Deck 13: Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Question 1

________ is an organization'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)Cost leadership
D)The balanced scorecard

Answer 1

C

Question 2

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

Answer 2

False

Question 3

Answer the following questions using the information below:
Meale Company makes a household appliance with model number X500. The goal for 2012 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 X500 units that can be produced. The industry market size for appliances increased 10% from 2011 to 2012. The following additional data are available for 2011 and 2012:

Which strategy is Meale's Corporation pursuing?

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

Answer 3

D

Question 4

Answer the following questions using the information below:
Stewart Corporation plans to grow by offering a sound system, the SS3000, that is superior and unique from the competition. Stewart believes that putting additional resources into R&D and staying ahead of the competition with technological innovations is critical to implementing its strategy.
Stewart's strategy is:

A)product differentiation
B)downsizing
C)reengineering
D)cost leadership

Question 5

Which of the following is a force that shapes an organization's profit potential?

A)Investors
B)Potential entrants into the market
C)Creditors
D)Research and development

Question 6

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 7

An organization that is using the product differentiation approach would:

A)focus on tight cost control
B)carefully cultivate their brands
C)provide products that are similar to competitors
D)offer products at a lower cost than competitors

Question 8

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

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

Question 9

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

Question 10

Explain the product differentiation and the cost leadership strategies.

Question 11

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

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

Question 12

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

A)product differentiation
B)downsizing
C)reengineering
D)cost leadership

Question 13

________ is an organization's ability to offer products or services that are perceived by its customers as being superior and unique relative to those of its competitors.

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

Question 14

Which of the following is NOT a force that shapes an organization's profit potential?

A)Competitors
B)Equivalent products
C)Bargaining power of input suppliers
D)All of these answers are correct.

Question 15

Product differentiation is an organization''s ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.

Question 16

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

Question 17

The cost leadership strategy is for products and services that are similar to competitor's products and services.

Question 18

An organization that is using the cost leadership approach would:

A)incur costs for innovative R&D
B)provide products at a higher cost than competitors
C)focus on productivity through efficiency improvements
D)bring products to market rapidly

Question 19

Product differentiation is an organization''s ability to offer products or services perceived by its customers to be superior and unique relative to the products or services of its competitors.

Question 20

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

Question 21

Successful reengineering involves:

A)cutting across functional lines to focus on the entire business process
B)redefining the roles and responsibilities of employees
C)using information technology
D)All of these answers are correct.

Question 22

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

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

Question 23

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

A)operating income
B)customer satisfaction
C)gross profit percentage
D)cost reductions

Question 24

All of the following relate to the balanced scorecard's learning and growth perspective EXCEPT:

A)How do we achieve greater employee satisfaction?
B)What new products do we create?
C)How do we provide information systems with updated technology?
D)How will we motivate and empower our employees?

Question 25

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

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

Question 26

The purpose of the balanced scorecard is best described as helping an organization:

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

Question 27

Reengineering 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 28

What is reengineering. Can you contrast a reengineering approach to change with a kaizen approach to change?

Question 29

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

Question 30

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

Question 31

The balanced scorecard measures an organization's performance from all of the following perspectives EXCEPT:

A)financial
B)government
C)customer
D)learning and growth

Question 32

Identify the best description of the balanced scorecard's financial perspective. To achieve our firm's vision and strategy:

A)how can we obtain greater profits for the current year?
B)how can we increase shareholder value?
C)how will we obtain continuous improvements?
D)how can we secure greater customer satisfaction?

Question 33

Measures of the balanced scorecard's customer perspective include:

A)market share
B)number of on-time deliveries
C)number of process improvements
D)revenue growth

Question 34

________ 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)Customer perspective
C)Learning and growth perspective
D)Reengineering

Question 35

Successful reengineering efforts generally involve changing the roles and responsibilities of employees.

Question 36

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

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

Question 37

Measures of the balanced scorecard's financial perspective include:

A)information system availability
B)number of new patents
C)revenue growth
D)defect rates

Question 38

The first step to successful balanced scorecard implementation is clarifying the:

A)organization's vision and strategy
B)elements that pertain to value-added aspects of the business
C)owner's expectations about return on investment
D)objectives of all four balanced scorecard measurement perspectives

Question 39

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

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

Question 40

Balanced scorecard objectives are in balance when:

A)debits equal credits
B)financial performance measurements are less than the majority of measurements
C)the measurements are fair
D)the measurements reflect an improvement over the previous year

Question 41

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 42

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

A)operating capabilities
B)number of new products
C)employee turnover rates
D)defect rates

Question 43

A strategy map is a diagram that describes how an organization creates value by connecting strategic objectives in explicit cause-and-effect relationships with each other in the financial, customer, internal business process, and learning and growth perspectives.

