Assignment Material

Questions

13-1. Define strategy
13-2. Describe the five key forces to consider when analyzing an industry.
13-3. Describe the two generic strategies.
13-4. What is a customer preference map, and why is it useful?
13-5. What are ways that a company can achieve cost leadership?
13-6. What are the four key perspectives in the balanced scorecard?
13-7. What are the five types of items to consider when evaluating a strategy map?
13-8. Describe three features of a good balanced scorecard.
13-9. What are three important pitfalls to avoid when implementing a balanced scorecard?
13-10. Describe three key components in doing a strategic analysis of operating income.
13-11. Why might an analyst incorporate the industry-market-size factor and the interrelationshipsamong the growth, price-recovery, and productivity components into a strategic analysis of operating income?
13-12. What are unused capacity costs?
13-13. What is downsizing?
13-14. What is a partial-productivity measure?
13-15. “We are already measuring total factor productivity. Measuring partial productivities would be ofno value.” Do you agree? Explain briefly.

Multiple-Choice Questions

13-16. Jacobs Inc. is a relatively new company that has established a position in the highly competitivebiotechnology industry. Which of the following statements is correct regarding Jacobs’ profitability?
1. a. Profits will increase when buyers have lower switching costs.
2. b. Significant up-front capital requirements for new entrants will help Jacobs’ profit margins.
3. c. Profitability is diminished when there are many suppliers.
4. d. Rival firms willing to spend a lot of money on advertising will increase Jacobs’ profits
13-17. The balanced scorecard describes all of the following except which one?
1. a. The initiatives critical for the organization’s performance.
2. b. The strategic goals.
3. c. The related measures associated with strategic and tactical goals.
4. d. The definition of strategic business
13-18. Canarsie Corporation uses a balanced scorecard to evaluate its digital camera manufacturingoperation. Which of the following statements with respect to balanced scorecards is/are correct?
1. I. A balanced scorecard reports management information regarding organizational performance inachieving goals classified by critical success factors to demonstrate that no single dimension oforganizational performance can be relied upon to evaluate success.
2. II. Performance measures used in a balanced scorecard tend to be divided into financial, customer,internal business process, and learning and growth.
3. III. In a balanced scorecard, internal business processes are what the company does in its attempts tosatisfy customers.
  1. 1. I and II only are correct.
  2. 2. II and III only are correct.
  3. 3. III only is correct.
  4. 4. I, II, and III are correct

Exercises

13-19. BALANCED SCORECARD. Pineway Electric manufactures electric motors. It competes and plans to grow by selling high-quality motors at a low price and by delivering them to customers in a reasonable time after receiving customers’ orders. There are many other manufacturers who produce similar motors. Pineway believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy in 2020.
1. Required
2. 1. Is Pineway’s 2020 strategy one of product differentiation or cost leadership? Explain briefly.
3. 2. Ramsey Corporation, a competitor of Pineway, manufactures electric motors with more sizes and features than Pineway at a higher price. Ramsey’s motors are of high quality but require more time to produce and so have longer delivery times. Draw a simple customer preference map as in Exhibit 13-1 for Pineway and Ramsey using the attributes of price, delivery time, quality, and design features.
4. 3. Draw a strategy map as in Exhibit 13-2 with at least two strategic objectives you would expect to see under each balanced scorecard perspective. Identify what you believe are any (a) strong ties, (b) focal points, (c) trigger points, and (d) distinctive objectives. Comment on the structural analysis of your strategy map.
5. 4. For each strategic objective, indicate a measure you would expect to see in Pineway’s balanced scorecard for 2020.
13-20. ANALYSIS OF GROWTH, PRICE-RECOVERY, AND PRODUCTIVITY COMPONENTS (CONTINUATION OF 13-19). An analysis of Pineway’s operating-income changes between 2019 and 2020 shows the following:

A table shows an analysis of Pineway’s operating-income changes between 2019 and 2020

The table depicts an analysis of Pineway’s operating-income changes between 2019 and 2020. The details of the table are as follows:

1. Operating income for 2019: 1,500,000 dollars

2. Add growth component: 91,000 dollars

3. Deduct price-recovery component: 82,000 dollars

4. Add productivity component: 145,000 dollars

5. Operating income for 2020: 1,654,000 dollars

The industry market size for electric motors did not grow in 2020, input prices did not change, and Pineway reduced the prices of its motors.
1. Required
2. 1. Was Pineway’s gain in operating income in 2020 consistent with the strategy you identified in requirement 1 of Exercise 13-19?
3. 2. Explain the productivity component. In general, does it represent savings in only variable costs, onlyfixed costs, or both variable and fixed costs?
13-21. Strategy, balanced scorecard, merchandising operation. Gianni & Sons buys T-shirts in bulk,applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Gianniwants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctiveGianni T-shirt. Gianni presents the following data for its first 2 years of operations, 2019 and 2020.

