STRATEGY, BALANCED SCORECARD, AND
STRATEGIC PROFITABILITY ANALYSIS
Solution Exhibit 13-16A
Customer Preference Map for Corrugated Boxes
Measures that we would expect to see on a La Quinta’s balanced scorecard for 2009 are
(1) Operating income from productivity gain, (2) operating income from growth, (3) cost reductions in key areas. These measures evaluate whether La Quinta has successfully reduced costs and generated growth through cost leadership. Customer Perspective
(1) Market share in corrugated boxes market, (2) new customers, (3) customer satisfaction index.
The logic is that improvements in these customer measures are leading indicators of whether La Quinta’s cost leadership strategy is succeeding with its customers and helping it to achieve superior financial performance.
Internal Business Process Perspective
(1) Productivity, (2) order delivery time, (3) on-time delivery, (4) number of major process improvements.
Improvements in these measures are key drivers of achieving cost leadership and are expected to lead to more satisfied customers and in turn to superior financial performance
Learning and Growth Perspective
(1) Percentage of employees trained in process and quality management, (2) employee satisfaction.
Improvements in these measures aim to improve La Quinta’s ability to achieve cost leadership and have a cause-and-effect relationship with improvements in internal business processes, which in turn lead to customer satisfaction and financial performance.
Solution Exhibit 13-16B presents the strategy for La Quinta for 2009.
Solution Exhibit 13-16B
Strategy Map for La Quinta for 2009
(20 min.) Analysis of growth, price-recovery, and productivity components (continuation of 13-16).
La Quinta’s operating income gain is consistent with the cost leadership strategy identified in requirement 1 of Exercise 13-16. The increase in operating income in 2009 was driven by the $140,000 gain in productivity in 2009. La Quinta took advantage of its productivity gain to reduce the prices of its boxes and to fuel growth. It increased market share by growing even though the total market size was unchanged.
The productivity component measures the change in costs attributable to a change in the quantity and mix of inputs used in a year relative to the quantity and mix of inputs that would have been used in a previous year to produce the current year output. It measures the amount by which operating income increases and costs decrease through the productive use of input quantities. When comparing productivities across years, the productivity calculations use current year input prices in all calculations. Hence, the productivity component is unaffected by input price changes. The productivity component represents savings in both variable costs and fixed costs. With respect to variable costs, such as direct materials, productivity improvements immediately translate into cost savings. In the case of fixed costs, such as fixed manufacturing conversion costs, productivity gains result only if management takes actions to reduce unused capacity. For example, reengineering manufacturing processes will decrease the capacity needed to produce a given level of output, but it will lead to a productivity gain only if management reduces the unused capacity by, say, selling off the excess capacity. 13-18 (20 min.)
Strategy, balanced scorecard, merchandising operation.
Oceano & Sons follows a product differentiation strategy. Oceano’s designs are “trendsetting,” its T-shirts are distinctive, and it aims to make its T-shirts a “must have” for each and every teenager. These are all clear signs of a product differentiation strategy, and, to succeed, Oceano must continue to innovate and be able to charge a premium price for its product.
Possible key elements of Oceano’s balance scorecard, given its product differentiation strategy:...
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