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Unformatted text preview: CHAPTER 13 STRATEGY, BALANCED SCORECARD, AND STRATEGIC PROFITABILITY ANALYSIS 13-1 Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. 13-2 The five key forces to consider in industry analysis are: (a) competitors, (b) potential entrants into the market, (c) equivalent products, (d) bargaining power of customers, and (e) bargaining power of input suppliers. 13-3 Two generic strategies are (1) product differentiation, an organizations ability to offer products or services perceived by its customers to be superior and unique relative to the products or services of its competitors and (2) cost leadership, an organizations ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. 13-4 The four key perspectives in the balanced scorecard are: (1) Financial perspectivethis perspective evaluates the profitability of the strategy, (2) Customer perspectivethis perspective identifies the targeted customer and market segments and measures the companys success in these segments, (3) Internal business process perspectivethis perspective focuses on internal operations that further both the customer perspective by creating value for customers and the financial perspective by increasing shareholder value, and (4) Learning and growth perspective this perspective identifies the capabilities the organization must excel at to achieve superior internal processes that create value for customers and shareholders. 13-5 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. 13-6 A good balanced scorecard design has several features: 1. It tells the story of a companys strategy by articulating a sequence of cause-and-effect relationships. 2. It helps to communicate the strategy to all members of the organization by translating the strategy into a coherent and linked set of understandable and measurable operational targets. 3. It places strong emphasis on financial objectives and measures in for-profit companies. Nonfinancial measures are regarded as part of a program to achieve future financial performance. 4. It limits the number of measures to only those that are critical to the implementation of strategy. 5. It highlights suboptimal tradeoffs that managers may make when they fail to consider operational and financial measures together. 13-1 13-7 Pitfalls to avoid when implementing a balanced scorecard are: 1. Dont assume the cause-and-effect linkages are precise; they are merely hypotheses. An organization must gather evidence of these linkages over time....
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- Spring '08
- Cost Accounting