A table shows data for 2019 and 2020 operations for Gianni and Sons

The table depicts number of T-shirts purchased, number of T-shirts discarded, number of T-shirts sold, average selling price, average cost per T-shirt, administrative capacity (number of customers), administrative costs, and administrative cost per customer for 2019 and 2020. The details of the table are as follows:

1. Number of T-shirts purchased

2019: 215,000
2020: 245,000

2. Number of T-shirts discarded

2019: 15,000
2020: 20,000

3. Number of T-shirts sold

2019: 200,000
2020: 225,000

4. Average selling price

2019: 30 dollars
2020: 31 dollars

5. Average cost per T-shirt

2019: 15 dollars
2020: 13 dollars

6. Administrative capacity (number of customers)

2019: 4,500
2020: 4,250

7. Administrative costs

2019: 1,633,500 dollars
2020: 1,593,750 dollars

8. Administrative cost per customer

2019: 363 dollars
2020: 375 dollars

Administrative costs depend on the number of customers Gianni has created capacity to support, not on theactual number of customers served. Gianni had 3,600 customers in 2019 and 3,500 customers in 2020.
1. Required
2. 1. Is Gianni’s strategy one of product differentiation or cost leadership? Explain briefly.
3. 2. Describe briefly the key measures Gianni should include in its balanced scorecard and the reasons fordoing so.
13-22. Strategic analysis of operating income (continuation of 13-21). Refer to Exercise 13-21.
1. Required
2. 1. Calculate Gianni‘s operating income in both 2019 and 2020.
3. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2019 to 2020.
4. 3. Comment on your answers in requirement 2. What does each of these components indicate?
13-23. Analysis of growth, price-recovery, and productivity components (continuation of 13-21 and 13-22). Refer to Exercise 13-21. Suppose that the market for silk-screened T-shirts grew by 10% during 2020. Allincreases in sales greater than 10% are the result of Gianni’s strategic actions.
Required
Calculate the change in operating income from 2019 to 2020 due to growth in market size, product differentiation, and cost leadership. How successful has Gianni been in implementing its strategy? Explain.
13-24. Identifying and managing unused capacity (continuation of 13-21). Refer to Exercise 13-21.
1. Required
2. 1. Calculate the amount and cost of unused administrative capacity at the beginning of 2020, based on theactual number of customers Gianni served in 2020.
3. 2. Suppose Gianni can only add or reduce administrative capacity in increments of 250 customers. Whatis the maximum amount of costs that Gianni can save in 2020 by downsizing administrative capacity?
4. 3. What factors, other than cost, should Gianni consider before it downsizes administrative capacity?
13-25. Strategy, balanced scorecard. Methuen Corporation makes a special-purpose machine, D4H, used in the textile industry. Methuen has designed the D4H machine for 2020 to be distinct from its competitors. It has been generally regarded as a superior machine. Methuen presents the following data for 2019and 2020.

	2019	2020
1. Units of D4H produced and sold	200	210
2. Selling price	$43,000	$45,000
3. Direct materials (kilograms)	310,000	317,500
4. Direct material cost per kilogram	$7.25	$8.00
5. Manufacturing capacity in units of D4H	275	275
6. Total conversion costs	$2,145,000	$2,172,500
7. Conversion cost per unit of capacity	$7,800	$7,900
8. Selling and customer-service capacity	95 customers	90 customers
9. Total selling and customer-service costs	$1,045,000	$900,000
10. Selling and customer-service capacity cost per customer	$11,000	$10,000

