African Journal of Business Management Vol. 5(12), pp. 4792-4801, 18 June, 2011 Available online at http://www.academicjournals.org/AJBM DOI: 10.5897/AJBM10.998 ISSN 1993-8233 ©2011 Academic Journals Full Length Research Paper

Developing a strategy for Mobin Petrochemical Company by using Balanced Scorecard attitude

S. Ali Hadawy1*, Naser Poursadegh2, Nader Bohlouli Zeinab3 and Reza Khavandi4

1Wastewater Treatment Plant of Mobin Petrochemical Company, South Pars (Assaluyeh), Iran.

2University of National Defense, Islamic Azad University, Bonab Branch, Iran. 3Islamic Azad University, Bonab Branch, Iran.

4Mobin Petrochemical Company, South Pars (Assaluyeh), Iran.

Accepted 3 February, 2011

Petrochemical industry as one of the largest and most important sectors is in need of the application of new managerial tools for strategic planning. There are different models and tools for strategic planning. The model of Balanced Scorecard (BSC) has been noticed by various organizations in recent years due to its special attention to intangible assets of organization like customer, internal processes, growth and learning in addition to financial indexes. Moreover, it is considered as one of the new methods of strategic planning. This research aims at developing a strategy for Mobin Petrochemical Company with a BSC attitude. The present research from the viewpoint of goal is an applied research and in respect of data collection, it uses a qualitative research method (focal group). For the purpose of learning about strategies of Mobin Petrochemical Company, while reviewing texts and literature related to strategic management, the views of senior petrochemical managers was used in the process of focus groups. During various focus meetings held in the presence of senior management body of the organization, the mission and vision of company were determined. Then identifying external opportunities and threats and determining internal weaknesses and strengths of organization and evaluating the IFE and EFE matrixes, the SWOT matrix was formed and strategies of Mobin Petrochemical Company were determined. The motifs of the company strategy were classified from the four main perspectives of BSC model. Afterwards, for determining the process of creation of value and cause and effect relation between strategic goals of organization, the strategy map of Mobin Petrochemical Company was drawn. Finally, the strategic pivots of Mobin Petrochemical Company were determined with regard to financial, customer, internal processes, growth and learning. In order to render strategies and determine objectives and performance measures in BSC system, various meeting were held in different units of the company. Reviewing the details of performance and method of implementation in each part, proper measures and their method of formation were determined. Having the confirmation of senior managerial body of Mobin Petrochemical Company, strategic plans and measures were adopted. Key words: Strategy, strategic planning, balanced scorecard.

INTRODUCTION In fact, the process of strategic planning is a coordinating process between internal industries of an organization and external opportunities. The purpose of this process is to look through a strategic window and determine *Corresponding author. E-mail: hadawy@mobinpc.net Tel: +989143119099.

opportunities which an organization enjoys or responds to. The process of strategic planning is a managerial pro-cess including the coordination of organization abilities with existing opportunities. These opportunities are determined in the course of time and they are considered for investment or lack of investment of organization industries. The domain in which strategic decisions are adopted includes the operational environment of an organization, mission of organization and comprehensive

goals of an organization. Strategic planning is a process which considers their factors altogether and facilitates the choice of strategic options which are adaptable with these three elements, then it employs these choices and evaluate.

In the complex conditions of today’s business, it is very difficult to have a correct and complete understanding of working environment and in many cases it is impossible. If the studies intend to think globally and gain appropriate opportunities for business, in that case concentration, structure and method of work should be changed in accordance with strategic plans. In a constant changing world, the studies should be committed in change and believe in it; even it encompasses a little risk. Petroc-hemical industry as one of the largest and most important sectors in the country is in need of new managerial instruments to develop business strategies. Mobin Petrochemical Company as one of the most important petrochemicals in the country tries to implement policies related to Iran Outlook Plan 2025 within the format of five years economic, social and cultural plans. Thus, strategic goals of Mobin Petrochemical Company are in line with the general policies of Iran National Petrochemical Company. However in the process of implementation of policies and achieving strategic objectives, Mobin Petrochemical Company as one of the most important petrochemical companies will constantly face various barriers and problems.

