The Stoneland Company was in the construction business. In building its Balanced Scorecard, managers interviewed many of its current and potential customers. They found that some customers were highly price-sensitive and wanted to continue business as usual. These customers developed internally all the specifications for their bids, put the detailed bidding document out to tender, and chose, from among all qualified suppliers, the one submitting the lowest bid. As one price-sensitive customer said during an interview:
We don't have the resources of time for doing anything fancy with our suppliers. Our business has become ruthlessly competitive, with price and margin reductions in recent years, and the need for us to cut costs wherever we can. We can't afford to choose anyone but the lowest-price supplier.
Historically, Stoneland competed by attempting to be the selected low-price bidder for price-sensitive customers. But the interviews also revealed that several large and important customers were looking for more than low price from their most valued supplier of construction services. They said:
We have to cut costs wherever we can. But we are looking to our suppliers to help us in this goal. If it's cheaper and more effective for them to take over some of our engineering functions, we should let them do that, and reduce' our internal engineering staffs accordingly. We don't have any special capabilities in construction. We want suppliers that can suggest new ways of doing business, and who can develop improved technologies for this task. Our best suppliers of engineering and construction services will anticipate our needs and suggest creative ways to meet these needs through new technologies, new project management approaches, and new financing methods.
These companies acknowledged that rapidly changing technology and an increasingly competitive marketplace for their final products had motivated them to look to their suppliers for innovative ways to lower their costs. Although price would still be a factor, a supplier's ability to offer innovative and more cost-effective approaches would be a strong influence on supplier selection. Stone land referred to these companies as those wanting differentiated services.
(I) How would the customer and internal business process perspectives of Stoneland's Balanced Scorecard differ, depending on whether It selected the price-sensitive or differentiated services customer types as the target for its future strategy? Be specific about how the measures would differ depending upon which strategy Stoneland followed.
(2) What new internal business processes would Stoneland have to perform very well if it wanted to meet the expectations of its customers wanting differentiated services?
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