Methuen produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2020. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Methuen can support, not the actual number of customers it serves. Methuen has 79 customers in 2019 and 84 customers in 2020.
1. Required
2. 1. Is Methuen’s strategy one of product differentiation or cost leadership? Explain briefly.
3. 2. Describe briefly key measures that you would include in Methuen’s balanced scorecard and the reasons for doing so.
13-26. STRATEGIC ANALYSIS OF OPERATING INCOME (CONTINUATION OF 13-25). Refer to Exercise 13-25.
1. Required
2. 1. Calculate the operating income of Methuen Corporation in 2019 and 2020.
3. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2019 to 2020.
4. 3. Comment on your answer in requirement 2. What do these components indicate?
13-27. ANALYSIS OF GROWTH, PRICE-RECOVERY, AND PRODUCTIVITY COMPONENTS (CONTINUATION OF 13-25 AND 13-26). Suppose that during 2020, the market for Methuen’s special-purpose machines grew by 3%. All increases in market share (that is, sales increases greater than 3%) are the result of Methuen’s strategic actions.
Required
Calculate how much of the change in operating income from 2019 to 2020 is due to the industry-market-size factor, product differentiation, and cost leadership. How successful has Methuen been in implementing its strategy? Explain.
13-28. IDENTIFYING AND MANAGING UNUSED CAPACITY (CONTINUATION OF 13-25). Refer to Exercise 13-25.
1. Required
2. 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2020 based on actual production and actual number of customers served in 2020.
3. 2. Suppose Methuen can add or reduce its manufacturing capacity in increments of 40 units. What is the maximum amount of costs that Methuen could save in 2020 by downsizing manufacturing capacity?
4. 3. Methuen, in fact, does not eliminate any of its unused manufacturing capacity. Why might Methuen not downsize?
13-29. STRATEGY, BALANCED SCORECARD, SERVICE COMPANY. Krater Associates is an architectural firm that has been in practice only a few years. Because it is a relatively new firm, the market for the firm’s services is very competitive. To compete successfully, Krater must deliver quality services at a low cost. Krater presents the following data for 2019 and 2020.

	2019	2020
1. Number of jobs billed	44	46
2. Selling price per job	$36,000	$35,000
3. Architect labor-hours	19,000	30,000
4. Cost per architect labor-hour	$38	$39
5. Architect support capacity (number of jobs the firm can do)	61	61
6. Total cost of software-implementation support	$164,700	$176,900
7. Software-implementation support-capacity cost per job	$2,700	$2,900

Architect labor-hour costs are variable costs. Architect support costs for each year depend on the architectsupport capacity that Krater chooses to maintain each year (that is, the number of jobs it can do each year). Architect support costs do not vary with the actual number of jobs done that year.
1. Required
2. 1. Is Krater Associate’s strategy one of product differentiation or cost leadership? Explain briefly.
3. 2. Describe key measures you would include in Krater’s balanced scorecard and your reasons fordoing so.

13-30. STRATEGIC ANALYSIS OF OPERATING INCOME (CONTINUATION OF 13-29). Refer to Exercise 13-29.
1. Required
2. 1. Calculate the operating income of Krater Associates in 2019 and 2020.
3. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2019 to 2020.
4. 3. Comment on your answer in requirement 2. What do these components indicate?
13-31. ANALYSIS OF GROWTH, PRICE-RECOVERY, AND PRODUCTIVITY COMPONENTS (CONTINUATION OF 13-29 AND 13-30). Suppose that during 2020, the market for architectural jobs increases by 10%. Assume that any increase in market share more than 10% and any decrease in selling price are the result of strategic choices by Krater’s management to implement its strategy.
Required
Calculate how much of the change in operating income from 2019 to 2020 is due to the industry-market-size factor, product differentiation, and cost leadership. How successful has Krater been in implementing its strategy? Explain.
13-32. IDENTIFYING AND MANAGING UNUSED CAPACITY (CONTINUATION OF 13-29). Refer to Exercise 13-29.
1. Required
2. 1. Calculate the amount and cost of unused architectural support capacity at the beginning of 2020, based on the number of jobs actually done in 2020.
3. 2. Suppose Krater can add or reduce its architectural support capacity in increments of 15 units. What is the maximum amount of costs that Krater could save in 2020 by downsizing architectural support capacity?
4. 3. Krater, in fact, does not eliminate any of its unused architectural support capacity. Why might Krater not downsize?