In order to identify barriers and present proper executive approaches to achieve strategic objectives, the company should design the strategic map of the organization and evaluate these strategies. In order to make a strategic planning, it is possible to use models such as Bryson, Glueck, Fray, Stoner models and the model of balanced scorecard (BSC). In early 1990’s, Robert Kaplan and David Norton presented BSC Model to planning, implementation and assessment strategies of organizations. This model as a result of giving attention to intangible assets of organizations such as customer, internal processes, growth and learning besides financial indexes have been noticed by many different organizations in recent years.

In this research, the development of the strategy of Mobin Petrochemical Company by BSC approach is dealt with and strategies of Mobin Petrochemical Company in respect of financial, customer, internal processes, and growth and learning perspectives are identified. HISTORY AND CONCEPT OF STRATEGY The history of the application of strategy concept dates back in fact to a time in which theorists of organization took shape as a natural system. For the first time, these theorists included the factor of environment into the studies of organizations. The factor which indeed activi-ties should be performed to achieve goals within its

Hadawy et al. 4793 framework. Selznick is one of the first theorists of theory of organization who put forth concepts related to the domain of strategy without using the term strategy in 1957 in a book entitled, “Leadership in Administration”. He referred to cases such as distinguishing capabilities of organization and making coordination between internal conditions and external expectation of an organization. He implicitly put forth the idea of the implementation of a strategy. However, for the first time, the term strategy was used by Alfred Chandler in 1962 in the book “Strategy and Structure”.

He studied the history of tens large commercial companies of America and as a result of that, the concept of strategy in understanding behavior and in particular the growth of commercial organizations emerged. In addition, the important topic of a link between the strategy of a company and its structure was appeared. Chandler who used the term strategy for the first time defines it as follows: “Strategy means to determine long term objectives of an organization and selection of a set of measures and allocation of necessary sources to achieve those goals”. For the first time, he put forth the difference between stra-tegy and tactics within the format of definition of strategic decisions (which deal with the long term health of an organization) and tactical decisions (which mainly relates to the daily activities) (Alidoosti, 1999). Strategic planning Strategic planning is a powerful managerial tool which is designed to help with the organizations to make them adapt with the forecasted changes of an environment competitively. In particular, the process of strategic planning presents an analytical attitude of an organization and the environment related to that. It also explains the present conditions of a company and identifies the key factors affecting its success (Fry and Stoner, 1995). Strategic Planning is the process of constant and complex organizational change and it considers how the world will be different after 5 to 10 years. It tries to create the future of an organization based on what might be happened in the future (Lerner, 2002). The model of Balanced Scorecard (BSC) A strategy-oriented organization for managing a great strategy will need something more than determining stra-tegies for business. In order to maximize efficiency, the strategies and standards of evaluation of all these units should be converged and linked with each other. These links are considered as the strategic architecture of an organization. An outstanding strategy at macro level of a

4794 Afr. J. Bus. Manage.

Starting Stage Statements of vision and

mission of the organization

Input Stage

Internal factor evaluation matrix

External factor evaluation matrix

Internal and External factor

Evaluation SWOT Matrix

Stage of Adaptation or Comparison

Determining Strategies

Balance Scorecard (BSC) Strategy Map

Translating Strategies and determining measures Determining performance

objectives

Figure 1. Framework of developing strategy in BSC method.

of a company includes a system being made of interlined components precisely.

These convergence conditions are created by sharing assets, skills and its specific capabilities. The synergy is obtained as a result of high interaction among units which should be seen directly in strategies. More than convergence of business units which sell their products and services to external customers, the organizations can create synergy by converging their internal units which offer common services. The challenge is that the services which are presented centrally should be responsive to strategies and needs of business units which must be supported.

