MA Tutorial 7: Balanced Scorecard Question 1a

MA Tutorial 7: Balanced Scorecard
Question 1a
Financial Perspective
 Evaluates the profitability of the strategy
 Uses the most objective measures in the scorecard
 Examples of financial perspective measures: Operating income, cost reduction in certain areas,
ROI
Customer Perspective
 Identifies targeted customer and market segments and measures the company’s success in
these segments, focuses on performance targets.
 Examples of such measures: market share, customer satisfaction, customer retention
percentage, time taken to fulfill customers’ requests
Internal Business Perspective
 Focuses on internal operations that create value for customers that, in turn, furthers the
financial perspective by increasing shareholder value
 Includes three subprocesses:
o Innovation
o Operations
o Post-sales service
Learning and growth Perspective
 Identifies the capabilities the organization must excel at to achieve superior internal processes
that create value for customers and shareholders
 Examples of such measures: employee education and skill level, employee satisfaction scores,
employee turnover rates, information system availability, percentage of processes with
advanced controls
Question 1b
Strategy: Cost leadership
Financial perspective
Goal: Grow operating income and reduce costs
Measure: Operating income from revenue growth
Main goal is to maximise profit, hence TA should increase their income mainly by lowering cost by
cutting down unnecessary costs so that a decrease in expenses will result in a higher profit.
Identify costs that can be easily reduced: to rent fewer airplanes, reducing leasing costs. Increase seat
revenue per plane, higher operating efficiency by having fewer empty seats
Customer perspective
Goal: Increase customer satisfaction and increase market share
Measure: Customer satisfaction ratings
Improvement of customer satisfaction is the cause of improvement of financial perspective
Internal Business perspective

Goal: Reduce staff absentee rate
Measure: Staff absentee rate
Goal: turnaround time and flight punctuality, cleanliness of the plane, develop online booking system
Measure: on ground time, on time departures, no. of flight delays
By improving turnaroung time, ensures that flights are able to depart on time or even earlier than their
scheduled departures. This in turn will increase the on time departures and reduce the no of flight
delays. Improving internal biz will be appreciated by the customers hence improve financial perspective
Learning and growth perspective

Goal: Align employee and organization goals
Measure: Employee-satisfaction ratings
Goal: employee skill level and employee turnover rate, reduce employee absentee rate
Measure: employee training and satisfaction survey
Sending employees to trainings will further equip them with the necessary skills required
Question 2a
Pdt differentiation: charge premium prices
Financial: increase operating income from higher margins on KE8 (unique characteristic, customer willing
to pay higher) and growth (more customers appreciating the unique product)
Customer: customer satisfaction and market share in the high end mkt (target high end consumers).
strategy should result in improvements in these customer measures that help evaluate whether
westwood’s product differentiaton strategy is succeeding with its customers
internal business-process: new product features added, development time for new products,
improvements in manufacturing processes, manufacturing quality order-delivery time and on time
delivery
learning and growth perspectives.
Question 2b
Change in operating income: 362000 F
Growth:
Revenue effect: (42,000 – 40,000) x $100 = $200,000 F
Cost effect on VC: (126,000 – 120,000) x $10 = $60,000 U
Units of input required to produce current output in prior period: 120000/40000x42000
units=126000
Cost effect on FC: (50,000 – 50,000) x $20 = $0
Selling price: $0
Change in operating income due to growth: $140,000 F
Price-Recovery:
Revenue effect: ($110 - $100) x 42,000 = $420,000 F
Cost effect on VC: ($11 - $10) x 126,000 = $126,000 U
Cost effect on FC: ($22 - $20) x 50,000 = $100,000 U
Price recoverty for selling and customer service cost: 25000 – 24000 x 30 = 30 000 U
Change in operating income due to price recovery: $194,000 F (164000 F)
Productivity:
Cost effect on VC: (123,000 – 126,000) x $11 = $33,000 F
Cost effect on FC: (50,000 – 50,000) x $22 = $0
Cost effect of productivity for selling and cust service cost (29-30) x 25000 = 25 000 F
Change in operating income due to productivity: $33,000 F (58000F)
Question 2c
When market is booming, every firm will do well, not necessarily due to individual firm effort.
Price recovery and growth components are two important factors to determine the success. (magnitude
of the productivity component is the smallest)
(for cost leadership, growth and productivity components determine the success of the strategy)
Question 3
CAFE
Internal business: improve quality of food. High quality service. Initiative: train staffs to cook better,
source for better suppliers.
CANOPY
Internal business: reduce unpopular food, reduce wastages

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MA Tutorial 7: Balanced Scorecard

Internal Business perspective

Learning and growth perspective

learning and growth perspectives.

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