Introduction A key variable is a significant indicator of business activity, whose sudden and unpredictable change warrants immediate action by management. A small change in a key variable will have significant impact on the performance of the organization. E.g.: profitability, market position,
Industry characteristics
In a given industry, there are certain general requirements for success, which apply to all the firms . E.g.: in insurance industry, the basic requirement for the success of a firm is a positive investment performance.
Environmental factors
The economic and political climate consist of environmental factors which determine key variables . E.g.: publishers who depend on the postal services are affected by postal rates.
Competitive strategy
The strategy that a company adapts usually determines the variables that must be monitored and emphasized. An organization that follows a lowcost strategy will require an analysis of the product cost structure
Stake holders
Aspects of the business that are important to key stakeholders , namely customers, executives , suppliers may be considered as key variables.
Significant functions
In an organization with a function based structure, every manager can identify one or a few key variables related to the function of the unit.
Production variables:
Capacity utilization. Losses. Quality control. Maintenance. Costs. Delivery.
Marketing variables:
Order book position. Market share. Institutional sales. Asset management variables. Asset turnover. Working capital turnover
Types of variables
Broadly classified as: Strategy. Structural. Process. Environmental.
Insurance industry
In an insurance industry, the key variables are number of claims settled in a given period of time , number of claims outstanding against major insurance policy, the number of policies processed in a given period of time, and growth rate in insurance business with respect to each policy.
Hotel industry
Room occupancy rate. Number of complaints by customers. Amount of food wasted in the restaurant. Percentage of revenue contributed by the restaurant. Percentage of absenteeism among employees
Sugar industry
Price of sugar sold in the open market. Transport cost per ton of cane. Fuel cost per kg of sugar. Number of production days lost. Support prices by government.
Power industry
The inputs for a power industry are cost and water. The output variables includes transmission losses. The key variables include the following.
Quantity and quality of coal. Availability of wagons for transportation of coal. Availability of water. Capacity utilization Preventive & breakdown maintenance