Deck 15: Strategy Formation, Strategic Control and the Balanced Scorecard

Question 1

What is an organisation's ability to offer products or services that are perceived by its customers as being superior and unique relative to those of its competitors called?

A)Cost leadership
B)The balanced scorecard
C)Product differentiation
D)Strategy

Answer 1

C

Question 2

________ is the fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance such as cost,quality,service,speed and customer satisfaction.

A)Strategy
B)Re-engineering
C)Learning and growth perspective
D)Customer perspective

Answer 2

B

Question 3

Answer the following questions using the information below:
TasiAudio Corporation plans to grow by offering an audio-visual system,the AV-5000 which is superior and unique from the competition.TasiAudio believes that putting additional resources into R&D and staying ahead of the competition with technological innovations is critical to implementing its strategy.
To further company strategy,measures on the balanced scorecard would MOST likely include:

A)an increase in operating profit from productivity gains.
B)manufacturing quality.
C)yield.
D)number of process improvements.

Answer 3

B

Question 4

Answer the following questions using the information below:
TasiAudio Corporation plans to grow by offering an audio-visual system,the AV-5000 which is superior and unique from the competition.TasiAudio believes that putting additional resources into R&D and staying ahead of the competition with technological innovations is critical to implementing its strategy.
TasiAudio's strategy is:

A)re-engineering.
B)downsizing.
C)cost leadership.
D)product differentiation.

Question 5

In general,profit potential ________ with greater competition,stronger potential entrants,products that are similar,and more-demanding customers and suppliers.

A)increases
B)increases exponentially
C)stays constant
D)decreases

Question 6

'Strategy' describes how an organisation matches its own capabilities with the opportunities in the marketplace to accomplish its overall objectives.

Question 7

________ describes how an organisation matches its own capabilities with the opportunities in the marketplace to accomplish its overall objectives.

A)Planning
B)Strategy
C)Customer perspective
D)Learning and growth perspective

Question 8

Answer the following questions using the information below:
Barrier Reef Corporation manufactures jet skis.It plans to grow by producing high-quality jet skis at a low cost that are delivered in a timely manner.There are a number of other manufacturers who produce similar jet skis.Barrier Reef believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy.
Barrier Reef's strategy is:

A)cost leadership.
B)product differentiation.
C)downsizing.
D)re-engineering.

Question 9

Re-engineering is the fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance such as cost,quality,service,speed and customer satisfaction.

Question 10

Which of these statements is NOT true?

A)Product differentiation increases the willingness of customers to pay higher prices.
B)Cost leadership can be sustained through economies of scale.
C)It is not necessary to choose between the strategies of product differentiation or cost leadership,most companies can have both.
D)No statement is untrue,i.e.all are true statements.

Question 11

One of the five forces of industry analysis is understanding the bargaining power of your customers.

Question 12

Explain the product differentiation and the cost leadership strategies.
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Question 13

In general,profit potential increases with greater competition,stronger potential entrants,products that are similar,and tougher customers and suppliers.

Question 14

Re-engineering benefits are most significant when they focus on one business function rather than crossing functional lines of the business process.

Question 15

The balanced scorecard uses only financial performance measures to evaluate short-run and long-run performance.

Question 16

One of the two basic strategies for a business is achieving market leadership.

Question 17

Bosely Corporation is reviewing its business strategy.The first step for Bosely is to perform an industry analysis.You have been hired to help the company go through the strategy formulation process.
Required:
To perform the industry analysis,what areas should Bosely focus on and give at least one example of how Bosely can effectively deal with each area.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 18

A product differentiation strategy is probably best for a company if the engineering team is more skilled at making process improvements than at creatively designing new products.

Question 19

________ is an organisation's ability to achieve low costs relative to competitors through productivity and efficiency improvements,elimination of waste,and tight cost control.

A)Strategy
B)Product differentiation
C)The balanced scorecard
D)Cost leadership

Question 20

An organisation would do one of the following actions in demonstrating using the cost leadership approach.Which one?