The model of balanced scorecard (BSC) for units of common services defines an opportunity of integrity and synergy and creates that. This model shows that how these organizations create value. The model of balanced scorecard (BSC) gives its attention to intangible assets in addition to tangible assets and finally the strategies of an organization are classified in four domains of financial,

customer, internal processes, growth and learning (Kaplan and Norton,2008). RESEARCH METHODOLOGY The present research is an applied research from the perspective of objective. As for the data collection, the qualitative research methods (focal groups) are used. With regard to the objective of research which is to identify the strategies of Mobin Petrochemical Company in four domains of financial, customer, internal processes, growth and learning based on the model of balanced scorecard (BSC), the researcher will review texts and literature related to strategic management and use the views of senior managers of Mobin Petrochemical Company in the process of focal groups. The framework of developing a strategy using the model of balanced scorecard (BSC) This framework which is shown in Figure 1 presents instruments and methods which are appropriate for types of organizations (in various sizes). It helps with strategists to identify, evaluate and

choose strategies. This framework (Figure 1) has five main stages including: i) Starting stage In this stage, the mission of an organization is determined and its vision and mission statement are prepared. ii) Input stage At this stage, the necessary main data are specified for the development of strategies. This stage includes the formation of the matrixes of external factor evaluation (EFE) and internal factor evaluation (IFE). It is likely that more knowledge about the input and output of organization will lead to change of mission of organization even during the process of strategic management. The data which is obtained at this stage (input stage) gives a base to compare and consider different strategy options, assess them and select the best strategy. iii) Stage of adaptation or comparison At this stage with regard to the data resulting from previous stages, while considering the mission of organization, the main internal factors (key strengths and weaknesses) and main external factors (strategic opportunities and threats) are compared with each other and in fact a kind of balance is created among them. At this stage, internal and external factors are compared with the help of various instruments to identify the strategies of organization. At this stage, SWOT (strength, weakness, opportunity and threats) Matrix is used to adapt the aforementioned factors. iv) Balanced scorecard (BSC) At this stage, the already identified strategies of the previous stage (stage of adaptation) are judged based on objective methods. Scre-ening and integrating similar strategies, they are classified from the four perspectives of financial, customer, internal processes, growth and learning. Finally by studying the cause and effect relation among strategies in four domains of BSC, the strategic map of the company is drawn. v) Translating strategies and determining objectives and performance measures In order to understand the correct intention of the one who studies and do not understand his language, there is a need for a translator. In line with this idea, the staffs are in need of working to be able to grasp it and instead of ambiguity lead to practical measures. So translating mission, values, visions and strategies of organization into a language which could create necessary motivation for performance in individuals and guarantee a common understanding of objectives of organization is necessary. Strategies are determined and described through quantitative measures of four perspectives which are connected with each other through a cause and effect relation.

The capability of this model is the quick and proper transfer of concepts related to motivations of organization to a broad spectrum of addresses and this is one of the main advantages of this model (Niven, 2003). Statement of vision and mission of organization Mission of an organization indicated the cause or the existential phi-losophy and mission of an organization. In other words, it indicates the identity of an organization. Each organization either being writ-ten or unwritten has a philosophy or a mission. It is this philosophy

Hadawy et al. 4795 and mission that shapes every kind of activities of an organization and behavior of its staff and forms based on the beliefs and values of owners and managers of an organization. If the studies have written the mission of an organization in the form of a written document and convey it to the beneficiaries and make as a blueprint of the activities of organization, in fact the studies have prepared the statement of mission of an organization. So, the state-ment of mission is a sentence and a phrase by which the intention of an organization is distinguished from that of similar organization.