Question 44

Answer the following questions using the information below:
Riter Corporation manufactures water toys. It plans to grow by producing high-quality water toys at a low cost that are delivered in a timely manner. There are a number of other manufacturers who produce similar water toys. Riter 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)number of process improvements
B)price premium earned
C)longer cycle times
D)an increase in operating income from increased profit margins

Question 45

The customer perspective of the balanced scorecard evaluates the profitability of the strategy.

Question 46

Surveys 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 47

Managers need to evaluate the success of a strategy by:

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

Question 48

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

Question 49

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

Question 50

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

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

Question 51

The balanced scorecard uses financial and nonfinancial performance measures to evaluate short-run and long-run performance in a single report.

Question 52

To achieve success, it is important to set nonfinancial objectives as well as financial objectives.

Question 53

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

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

Question 54

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

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

Question 55

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

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

Question 56

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 57

In for-profit companies, the primary goal of the balanced scorecard is to sustain short-run financial performance.

Question 58

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

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

Question 59

The balanced scorecard translates an organization's mission and strategy into a set of performance measures that provides the framework for implementing its strategy.

Question 60

Answer the following questions using the information below:
Stewart Corporation plans to grow by offering a sound system, the SS3000, that is superior and unique from the competition. Stewart 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)number of process improvements
B)manufacturing quality
C)yield
D)an increase in operating income from productivity gains

Question 61

Which component of strategy measures the changes in operating income 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 productivity component
D)the cost leadership component

Question 62

When implementing a balanced scorecard, the cause-and-effect linkages are always precise.

Question 63

When analyzing the change in operating income, the strategy component of productivity will increase when:

A)capacity is reduced
B)quality is enhanced
C)selling prices are increased
D)more units are produced and sold

Question 64

Different strategies call for different scorecards.

Question 65

Which component of strategy measures the change in operating income attributable solely to changes in a company's profit margins between Year 1 and Year 2?

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

Question 66

Which component of strategy measures the reduction in costs attributable to a reduction in the quantity of inputs used in Year 2 relative to the quantity of inputs that would have been used in Year 1 to produce the Year 2 output?

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

Question 67

When analyzing the change in operating income, the strategy component of growth will increase when:

A)capacity is reduced
B)production efficiencies are successfully implemented
C)selling prices are increased
D)more units are sold

Question 68

The customer perspective under the balanced scorecard approach would include measures on cost reduction.

Question 69

When analyzing the change in operating income, the strategy component of price-recovery will increase when:

A)capacity is reduced
B)production efficiencies are successfully implemented
C)selling prices are increased
D)more units are sold

Question 70

When analyzing the change in operating income, the strategy component of productivity:

A)calculations are similar to the sales-volume variance calculations
B)compares the change in output price with the changes in input prices
C)will report a large positive amount when a company has successfully pursued the cost leadership strategy
D)isolates the change attributed solely to an increase in the quantity of units sold

Question 71

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

Question 72

When analyzing the change in operating income, the strategy component of growth:

A)calculations are similar to the selling-price variance calculations
B)isolates the change attributed solely to an increase in market share
C)isolates the change attributed solely to an increase in industry growth
D)isolates the change attributed solely to an increase in the quantity of units sold

Question 73

The financial perspective of the balanced scorecard identifies targeted customers and market segments and measures the company's success in these segments.

Question 74

Buck Corporation plans to grow by offering a computer monitor, the CM3000 that is superior and unique from the competition. Buck 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 Buck's strategy one of product differentiation or cost leadership? Explain briefly.
Identify at least one key element that you would expect to see included in the balanced scorecard:
b. for the financial perspective.
c. for the customer perspective.
d. for the internal business process perspective.
e. for the learning and growth perspective.

Question 75

What is the primary purpose of the balanced scorecard?

Question 76

Successful implementation of a cost leadership strategy will result in:

A)large favorable growth and price-recovery components
B)large favorable price-recovery and productivity components
C)large favorable productivity and growth components
D)only a large favorable growth component

Question 77

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

Question 78

When analyzing the change in operating income, the strategy component of price-recovery:

A)calculations are similar to the efficiency-variance calculations
B)compares the change in output price with the changes in input prices
C)will report a large positive amount when a company has successfully pursued the cost leadership strategy
D)isolates the change attributed solely to an increase in production efficiencies

Question 79

What are the four key perspectives in the balanced scorecard?

Question 80

Successful implementation of a product differentiation strategy will result in:

A)a large favorable growth and price-recovery components
B)a large favorable price-recovery and productivity components
C)a large favorable productivity and growth components
D)only a large favorable growth component