A)Heavily emphasise developing new products.
B)Bring products to market rapidly.
C)Focus on productivity through efficiency improvements.
D)Provide products at a higher cost than competitors.

Question 21

A strategic objective that has a hub-and-spoke quality with multiple ties flowing into or out of it is referred to as a 'focal point'.

Question 22

_______________ control systems diagnose whether or not performance is up to expectations.

A)Management
B)Financial
C)Diagnostic
D)Innovative

Question 23

What is re-engineering? Explain.
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Question 24

A _____________ is a diagram that shows how an organisation creates value by connecting strategic objectives in explicit cause-and-effect relationships with one another in the financial,customer,internal-business-process and learning-and-growth perspectives.

A)balanced scorecard
B)diagnostic control
C)boundary control
D)strategy map

Question 25

Strategic objectives that distinguish an organisation from its competitors,based on the organisation's strategy,are distinctive objectives.

Question 26

Although the ___________ benefits of these long-run changes might not show up immediately in short-run earnings,strong improvements in non-financial measures usually presage the creation of future economic value.

A)organisational
B)systematic
C)fringe
D)financial

Question 27

Diagnostic control systems diagnose whether or not performance is up to expectations.

Question 28

In contrast to a focal point,a ________ point is a strategic objective out of which many ties spur,resulting in the achievement of many strategic objectives.

A)trigger
B)balanced
C)strategic
D)boundary

Question 29

Excessive emphasis on __________ control systems and critical performance variables has the potential to cause an organisation to ignore emerging threats and opportunities.

A)diagnostic
B)boundary
C)beliefs
D)interactive

Question 30

______ are the causal links between strategic objectives,and can be qualified as strong,moderate or weak.

A)Beliefs
B)Boundaries
C)Maps
D)Ties

Question 31

Managers can coordinate beliefs and boundary systems to simultaneously stimulate search activity
and avoid risks,while communicating vision and strategic domain.

Question 32

_______________ companies set aggressive environmental goals,and measure and report their performance against them.

A)Modern
B)Innovative
C)Socially responsible
D)Traditional

Question 33

In contrast to a focal point,a trigger point is a strategic objective out of which many ties spur,resulting in the achievement of many strategic objectives.

Question 34

What does senior management most often use to exercise diagnostic control?

A)staff
B)variances
C)computers
D)budgets

Question 35

Managers need to evaluate the success of a strategy by:

A)linking the sources of operating-profit increases to the strategy.
B)doing a cost-benefit analysis.
C)evaluating budget-to-actual variances.
D)evaluating the level of bonus compensation.

Question 36

An opportunity to evaluate the contribution that the strategic objective brings to the overall strategy is known as:

A)orphan.
B)balanced.
C)strategic.
D)environmental.

Question 37

Interactive control systems relate to _________ uncertainties and focus managers' attention and learning on key strategic issues.

A)strategic
B)operational
C)staffing
D)environmental

Question 38

Interactive control systems force busy managers to step back from the actions needed to manage the business today and to shift their focus forward to positioning the organisation for the opportunities and threats of tomorrow.

Question 39

The balanced scorecard reduces managers' emphasis on short-run __________ performance (such as quarterly earnings)because the key strategic non-financial and operational indicators (such as product quality and customer satisfaction)measure changes that a company is making for the long run.

A)financial
B)organisational
C)non-financial
D)environmental

Question 40

Interactive control systems relate to strategic uncertainties and focus managers' attention and learning on key strategic issues.

Question 41

Measures of the balanced scorecard's customer perspective include all of the following EXCEPT:

A)customer satisfaction.
B)number of new customers.
C)customer training on new products.
D)market share.

Question 42

________ translates an organisation's mission and strategy into a comprehensive set of performance measures that provide the framework for implementing its strategy.

A)Product differentiation
B)Cost leadership
C)Productivity component
D)The balanced scorecard

Question 43

Measures of the balanced scorecard's customer perspective include:

A)market share.
B)employee satisfaction ratings.
C)revenue growth.
D)number of process improvements.

