales by 2019, 8% by 2020 and 12% by 2021”

SI6: A new business management model focused on sales and profit growth was implemented.

SI7: The cost structure was optimized and the company’s cash flow was strengthened by establishing a fixed remuneration for family members who are part of the company.

SI8: Inventory levels of inputs and finished products were reduced.

SI9: Better financing conditions were obtained and the company’s solvency was improved.

Table 4 Results of the implementation of the BSC. 

N/A: Not Available.

Source: Prepared by the author.

The strategic initiatives (SI) implemented to achieve the objectives of the Customer Perspective are shown below.

For strategic objective “Improve customer satisfaction”

SI10: Sales and distribution processes were improved.

For strategic objective “Maximize profitability per customer”

SI11: Average sales per client were increased.

For strategic objective “Expand customer base”

SI12: A marketing and sales plan was drawn up and implemented.

The strategic initiatives (SI) implemented to achieve the objectives of the Internal-Business-Process Perspective are shown below.

For strategic objective “Improve product quality”

SI13: The purchasing process was optimized to be able to acquire better quality inputs at a better price and under better payment conditions.

For strategic objective “Improve warehouse management”

SI14: A customized inventory control system for finished products was implemented.

For strategic objective “Improve operational efficiency”

SI15: Production processes were planned following the sales estimates of the sales area.

The strategic initiatives (SI) implemented to achieve the objectives of the Learning and Growth Perspective are shown below.

For strategic objective “Improve employee productivity”

SI16: A new corporate culture focused on meeting individual, team and organizational objectives was fostered.

SI17: Outstanding performance was encouraged and rewarded.

SI18: Work climate began to be measured and measures were taken to improve it.

SI19: Group dynamics were carried out to sensitize personnel on the importance of their work within the organization.

SI20: A database of qualified personnel with the potential to be hired for various positions was created.

Hypothesis Testing

As shown in Table 4, the results of the design and implementation of the BSC indicate that the implementation of the BSC as a business management system has provided direction to the company under study for the short, medium and long term. The benefits obtained from the implementation of the BSC as a business management system are evidenced in profitability, sales growth, customer base growth, proactive monitoring of the competitive environment, design and implementation of management strategies, and in the new corporate culture. From the above, the company has substantially improved its business management, thus the general hypothesis of the research is accepted.

Similarly, provided that the design and implementation of the BSC improved the business management of the company under study in terms of sales growth as shown in Table 5, HE₁ is also accepted.

Table 5 Sales Performance. 

Source: Prepared by the author.

As the BSC implementation succeeded in improving the business management of the company under study in terms of profitability, as shown in Table 6, HE₂ is also accepted.

Table 6 Profit and Loss Statement. 

Source: Prepared by the author.

DISCUSSION

The performance of the indicators in the four CMI perspectives for the year 2019 will be analyzed and forecast below. The results obtained up to September will be used as a baseline.

CONCLUSIONS

The design and implementation of the BSC substantially improved business management in the Lima-based company that manufactures ink for the graphic sector located in the city of Lima.

Over the period January-September 2019, sales increased by 18% compared to the same period of the previous year. Likewise, profitability increased from 0.89% to 4.64% net margin in the same period.

By implementing the BSC as a business management system, the company improved its capacity to increase sales.

The BSC as a new business management system led to changes in all areas of the company, as well as in the relationship with its customers, suppliers and creditors. As a result, profitability margins improved substantially.

Prior to the implementation of the BSC, the company studied was in a weak internal position and was not competitive. It was found that its competitive advantage lies in manufacturing good quality products at competitive prices for a specific market segment. The BSC and its components made it possible to align organizational objectives with the strategy to be adopted.

Through the implementation of the BSC, the company strengthened its ability to monitor its dynamic competitive environment, minimize threats and take advantage of opportunities.