Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
Financial: operating margin, cost per patient-day, percentage of
overdue patient accounts, sales growth
Customer: patient satisfaction, speed of service, number of
referring physicians, measures of patient health (re-admits for
complications,…)
Internal Processes : patient complaints, percentage of
procedures completed on time, infection rate, mortality rate
Learning & Growth : number of employee hours of training,
number of employee suggestions, measures of absenteeism,
employee satisfaction
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-47 Strategic Positioning (20 min)
Farming is basically a commodity operation, and this is true of
Fowler’s farm as well. The products are difficult to differentiate
except by grade which can affect market prices to some degree. For
this reason, the best description of the farm’s strategy is cost
leadership. This strategy is also consistent with the financial
problems facing farms in the U.S. The Farm Aid concerts sponsored
by Willie Nelson and others are an illustration of the broad concern of
the diminishing profits of farming. Also, the case notes price
pressures facing the Fowler farm. Good cost management is
becoming more critical for successful farming, and this appears to be
at the top of Kelly’s agenda.
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-48 SWOT Analysis (20 min)
There are likely to be a wide variety of answers. Here are some
representative items.
Strengths
Good sized farm in an established farming area
Automated milking equipment
Extensive experience
Significant capital investment
Weaknesses
Future of tobacco as a crop?
FDA regulations and compliance
Some unscientific farming methods used in the past
Varied terrain in the farm’s fields
Opportunities
More efficient farming operations, through Kelly
More leisure time for Dad
Export subsidies, tariffs, etc. in the U.S. and abroad that make
Fowler’s farm products more competitive
Threats
New regulations, taxes,…etc. re: tobacco
Export subsidies, tariffs, etc in the U.S. and abroad that make
Fowler’s farm products less competitive
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-49 Value Chain Analysis (20 min)
The value chain should identify the elements or activities in the value
chain in enough detail that Kelly can identify potential areas for cost
reduction. One representative example (only one possible example)
of a value chain for the farm is as follows.
Value Activity Timing
Soil Preparation February – March
Obtain seed, fertilizer and supplies February-April
Planting April
Weed control and irrigation May – July
Harvesting August – September
Sort, clean and package for sale August – September
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-50 The Balanced Scorecard (20 min)
There are a number of possibilities for determining both the number
and types of perspectives for the balanced scorecard, and for
determining the critical success factors which belong under each
perspective. The answer below is representative of a balanced
scorecard that would be a good fit for the Fowler farm. This
scorecard puts the operations and financial perspectives first, to
Operations
crop rotation; number of fields in rotation
inventory of supplies and parts, by type of equipment, cost
and date purchased
weather forecast, days missed, important weather changes
irrigation schedule; % days on schedule
fuel used, by type of equipment
equipment breakdowns, by type of equipment; cost of
repair, length of time needed for repair
Financial
sales; trend
monthly earnings trend
return on investment; compared to industry average for region
cost of materials; fertilizer, fuel, etc.
cost of labor; by type of employee
prices received for each major product
interest cost
Employees
turnover (number and percent)
accidents (number )
experience; years in farming
efficiency; hours required for each well-defined task
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-50 (continued -1)
Regulatory Compliance and Environmental
compliance with local, state and federal laws on tobacco
farming
compliance with FDA regulations regarding handling raw milk
usage of restricted chemicals known to have negative
environmental effects (amount, percent)
Customer
orders shipped on time (number and percent)
quality complaints (number, percent)
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-51 Strategic Positioning (20 min)
Because of the emphasis in the case information on product
quality and craftsmanship, the strategy for Tartan (the reason it has
been successful) is best described as differentiation on the basis of
quality. While there are some cost concerns for the company,
particularly with the Classic line, these are not critical to the
company’s success. In contrast, the company is most likely to
succeed if it can continue to appeal to those customers looking for
up-scale, higher quality lamps and lighting fixtures. The Classic line
is critical to this strategy since it is the original product line for the
company, and the most identified with quality and craftsmanship.
When using differentiation as the Company’s strategy, it
becomes clear that maintaining the Classic line is critical to the
company’s success. Thus, elimination of the line could damage the
firm’s quality and craftsmanship image, and thus hurt the company’s
strategic competitive advantage. Even if the Classic line is losing
money for the company, it is important to both retain it and to
publicize it, because it is the product line which most supports the
company’s quality image.
Since sales of the Classic line seem to be focused on the
northeast states, it might be appropriate to obtain efficiencies by
focusing manufacturing and distribution efforts in these states.
However, the marketing of the Classic line should continue to be
throughout all sales regions because of the strategic importance of
the Classic line.
The Classic line can be considered an example of what is
sometimes called a “loss leader,” a product or service that draws
attention to the company, but which in itself is not profitable.
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-52 SWOT Analysis (20 min)
There are likely to be a wide variety of answers. Here are some
representative items.
Strengths
90+ years of reputation for quality and innovation
Highly trained craftsmen (Classic Line)
Loyal work force
Threats
Ability to replace skilled workers in the Classic line?
Order backlog – effect on customer satisfaction?
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-53 Value Chain Analysis (30 min)
There are a large number of possible value chains for a company
such as Tartan. The value chain provided below is a representative
example. A solution such as this should include upstream,
manufacturing, and downstream activities – all the way from product
planning and research to customer service.
Value Activity (in sequence) The Role of this Activity
Market research To benchmark and maintain our
overall strategy
Product planning Importance of developing new
products
Advertising and Promotion Stress the firm’s quality
Product design Focus on innovation, quality
Develop bill of materials May need long lead times to
acquire the best quality materials
Source parts and skilled labor Very important because of
Tartan’s reputation for quality and
Assembly Importance of quality
Finish and painting Importance of quality
Preparation for Shipment Importance of quality
Invoice customer Accuracy, customer service
Customer service A key step in the differentiation
Customer satisfaction follow–up Important to Tartan’s
differentiation strategy
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-53 (continued -1)
Here are some points that address why the value chain is important
to profitability and overall competitiveness. Many of these point to
questions about Tartan’s operations that go beyond the data available
in the case; for these points, the role of the value chain is to help to
identify the important questions.
1. The value chain provides a basis for identifying those
activities for which the firm is very competitive and those for which it
is not competitive. In this case, the upstream activities of design and
manufacturing are probably at the heart of Tartan’s past success, as
the firm has developed a reputation for products of high quality.
Customer service is also a key to maintaining the firm’s differentiation
strategy. The use of the value chain should highlight this important
activity and draw the firm’s attention to its performance in that activity.
2. Since manufacturing capacity is overall pretty tight, the value
chain can be used to help identify those activities where the capacity
3. The value chain can be used to benchmark specific
activities, perhaps against industry figures for manufacturing
productivity, and so on. Most industries, including the lighting
manufacturer’s industry, collect and publish summarized information
about operating performance of firms in the industry. As a member of
the industry association, Tartan would have access to this type of
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