Question 44

The return-on-investment ratio is an example of a balanced-scorecard measure of the:

A)internal business process perspective.
B)customer perspective.
C)learning and growth perspective.
D)financial perspective.

Question 45

The balanced scorecard is said to be 'balanced' because it measures:

A)internal and external objectives.
B)short-term and long-term objectives.
C)financial and non-financial objectives.
D)All of these answers are correct.

Question 46

A 'strategy map' is a diagram that shows how an organisation creates value by connecting strategic objectives in explicit cause-and-effect relationships with one another in the financial,customer,internal-business-process,and learning-and-growth perspectives.

Question 47

The purpose of the balanced scorecard is BEST described as helping an organisation:

A)mobilise employee skills for continuous improvements in processing capabilities,quality and response times
B)introduce innovative products and services desired by target customers
C)develop customer relations
D)translate an organisation's mission and strategy into a set of performance measures that help to implement the strategy

Question 48

Identify the BEST description of the balanced scorecard's internal business processes perspective.To achieve our firm's vision and strategy:

A)how do we lower costs?
B)what processes will increase value to our customers?
C)how can we obtain greater profits?
D)how do we motivate employees?

Question 49

Which of the following is NOT true of the balanced scorecard?

A)Successful implementation requires commitment and leadership from top management.
B)Cause-and-effect linkages may not be precise and should evolve over time.
C)Different strategies call for different scorecards.
D)Only objective measures should be used and subjective measures should be avoided.

Question 50

Measures of the balanced scorecard's learning-and-growth perspective include:

A)employee satisfaction ratings.
B)time taken to deliver a product to customers.
C)economic value added.
D)customer-retention percentage.

Question 51

Which of the following statements concerning the balanced scorecard is TRUE?

A)It broadens management's attention to short-run and long-run performance.
B)The aim is to always show an improvement over the previous year.
C)Debits must equal credits.
D)All of the statements are true.

Question 52

Which of the following is a measure of the balanced scorecard's financial perspective?

A)Defect rates
B)Revenue growth
C)Number of new patents
D)Information system availability

Question 53

Measures of the balanced scorecard's learning-and-growth perspective include all of the following EXCEPT:

A)employee education and skill level.
B)time taken to replace defective products.
C)employee-satisfaction ratings.
D)percentage of processes with advanced controls.

Question 54

The internal business processes perspective of the balanced scorecard comprises three sub-processes that address all of the following EXCEPT:

A)providing service and support to the customer after the sale.
B)delivering existing products and services to best meet the needs of customers.
C)motivating current employees.
D)innovative processes used to create new products,services,and processes.

Question 55

Which of the following need to be clarified FIRST for successful balanced scorecard implementation?

A)Elements that pertain to value-added aspects of the business
B)Owner's expectations about return on investment
C)Objectives of all four balanced scorecard measurement perspectives
D)Organisation's vision and strategy

Question 56

Which of the following is NOT true of a good balanced scorecard?

A)It identifies all measures,whether significant or small,that helps to implement strategy.
B)It helps to communicate corporate strategy to all members of the organisation.
C)It tells the story of a company's strategy by articulating a sequence of cause-and-effect relationships.
D)It uses non-financial measures to serve as leading indicators of future financial performance.

Question 57

Measures of the balanced scorecard's internal-business-process perspective include all of the following EXCEPT:

A)operating capabilities.
B)number of new customers.
C)number of new products.
D)defect rates.

Question 58

Measures of the balanced scorecard's internal-business-process perspective include:

A)return on investment.
B)market share.
C)new product development time.
D)employee education.

Question 59

Which of the following is NOT a measure of the balanced scorecard's financial perspective?

A)Customer satisfaction
B)Cost reductions
C)Gross profit percentage
D)Operating profit

Question 60

Orphan status represents an opportunity to evaluate the contribution that the strategic objective brings to the overall strategy.