Problems

13-33. Balanced scorecard and strategy. The R and J Company manufactures a robotic vacuum calledthe Baxter. The company sells the vacuum to discount stores throughout the country. The Baxter is a basicrobotic vacuum with a remote and is significantly less expensive than the robotic vacuum that requires asmartphone and app offered by competitor Stone Manufacturing. Furthermore, the Baxter has experiencedproduction problems that have resulted in significant rework costs. Stone’s model has an excellent reputation for quality.
1. Required
2. 1. Is R and J’s current strategy that of product differentiation or cost leadership? What about the strategyof Stone Manufacturing?
3. 2. R and J would like to improve quality and decrease costs by improving processes and training workers to reduce rework. R and J’s managers believe the increased quality will increase sales. Sketch astrategy map for R and J.
4. 3. For each of the four perspectives, suggest a measure you would include in a balanced scorecard forR and J.
13-34. Strategic analysis of operating income. XBlast manufactures an entry-level hoverboard, HOV-X. Pursuing a cost-leadership strategy, the company has tried to improve quality and reduce costs. As a result of the actions taken over the last year, quality has significantly improved in 2020 while rework and unit costsof the HOV-X have decreased. XBlast has reduced manufacturing capacity because capacity is no longer needed to support rework. XBlast has also lowered HOV-X’s selling price to gain market share and unit sales have increased. Information about the current period (2020) and last period (2019) follows:

	2019	2020
1. Units of HOV-X produced and sold	15,000	25,000
2. Selling price	$125	$100
3. Direct materials used (kits^a)	18,000	27,000
4. Direct material cost per kit^a	$30	$30
5. Manufacturing capacity in kits processed	30,000	28,000
6. Total conversion costs	$660,000	$616,000
7. Conversion cost per unit of capacity $(row 6 \div row 5)$	$22	$22
8. Selling and customer-service capacity	200 customers	200 customers
9. Total selling and customer-service costs	$35,000	$38,000
10. Selling and customer-service capacity cost per customer $(row 9 \div row 8)$	$175	$190

^a A kit is composed of all the major components needed to produce a hoverboard.

Conversion costs in each year depend on production capacity defined in terms of kits that can be processed, not the actual kits started. Selling and customer-service costs depend on the number of customers that XBlast can support, not the actual number of customers it serves. XBlast has 125 customers in 2019 and 150 customers in 2020.
1. Required
2. 1. Calculate operating income of XBlast for 2019 and 2020.
3. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2019 to 2020.
4. 3. Comment on your answer in requirement 2. What do these components indicate?
13-35. ANALYSIS OF GROWTH, PRICE-RECOVERY, AND PRODUCTIVITY COMPONENTS (CONTINUATION OF 13-34). Suppose that during 2020, the market for hoverboards increased by 25%. All increases in market share (that is, sales increases greater than 25%) and decreases in the selling price of HOV-X are the result of XBlast’s strategic actions.
Required
Calculate how much of the change in operating income from 2019 to 2020 is due to the industry-market-size factor, product differentiation, and cost leadership. How does this relate to XBlast’s strategy and its success in implementation? Explain.
13-36. IDENTIFYING AND MANAGING UNUSED CAPACITY (CONTINUATION OF 13-34). Refer to the information for XBlast in Problem 13-34.
1. Required
2. 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2020 based on actual production and actual number of customers served in 2020.
3. 2. Suppose XBlast can add or reduce its selling and customer-service capacity in increments of 10 customers. What is the maximum amount of costs that XBlast could save in 2020 by downsizing selling and customer-service capacity?
4. 3. XBlast, in fact, does not eliminate any of its unused selling and customer-service capacity. Why might XBlast not downsize?
13-37. BALANCED SCORECARD. Following is a random-order listing of perspectives, strategic objectives, and performance measures for the balanced scorecard.

Perspectives	Performance Measures
Internal business process	Percentage of defective-product units
Customer	Return on assets
Learning and growth	Number of patents
Financial	Employee turnover rate
Strategic Objectives	Net income Customer profitability Percentage of processes with real-time feedback Return on sales Average job-related training-hours per employee Return on equity Percentage of on-time deliveries by suppliers Product cost per unit Profit per salesperson Percentage of error-free invoices Customer cost per unit Earnings per share Number of new customers Percentage of customers retained
Acquire new customers Increase shareholder value Retain customers Improve manufacturing quality Develop profitable customers Increase proprietary products Increase information-system capabilities Enhance employee skills On-time delivery by suppliers Increase profit generated by each salesperson Introduce new products Minimize invoice-error rate

