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3. In the 2011-2014 period Mexico’s peso has been stable relative to the
U.S. dollar; The Canadian dollar also has been relatively stable to the
U.S. dollar.
These relatively stable exchange rates support, in part, the strong
trade relationships among these three countries. Ford Motor Company
benefits through its ability to purchase parts and components for its vehicle
from low-cost suppliers in Mexico, and to sell its products throughout the
region under the terms of the NAFTA agreement. The down-side for U.S.
job seekers is that the agreement has resulted in some jobs moving to
these other countries. A debate about the benefits and costs of free trade
While not addressed in the question, the instructor might note that some
key South American countries, including Brazil, Argentina, and Venezuela,
have had a significant decline in the value of their currencies in the 2012-
2014 period. These countries have had a decline of 40-50%. Venezuela
had a devaluation in February 2013, Brazil has had a steady slide during
this period, and Argentina’s currency has fallen by 100% during this period.
These currency problems lead to financial instability and to shrinking
economies, as investors retreat.
See Also: Camila Russo, “Argentines Gird for a Financial Storm,”
Bloomberg Businessweek, August 11, 2014, pp 16-17; Maxwell Murphy
Pushes Exports, Draws Risks,” The Wall Street Journal, July 11, 2011, p
A2; William Kazer and Andrew Browne, “China Moves in to Calm Market’s
Nerves,” The Wall Street Journal, August 12, 2011, p A10.
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-70 Research Assignment: Value Chain (30 min)
1. Disruptive innovation changes completely the nature of the market or
business. Examples include the iPhone or iPad. Sustaining
innovation involves significant improvements in existing products and
2. The five value chain activities mentioned in the article are:
a. Market analysis
b. Product development and design
c. Sales and marketing
d. Procurement, production and distribution
e. After-sale customer service
The five activities are broadly representative of many organizations,
especially manufacturers. It could be readily adapted to apply more
specifically to a service organization, by for example replacing
“Product Development and Design” with “Assess Current and
Potential New Services,” and replace “Procurement, Production and
Distribution,” with “Operations.”
3. While not mentioned in the article, strategy plays a key role in the
review of the activities for opportunities for innovation. Depending on
the firm’s strategy, cost leadership or differentiation, the management
accountant will find that some of the activities will be more or less
important in innovation. For example, a company that succeeds on
differentiation will likely spend more effort on innovation in the market
in the operations areas – procurement, production, and distribution.
4. Innovation in the market analysis activity can be attained by
surveying customers to determine how they are using the product or
service, what features or services they value or do not value, etc.A
technique called Maximum Difference Scaling (MaxDiff) can be used
to determine which product or service features are most important.
5. Innovation in the product development and design activity can be
aided by encouraging everyone in the company to consider and
provide their own ideas. Also, strategic alliances and joint ventures
Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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6. Innovation in sales and marketing might use for example, integrated
marketing efforts in which the firm partners with media firms or the
firm uses social media to help the company market its products and
services. The key is to think “out of the box” about how to get the
predictive analytics and business intelligence (see chapter 8).
7. Innovation in procurement, production, and distribution is an area
wherein many firms can benefit significantly from innovation,
particularly for manufacturing and retail firms for which much of the
value-added activities occur in the production-distribution activity.
8. Innovation in the after-sale customer service activity could also
benefit from the application of web-based resources and business
intelligence techniques. The idea is to extend the company’s ability
to identify and react to customer needs quickly and cost effectively.
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2-71 Measuring the Impact of Sustainability Efforts (20 min)
Advantages of the Comprehensive Sustainability Report
For Countries (GDP)
The more comprehensive reporting would provide a basis for more
informed decision making about the use of natural resources. For
example, the government of Malaysia recently was considering a
year; the tourist hotel was not built.
As a Puma executive explained, “Once you start measuring things
you realize something and start managing for it.”
For Companies (like Puma)
The more comprehensive reporting would provide a basis for
improved strategic analysis of the company’s existing and planned
concerns
The reporting framework helps the company move ahead with a
sustainable strategy that is welcomed by customers and
shareholders
Disadvantages of Comprehensive Sustainability Reporting
For Countries (GDP)
The sustainability calculations can be costly to develop
The sustainability measures may lack credibility because of the
assumption that must be made in the calculations
For Companies (like Puma)
As above for countries, the cost and extent of assumptions needed
for the sustainability reporting as well as the limitations of no legal
framework.
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Chapter 02 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
For global companies with suppliers in different countries, under
different laws and regulations, the comprehensive framework may
be difficult to implement
Also, in an article in Strategic Finance, Marc Epstein and Kristi Yuthas
present a practical approach for measuring the monetary value of
sustainability efforts.
Source: Marc J. Epstein and Kristi Yuthas, “Sustainability Impacts,”
Strategic Finance, January 2012, pp 27-33; Alex Morales, Eric Roston, and
Chisaki Watanabe, “A Kinder, Gentler – and Greener – GDP Number,”
Bloomberg Businessweek, June 25, 2012, pp 12-14; Jeb Blount,
“Accounting for Pollution Likely Within a Decade,” Reuters, June 21, 2012;
2-72 Research Assignment; Sustainability (30 min)
1. The three options are:
a. Adding a fifth perspective to the BSC
b. Developing a separate sustainability balanced scorecard
c. Integrating the measures throughout the four perspectives:
financial, customer, internal business processes, and learning
and growth.
desirable. For other firms, that wish to show a comprehensive single
BSC, approach (a) works well since it puts all of the firms goals in a
single, comprehensive system.
2. The seven BSC measurement selection considerations for a
sustainability scorecard are:
a. There is an underlying objective for the measurement. That is,
the measure reflects an important goal for the company.
b. Measurement terminology is defined and used consistently
throughout the organization. This step provides the needed
measures should be reliable and produced from a system that
can be audited to insure the accuracy of the information.
d. The measurement will create behavior that is in agreement with
the organizational goals and objectives. This means that the
measures are chosen based upon the strategy, goals, and
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e. While there will likely be a combination of lagging and leading
indicators, leading indicators are more appropriate to help
predict how the organization will perform in the future. Likely a
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