Question 61

What is the primary purpose of the balanced scorecard?
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Question 62

For each of the following measures,identify which perspective of the balanced scorecard it represents: financial,customer,internal-business-process or learning-and-growth.
1.service response time
2.market share
3.gross margin percentage
4.defect rates
5.customer satisfaction
6.information system availability
7.new-product development time
8.economic value added
9.employee education
10.manufacturing downtime
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Question 63

When analysing the change in operating profit,the strategy component of productivity will increase when:

A)less capacity is used in the current year to produce the same output as in the previous year.
B)selling prices are increased.
C)quality is enhanced.
D)more units are produced and sold.

Question 64

When evaluating managers and employees under the balanced scorecard approach,only financial measures should be considered.

Question 65

An operating profit analysis of Deb Schmidt Ltd revealed the following:
$$\begin{array} { l r } \text { Operating profit for } 2017 & \$ 500000 \\\text { Add growth component } & 15000 \\\text { Add price-recovery component } & 100000 \\\text { Deduct productivity component } & ( 8000 ) \\\text { Operating profit for } 2018 & \$ 607000\end{array}$$
Schmidt's operating profit gain is consistent with the:

A)re-engineering strategy.
B)cost leadership strategy.
C)downsizing strategy.
D)product differentiation strategy.

Question 66

Which component of strategy measures the changes in operating profit attributed solely to an increase in the quantity of output between Year 1 and Year 2?

A)The growth component
B)The price-recovery component
C)The cost leadership component
D)The productivity component

Question 67

Answer the following questions using the information below:
Barrier Reef Corporation manufactures jet skis.It plans to grow by producing high-quality jet skis at a low cost that are delivered in a timely manner.There are a number of other manufacturers who produce similar jet skis.Barrier Reef believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy.
To further company strategy,measures on the balanced scorecard would MOST likely include:

A)an increase in operating profit from increased profit margins.
B)a number of process improvements.
C)price premium earned.
D)longer cycle times.

Question 68

Evans Corporation manufactures carbon bicycle frames.It plans to grow by producing high-quality carbon frames at a low cost that are delivered in a timely manner.There are a number of other manufacturers who produce similar carbon frames.Evans believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy.
Required:
a.Is Evans's strategy one of product differentiation or cost leadership? Explain briefly.
b.Identify at least one key element that you would expect to see included in the balanced scorecard:
- for the financial perspective.
- for the customer perspective.
- for the internal business process perspective.
- for the learning and growth perspective.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 69

The primary purpose of the balanced scorecard is to obtain increased operating profits for the current year.

Question 70

What are the four key perspectives in the balanced scorecard?
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Question 71

Employee satisfaction is a measure of the internal business perspective of the balanced scorecard.

Question 72

Answer the following questions using the information below:
Mitsufugi Company makes a kitchen appliance with model number KA450.The goal for 2018 is to reduce direct materials usage per unit.No defective units are currently produced.Manufacturing conversion costs depend on production capacity defined in terms of KA450 units that can be produced.The industry market size for appliances increased 5% from 2017 to 2018.The following additional data are available for 2017 and 2018:
$$\begin{array} { l r r } & 2017 & 2018 \\\text { Units of KA450 produced and sold } & 10000 & 10300 \\\text { Selling price } & \$ 150 & \$ 145 \\\text { Direct materials (square metres) } & 30000 & 29000 \\\text { Direct material costs per square metre } & \$ 12 & \$ 13 \\\text { Manufacturing capacity for KA450 (units) } & 12500 & 12000 \\\text { Total conversion costs } & \$ 250000 & \$ 240000 \\\text { Conversion costs per unit of capacity } & \$ 20 & \$ 20\end{array}$$

-What is operating profit for 2018?

A)$678 500
B)$997 500
C)$876 500
D)$428 500

Question 73

Survey of employee satisfaction is an example of a balanced-scorecard measure of the:

A)internal business process perspective.
B)customer perspective.
C)learning and growth perspective.
D)financial perspective.