Required
For each perspective, select those strategic objectives from the list that best relate to it. For each strategic objective, select the most appropriate performance measure(s) from the list.
13-38. BALANCED SCORECARD. (R. Kaplan, adapted) Petrocal, Inc., refines gasoline and sells it through its own Petrocal gas stations. On the basis of market research, Petrocal determines that 60% of the overall gasoline market consists of “service-oriented customers,” medium- to high-income individuals who are willing to pay a higher price for gas if the gas stations can provide excellent customer service such as a clean facility, a convenience store, friendly employees, a quick turnaround, the ability to pay by credit card, and high-octane premium gasoline. The remaining 40% of the overall market are “price shoppers” who look to buy the cheapest gasoline available. Petrocal’s strategy is to focus on the 60% of service-oriented customers. Petrocal’s balanced scorecard for 2020 follows. For brevity, the initiatives taken under each objective are omitted.

Objectives	Measures	Target Performance	Actual Performance
Financial Perspective
Increase shareholder value	Operating-income changes from price recovery	$80,000,000	$85,000,000
	Operating-income changes from growth	$60,000,000	$62,000,000
*Customer Perspective*
Increase market share	Market share of overall gasoline market	4%	3.8%
*Internal-Business-Process Perspective*
Improve gasoline quality	Quality index	92 points	93 points
Improve refinery performance	Refinery-reliability index (%)	91%	91%
Ensure gasoline availability	Product-availability index (%)	99%	99.5%
*Learning-and-Growth Perspective*
Increase refinery process capability	Percentage of refinery processes with advanced controls	94%	95%

1. Required
2. 1. Was Petrocal successful in implementing its strategy in 2020? Explain your answer.
3. 2. Would you have included some measure of employee satisfaction and employee training in the learning-and-growth perspective? Are these objectives critical to Petrocal for implementing its strategy? Why or why not? Explain briefly.
4. 3. Explain how Petrocal did not achieve its target market share in the total gasoline market but still exceeded its financial targets. Is “market share of overall gasoline market” the correct measure of market share? Explain briefly.
5. 4. Is there a cause-and-effect linkage between improvements in the measures in the internal-business-process perspective and the measure in the customer perspective? That is, would you add other measures to the internal-business-process perspective or the customer perspective? Why or why not? Explain briefly.
6. 5. Do you agree with Petrocal’s decision not to include measures of changes in operating income from productivity improvements under the financial perspective of the balanced scorecard? Explain briefly.
13-39. BALANCED SCORECARD. Vic Corporation manufactures various types of color laser printers in a highly automated facility with high fixed costs. The market for laser printers is competitive. The various color laser printers on the market are comparable in terms of features and price. Vic believes that satisfying customers with products of high quality at low costs is important to achieving its target profitability. For 2020, Vic plans to achieve higher quality and lower costs by improving yields and reducing defects in its manufacturing operations. Vic will train workers and encourage and empower them to take the necessary actions. Currently, a significant amount of Vic’s capacity is used to produce products that are defective and cannot be sold. Vic expects that higher yields will reduce the capacity that Vic needs to manufacture products. Vic does not anticipate that improving manufacturing will automatically lead to lower costs because many costs are fixed costs. To reduce fixed costs per unit, Vic could lay off employees and sell equipment, or it could use the capacity to produce and sell more of its current products or improved models of its current products.
Vic’s balanced scorecard (initiatives omitted) for the just-completed fiscal year 2020 follows.

Objectives	Measures	Target Performance	Actual Performance
*Financial Perspective*
Increase shareholder value	Operating-income changes from productivity improvements	$2,000,000	$1,200,000
	Operating-income changes from growth	$2,500,000	$1,100,000
*Customer Perspective*
Increase market share	Market share in color laser printers	4%	3.6%
*Internal-Business-Process Perspective*
Improve manufacturing quality	Yield	88%	90%
Reduce delivery time to customers	Order-delivery time	23 days	20 days
*Learning-and-Growth Perspective*
Develop process skills	Percentage of employees trained in process and quality management	92%	93%
Enhance information-system capabilities	Percentage of manufacturing processes with real-time feedback	90%	92%

