ch13sol - CHAPTER 13 STRATEGY, BALANCED SCORECARD, AND...

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CHAPTER 13 STRATEGY, BALANCED SCORECARD, AND STRATEGIC PROFITABILITY ANALYSIS 13-26 (15 min.) Strategy, balanced scorecard, service company. 1. Snyder Corporation’s strategy in 2006 is cost leadership. Snyder’s consulting services for implementing sales management software is not distinct from its competitors. The market for these services is very competitive. To succeed, Snyder must deliver quality service at low cost. Improving productivity while maintaining quality is key. 2. Balanced Scorecard measures for 2006 follow: Financial Perspective (1) Increase operating income from productivity gains and growth, (2) revenues per employee, (3) cost reductions in key areas, for example, software implementation and overhead costs. These measures indicate whether Snyder has been able to reduce costs and achieve operating income increases through cost leadership. Customer Perspective (1) Market share, (2) new customers, (3) customer responsiveness, (4) customer satisfaction. Snyder’s strategy should result in improvements in these customer measures that help evaluate whether Snyder’s cost leadership strategy is succeeding with its customers. These measures are leading indicators of superior financial performance. Internal Business Process Perspective (1) Time to complete customer jobs, (2) time lost due to errors, (3) quality of job (Is system running smoothly after job is completed?) Improvements in these measures are key drivers of achieving cost leadership and are expected to lead to more satisfied customers, lower costs, and superior financial performance. Learning and Growth Perspective (1) Time required to analyze and design implementation steps, (2) time taken to perform key steps implementing the software, (3) skill levels of employees, (4) hours of employee training, (5) employee satisfaction and motivation. Improvements in these measures are likely to improve Snyder’s ability to achieve cost leadership and have a cause-and-effect relationship with improvements in internal business processes, customer satisfaction, and financial performance.
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13-27 (30 min.) Strategic analysis of operating income (continuation of 13-26). 1. Operating income for each year is as follows: 2005 2006 Revenues ($50,000 × 60; $48,000 × 70) $3,000,000 $3,360,000 Costs Software implementation labor costs ($60 × 30,000; $63 × 32,000) 1,800,000 2,016,000 Software implementation support costs ($4,000 × 90; $4,100 × 90) 360,000 369,000 Software development costs ($125,000 × 3; $130,000 × 3) 375,000 390,000 Total costs 2,535,000 2,775,000 Operating income $ 465,000 $ 585,000 Change in operating income $120,000 F 2. The Growth Component Revenue effect of growth = Actual units of Actual units of output sold output sold in 2006 in 2005 - ÷ ÷ × Selling price in 2005 = (70 – 60) × $50,000 = $500,000 F Cost effect of growth for
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This note was uploaded on 05/18/2010 for the course BUSS 210 taught by Professor Paejinhan during the Spring '09 term at Korea University.

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ch13sol - CHAPTER 13 STRATEGY, BALANCED SCORECARD, AND...

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