At the stage of determining the statement of mission, prevailing questions on statement of mission are asked including determining the customers, products and services, market, technology, giving attention to survival and growth, philosophy, distinctive features, paying attention to the image of peoples, and staff (Fredar, 2003). According to the interviews with senior and executive managers and results of related questionnaire, the mission statement of Mobin Petrochemical Company is defined as follows: Mobin Petrochemical Company is activating as the manufacturer of utility services, water supply, electricity, steam, oxygen, nitrogen and compressed air supply and treated industrial wastewater of petrochemical complexes of South Pars Region (Assaluyeh). It tries to use modern technology of the world to promote satisfaction of beneficiaries (stakeholders, customers, staff and society) through continuity production and promotion of qualitative and quantitative level of products by reducing energy consumption and observing international standards and maintaining environment thereby bring about growth, survival and profitability for organization. The ultimate desire of this organization is increase of efficiency of the staff through holding training courses and creating a life associated with relation and meaning. So, giving attention to human forces, staff and their beliefs as the most important and valuable sources of organization is an indispensable part of activities of company. Determining vision for Mobin petrochemical company With regard to focal meetings on vision of Mobin Petrochemical Company, the vision was defined as follow: Trusting on Almighty God and relying on efficient human resources while maintaining ethical principles and human dignity and observing work conscience, Mobin Petrochemical Company in the horizon of 2025 is: A customer-oriented, productive, learning and innovative company. The structure of vision based on BSC is in shown in Figure 2. Mobin A customer-oriented, (from the perspective of customer), productive (from the perspective of finance), learning (from the perspective of growth and learning) and innovative (from the perspective of processes) company. External environment of a business External environment of business includes all factors which exist outside the organization border and have potential impacts on all or part of an organization. Some of the most important of these factors are: Government, technology, rules and regulations, competitive conditions, status of economic environment, and socio-cultural circumstances (Hezar, 2005).

4796 Afr. J. Bus. Manage.

Figure 2. Structure of vision based on BSC.

By factors of external environment, it means events, economic, social and cultural, ecological, political, legal, governmental, technological and competitive trends which can bring about benefit or damage to an organization to a great extent in the future. These factors are to a great extent beyond the control of an organization, so that the term external is used. Revolution in computers, bio technology, population mobility, change in the attitude and work values, and discovery of space, recycle of wastes and increase of competition by foreign companies are examples of these factors. Such kind of changes brings about a specific type of consumer and consequently there is a need to various types of products and ser-vices. The external environment can be divided into the followings: i) Far external environment including economic, social, cultural, political, legal, technological and international environments. ii) Near external environment including neighboring organizations and institutions like rivals and suppliers (Fredar, 2003). Evaluating, identified external factors for organization based on their positive or negative impact are introduced as opportunities and threats. Following various studies and meetings in the presence of senior management body of the company, 13 opportunities and 8 threats in the external environment of organization were determined. With regard to the evaluations in the matrix of EFE, the score of Mobin Petrochemical Company is 2.67. Internal environment of a business Factors of this environment are among the controllable activities of an organization which is done by the organization in a bad or good form. These factors include management processes, organization financial standing, technological status, organizational structure, human resources, public relations and organization processes (Fredar, 2003). The evaluation of identified internal factors for an organization is introduced as the positive or negative impact on organization in the form of strengths and weaknesses accordingly. Holding brain storming meetings in the presence of senior managers of company and studying the internal environment of

organization, 9 cases of strengths and 12 cases of weaknesses were identified. With regard to the evaluation, in the Internal Factor Evaluation Matrix, the score of Mobin Petrochemical Company was 2.55. Analysis of internal and external factors For the concurrent analysis of internal and external factors, an instrument called internal and external (IE) Matrix is used. This matrix is used to determine the position of an organization or business. In other words, using this matrix, an organization can determine the combination and duties of its own business. As it can be learned from Figure 3, the result of studying the mentioned matrix indicates that the activities of Mobin Petrochemical Company are at the aggressive area. Determining strategies through SWOT analysis In analyzing SWOT, internal and external factors are studies to identify opportunities, threats, strengths and weaknesses of organization in the future and develop proper strategies to face it better. For analyzing this analysis, the SWOT matrix is used. This matrix shown in Table 1 is one of the most important instruments by which managers can compare data on internal and external factors and can present possible strategies with regard to the matrix of main strategies.

The possible strategies can be enumerated within the categories of SO, WO, ST and WT. Comparing the main internal and external factors are one of the most difficult part of preparing the matrix of threats, opportunities, weaknesses and strengths and needs good judgment. In using this matrix, efforts are made to have the presence of learned, expert and experienced people from inside and outside of organization and by using the method of brain storming, useful strategies are extracted through adaptation of internal and external factors (Chih and Shou, 2006). With regard to the identification of external factors including opportunities and threats and internal factors including weaknesses and strengths for

Hadawy et al. 4797

Internal factors evaluation matrix score

Ext

erna

l fac

tors

eva

luat

ion

mat

rix s

core

Figure 3. Matrix of analysis of internal and external evaluation (IEE).