Required

1. 1. Was Vic successful in implementing its strategy in 2020? Explain.
2. 2. Is Vic’s balanced scorecard useful in helping the company understand why it did not reach its target market share in 2020? If it is, explain why. If it is not, explain what other measures you might want to add under the customer perspective and why.
3. 3. Would you have included some measure of employee satisfaction in the learning-and-growth perspective and new-product development in the internal-business-process perspective? That is, do you think employee satisfaction and development of new products are critical for Vic to implement its strategy? Why or why not? Explain briefly.
4. 4. What problems, if any, do you see in Vic improving quality and significantly downsizing to eliminate unused capacity?
13-40. BALANCED SCORECARD, ENVIRONMENTAL, AND SOCIAL PERFORMANCE. Gardini Chocolates makes custom-labeled, high-quality, specialty candy bars for special events and advertising purposes. The company employs several chocolatiers who were trained in Germany. The company offers many varieties of chocolate, including milk, semi-sweet, white, and dark chocolate. It also offers a variety of ingredients such as coffee, berries, and fresh mint. The real appeal for the company’s product, however, is its custom labeling. Customers can order labels for special occasions (for example, wedding invitation labels) or business purposes (for example, business card labels). The company’s balanced scorecard for 2020 follows. For brevity, the initiatives taken under each objective are omitted.

Objectives	Measures	Target Performance	Actual Performance
Financial Perspective
Increase shareholder value	Operating-income changes from price recovery	$1,000,000	$1,500,000
	Operating-income changes from growth	$200,000	$250,000
	Cost savings due to reduced packaging size	$40,000	$50,000
*Customer Perspective*
Increase market share	Market share of overall candy bar market	8%	7.8%
Increase the number of new product offerings	Number of new product offerings	5	7
Increase customer acquisitions due to sustainability efforts	Percentage of new customers surveyed who required recycled paper options	35%	40%
*Internal-Business-Process Perspective*
Reduce time to customer	Average design time	3 days	3 days
Increase quality	Internal quality rating (10-point scale)	7 points	8 points
Increase use of recycled materials	Recycled materials used as a percentage of total materials used	30%	32%
*Learning-and-Growth Perspective*
Increase number of professional chocolatiers	Number of chocolatiers	5	6
Increase number of women and minorities in the workforce	Percentage of women and minorities in the workforce	40%	38%

1. Required
2. 1. Was Gardini successful in implementing its strategy in 2020? Explain your answer.
3. 2. Would you have included some measure of customer satisfaction in the customer perspective? Are these objectives critical to Gardini for implementing its strategy? Why or why not? Explain briefly.
4. 3. Explain why Gardini did not achieve its target market share in the candy bar market but still exceeded its financial targets. Is “market share of overall candy bar market” a good measure of market share for Gardini? Explain briefly.
5. 4. Do you agree with Gardini’s decision not to include measures of changes in operating income from productivity improvements under the financial perspective of the balanced scorecard? Explain briefly.
6. 5. Why did Gardini include balanced scorecard standards relating to environmental and social performance? Is the company meeting its performance objectives in these areas?
13-41. BALANCED SCORECARD, SOCIAL PERFORMANCE. Comtex Company provides cable and internet services in the greater Boston area. There are many competitors that provide similar services. Comtex believes that the key to financial success is to offer a quality service at the lowest cost. Comtex currently spends a significant number of hours on installation and post-installation support. This is one area that the company has targeted for cost reduction. Comtex’s balanced scorecard for 2020 follows.

Objectives	Measures	Target Performance	Actual Performance
*Financial Perspective*
Increase shareholder value	Operating-income changes from productivity	$2,400,000	$800,000
	Operating-income changes from growth	$520,000	$250,000
	Increase in revenue from new customer acquisition	$50,000	$24,000
*Customer Perspective*
Increase customer satisfaction	Positive customer survey responses	70%	65%
Increase customer acquisition	New customers acquired through company sponsored community events	475	350
*Internal-Business-Process Perspective*
Develop innovative services	Research and development costs as a percentage of revenue	5%	6%
Increase installation efficiency	Installation time per customer	5 hours	4.5 hours
Increase community involvement	Number of new programs with community organizations	12	15
Decrease workplace injuries	Number of employees injured in the workplace	$<$ 3	7
*Learning-and-Growth Perspective*
Increase employee competence	Number of annual training-hours per employee	10	11
Increase leadership skills	Number of leadership workshops offered	2	1
Increase employee safety awareness	Percent of employees who have completed safety certification training	100%	95%