Question 74

Answer the following questions using the information below:
Mitsufugi Company makes a kitchen appliance with model number KA450.The goal for 2018 is to reduce direct materials usage per unit.No defective units are currently produced.Manufacturing conversion costs depend on production capacity defined in terms of KA450 units that can be produced.The industry market size for appliances increased 5% from 2017 to 2018.The following additional data are available for 2017 and 2018:
$$\begin{array} { l r r } & 2017 & 2018 \\\text { Units of KA450 produced and sold } & 10000 & 10300 \\\text { Selling price } & \$ 150 & \$ 145 \\\text { Direct materials (square metres) } & 30000 & 29000 \\\text { Direct material costs per square metre } & \$ 12 & \$ 13 \\\text { Manufacturing capacity for KA450 (units) } & 12500 & 12000 \\\text { Total conversion costs } & \$ 250000 & \$ 240000 \\\text { Conversion costs per unit of capacity } & \$ 20 & \$ 20\end{array}$$

-What is operating profit for 2017?

A)$890 000
B)$1 500 000
C)$700 000
D)$750 000

Question 75

One valuable measure of the customer perspective of the balanced scorecard is market share.

Question 76

Answer the following questions using the information below:
Mitsufugi Company makes a kitchen appliance with model number KA450.The goal for 2018 is to reduce direct materials usage per unit.No defective units are currently produced.Manufacturing conversion costs depend on production capacity defined in terms of KA450 units that can be produced.The industry market size for appliances increased 5% from 2017 to 2018.The following additional data are available for 2017 and 2018:
$$\begin{array} { l r r } & 2017 & 2018 \\\text { Units of KA450 produced and sold } & 10000 & 10300 \\\text { Selling price } & \$ 150 & \$ 145 \\\text { Direct materials (square metres) } & 30000 & 29000 \\\text { Direct material costs per square metre } & \$ 12 & \$ 13 \\\text { Manufacturing capacity for KA450 (units) } & 12500 & 12000 \\\text { Total conversion costs } & \$ 250000 & \$ 240000 \\\text { Conversion costs per unit of capacity } & \$ 20 & \$ 20\end{array}$$

-Which strategy is Mitsufugi Corporation pursuing?

A)Cost leadership,because the selling price decreased.
B)Product differentiation,because total conversion costs decreased.
C)Product differentiation,because the units produced and sold increased.
D)Cost leadership,because direct material costs per square metre increased.

Question 77

Manufacturing cycle efficiency is an example of a balanced-scorecard measure of the:

A)internal business process perspective.
B)customer perspective.
C)learning and growth perspective.
D)financial perspective.

Question 78

Bledisloe Corporation plans to grow by offering an audio-visual training programme,the Rugger2018 that is superior and unique from the competition.Bledisloe believes that putting additional resources into R&D and staying ahead of the competition with technological innovations are critical to implementing its strategy.
Required:
a.Is Bledisloe's strategy one of product differentiation or cost leadership? Explain briefly.
b.Identify at least one key element that you would expect to see included in the balanced scorecard:
- for the financial perspective.
- for the customer perspective.
- for the internal business process perspective.
- for the learning and growth perspective.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question 79

An operating profit analysis of ACT Incorporated revealed the following:
$$\begin{array} { l r } \text { Operating profit for } 2017 & \$ 500000 \\\text { Add growth component } & 25000 \\\text { Deduct price-recovery component } & ( 15000 ) \\\text { Add productivity component } & 60000 \\\text { Operating profit for } 2018 & \$ 570000\end{array}$$
ACT's operating profit gain is consistent with the:

A)product differentiation strategy.
B)cost leadership strategy.
C)re-engineering strategy.
D)downsizing strategy.

Question 80

The number of complaints about a product is an example of a balanced-scorecard measure of the:

A)internal business process perspective.
B)customer perspective.
C)learning and growth perspective.
D)financial perspective.