Table 1. SWOT matrix (Chih and Shou, 2006).

Matrix of internal factor evaluation Matrix of external factor evaluation

S-Strengths W-Weaknesses

List strengths List weaknesses O-Opportunities Strategies- SO Strategies- WO List Opportunities Using strengths try to utilize opportunities Using opportunities remove weaknesses T-Threats Strategies- ST Strategies- WT List threats In order to avoid threats, utilize the strengths Reduce weaknesses and avoid threats

4798 Afr. J. Bus. Manage. Mobin Petrochemical Company, the SWOT matrix of this company is obtained in the form of Figure 3. The digit 1 means the existence of a relation and digit 0 means the lack of relation between internal and external factors.

Following SWOT matrix analysis and determining strategies, 83 cases of aggressive strategies of SO, 42 cases of competitive strategies of ST, 63 cases of conservative strategies of WO and 25 cases of defensive strategies were identified and totally 213 strategies were determined. Classification of strategies After identifying strategies of Mobin Petrochemical Company with regard to analysis of SWOT resulting from meeting with senior managers of organization, the similar strategies were combined and finally after summing up and screening, 47 strategies were defined for Mobin Petrochemical Company. Considering the motifs being used in strategies and in order to use BSC from the four perspectives of financial, customer, internal process, growth and learning, 35 strategic motifs were noticed for Mobin Petrochemical Company and finally these motifs are presented in 12 strategic pivots in form of Table 2. If studies intend to present a general strategy from a general perspective, these strategies will be as follows: i) Financial perspective: Stable profitability. ii) Customer perspective: Customer-oriented trend. iii) Internal process perspective: Improving processes and development of undertaking social responsibility. iv) Growth and learning perspective: Developing scientific management. The general strategy of company is defined as follows: “Stable profitability based on scientific management”. STRATEGY MAP Upon specifying strategies of organization, it is possible to specify the value chain of organization through cause and effect relationship among strategic objectives of organization within the framework of BSC. For this purpose, the strategy map of an organization is created with regard to BSC. The strategy map of BSC creates a framework to show how strategy relates the intangible assets to the process of creation of value. The financial feature describes the visible results of strategy through financial concepts. The customer feature determines the presentable value to target customer. The customer feature prepares grounds for the creation of value from intangible assets. The financial and customer features describe the expectable results from strategy. The feature of internal processes introduces the few vital processes which are expected to have the greatest impact on strategy materialization. The feature of growth and learning define the intangible assets which are of importance for strategy.

The objectives of this feature specify that which of the organizational units and expertise (human capital), which systems (information capitals) and which organizational atmosphere (organizational capital) are necessary to

support the internal processes for creating values. These assets should be accumulated together and to be allocated to internal vital processes. The objectives of these four features are related with each other through a cause and effect relations. Starting from the end is an assumption which tells the financial results will be acces-sible only when the satisfaction of customer is made. The value presentable to customer describes the quality of sale and loyalty towards the target customers. Internal processes create and present presentable values to customers. The intangible assets which back up internal processes create an infrastructure for strategy. Coordination among objectives in these four features is the key of value creation.