1. Required
2. 1. Was Comtex successful in implementing its strategy in 2020? Explain.
3. 2. Do you agree with Comtex’s decision to include measures of developing innovative services (R&D costs) in the internal-business-process perspective of the balanced scorecard? Explain briefly.
4. 3. Is there a cause-and-effect linkage between the measures in the internal-business-process perspective and the customer perspective? That is, would you add other measures to the internal-business-process perspective or the customer perspective? Why or why not?
5. 4. Why do you think Comtex included balanced scorecard measures relating to employee safety and community engagement? How well is the company doing on these measures?
13-42. BALANCED SCORECARD, ENVIRONMENTAL, AND SOCIAL PERFORMANCE. WrightAir is a no-frills airline that services the Midwest. Its mission is to be the only short-haul, low-fare, high-frequency, point-to-point carrier in the Midwest. However, there are several large commercial carriers offering air transportation, and WrightAir knows that it cannot compete with them based on the services those carriers provide. WrightAir has chosen to reduce costs by not offering many inflight services such as food and entertainment options. Instead, the company is dedicated to providing the highest quality transportation at the lowest fare. WrightAir’s balanced scorecard measures (and actual results) for 2020 follow:

Objectives	Measures	Target Performance	Actual Performance
*Financial Perspective*
Increase shareholder value	Operating-income changes from productivity	$7,200,000	$8,400,000
	Operating-income changes from price recovery	$2,700,000	$3,600,000
	Operating-income changes from growth	$3,000,000	$3,960,000
	Cost savings due to reduction in jet fuel consumption	$900,000	$1,080,000
*Customer Perspective*
Increase the number of on-time arrivals	FAA on-time arrival ranking	1^st in industry	2^nd in industry
Improve brand image	Percentage of customer survey respondents with greater than 90% approval rating on company’s sustainability efforts	100%	96%
*Internal-Business-Process Perspective*
Reduce turnaround time	On-ground time	< 25 minutes	30 minutes
Reduce CO₂ emissions	Number of engineering changes that decreased CO₂ emissions	10	9
*Learning-and-Growth Perspective*
Align ground crews	% of ground crew stockholders	70%	68%
Acquire new energy management tool and technology	Achieve ISO 50001 certification in energy management	Acquire certification by Dec. 31	Acquired certification by Dec. 31

1. Required
2. 1. What is WrightAir’s strategy? Was WrightAir successful in implementing its strategy in 2020? Explain your answer.
3. 2. Draw a strategy map as in Exhibit 13-2 for WrightAir describing the cause-and-effect relationships among the strategic objectives described in the balanced scorecard. Identify what you believe are any (a) strong ties, (b) focal points, (c) trigger points, and (d) distinctive objectives. Comment on your structural analysis of the strategy map.
4. 3. Based on the strategy identified in requirement 1 above, what role does the price-recovery component play in explaining the success of WrightAir?
5. 4. Would you have included customer-service measures in the customer perspective? Why or why not?
6. 5. Would you have included some measure of employee satisfaction and employee training in the learning-and-growth perspective? Would you consider this objective critical to WrightAir for implementing its strategy? Why or why not?
7. 6. Why do you think WrightAir has introduced environmental measures in its balanced scorecard? Is the company meeting its performance objectives in this area?
13-43. PARTIAL-PRODUCTIVITY MEASUREMENT. Goldstein Company manufactures wallets from fabric. In 2019, Goldstein made 2,700,000 wallets using 1,875,000 yards of fabric. In 2019, Goldstein has capacity to make 3,600,000 wallets and incurs a cost of $10,800,000 for this capacity. In 2020, Goldstein plans to make 3,348,000 wallets, make fabric use more efficient, and reduce capacity.
Suppose that in 2020 Goldstein makes 3,348,000 wallets, uses 2,160,000 yards of fabric, and reduces capacity to 3,100,000 wallets at a cost of $10,540,000.
1. Required
2. 1. Calculate the partial-productivity ratios for materials and conversion (capacity costs) for 2020, and compare them to a benchmark for 2019 calculated based on 2020 output.
3. 2. How can Goldstein Company use the information from the partial-productivity calculations?
13-44. TOTAL FACTOR PRODUCTIVITY (CONTINUATION OF 13-43). Refer to the data for Problem 13-43. Assume the fabric costs $4.40 per yard in 2020 and $4.55 per yard in 2019.
1. Required
2. 1. Compute Goldstein Company’s total factor productivity (TFP) for 2020.
3. 2. Compare TFP for 2020 with a benchmark TFP for 2019 inputs based on 2020 prices and output.
4. 3. What additional information does TFP provide that partial-productivity measures do not?