The map strategy round the structure of cause and effect which links the four features is developed. With re-gard to the strategies of Mobin Petrochemical Company from the perspectives of financial, customer, internal process and growth and learning, the strategy map of Mobin Petrochemical Company is presented in Figure 4. Translating strategies and determining objectives and performance measures (evaluating tools) The process of determining objectives and measures is started by brain storming and for each perspective, the highest number of goals and measures are determined. The members of team based on their record, experience and position in the hierarchy of organization and following a series of meeting in different sectors of Mobin Petrochemical Company and reviewed the details of performance and methods of implementation in each unit. Then proper measures were determined and the performance of the last 3 years was extracted and objec-tives were specified for the year 2010. The programs and action for each unit were prepared with the confirmation of senior management body of the organization. Conclusion In general, it can be concluded that if a strategic manage-ment process including planning, implementation and control of strategy to be established, it will be possible to achieve specified strategies and objectives outlined in the strategic map of Mobin Petrochemical Company. With regard to a cause and effect relations among the four do-mains of financial, customer, internal processes, growth and learning in BSC, it can also be concluded that the proper implementation of strategic management will lead to the promotion of long term value for stakeholders. In order to achieve such a goal, in the financial perspective, the strategy of growth of income should be adopted through maintaining present customers, absorbing new customers, making new investments for development and also the strategy of growth of productivity should be considered through an efficient use of assets and cost

Hadawy et al. 4799

Figure 3. SWOT analysis.

4800 Afr. J. Bus. Manage.

Figure 4. Strategy map of Mobin Petrochemical Company.

Hadawy et al. 4801

Table 2. Strategic pivots of Mobin Petrochemical Company from the four perspectives of BSC. Perspective Strategic pivot

Financial Cost reduction Optimal use of resources and assets Investment development

Customer Customer-oriented management Stability of quality and quantity of products

Internal process Development of social responsibility undertaking Development of research and technology Process improvement

Growth and learning

Making a scientific management Institutionalization of the culture of being superior and organizational learning Knowledge management Establishment of new management systems

reduction.

Implementing and achieving the determined strategies from a financial perspective demands the selection of a flexible strategy towards changes in customers’ de-mands, production continuation and the quality stability of products in the perspective of customer. For performing and reaching customer perspective strategies, it is necessary to have the followings in place: In perspective of internal processes in the part of operation management, the strategies of efficient use of chemicals, energy efficiency, production improvement and network distribution, efficient use of production capa-city, maintenance and repair performance improvement, efficient management and performance of storing spare parts and chemicals, reinforcement of chain supply management and logistics, reinforcement of project management system should be implemented; Also, in section of innovation of strategy for promotion of management and “R&D” processes, in the part of custo-mer management, the strategies of improving after-sale services and using the facilities of neighboring companies should be adopted; Finally in legal and social sections, the strategies of reducing environment pollutants, incidents reduction, staff health and development of undertaking social responsibility should be conducted. The strategies in the perspective of internal processes will be performed well if the following steps could be implemented: From the standpoint of growth and learning in organizational capitals section, the strategies of creation of stability in the organization, institutionalizing team work culture, promotion of leadership style with regard to

human dignity, institutionalizing the learning organization, also in section of human capital, the strategies of knowledge management, motivation rise, supplying and promoting merits and capabilities of key staff and institutionalizing the system of training successor and in section of information capitals, the establishment of information systems and development of networks and information infrastructures and IT. ACKNOWLEDGEMENT We would like to extend our sincere thanks to all professors and the Management of Mobin Petrochemical Company for their cooperation. REFRENCES Alidoosti S (1999). Course of Evolution of Concept of Strategy in

Theories of Organization Summer, University of Tehran Press. Chih-Hsien Chen, Shuo-Yan Chou (2006). A BSC framework for Air

Cargo Terminal Industrial Technology. Fredar D (2005). Translated by Parsaeeyan A, Arabi SM, Strategic

Management, Office of Cultural Researches. Fry LF, Stoner RC (1995). Strategic planning for the new and small

Business, Upstart publishing company. Hezar Jaribi J (2005). Entrepreneurship, Bazargani Publications.

Tehran, First Edition. Kaplan R, Norton D (2008). Translated by Akbari H, Soltani M, Maleki

A, Strategy Map, Aryana Industrial Research Group Publications. Kaplan R, Norton D (2008). Translated by Bakhtiyari P,Strategy -

Oriented Organization, Organization of Industrial Management Publications.

Lerner LA (2002). A Strategic Planning primer for higher education. Niven PR (2003). Balanced Scorecard Step by Step: Maximizing

Performance and Maintaining Results. John Wily Sons, Inc.