Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-34 (continued -1)
Each class will have different results, and these differences can be
used for a discussion of the value to the consumer of ethical behavior
and sustainability.
Source: RemiTrudel and June Cotte, “Does Being Ethical Pay?” The
Wall Street Journal, May 12, 2008, p R4.
Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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PROBLEMS
2-35 Strategy; Health Care (25 min)
1. Medical University’s strategy, a differentiation strategy, should
encompass a focus on the quality of its clinical care, education, and
research. The relative size of the healthcare system is important as a
way to attract third party payers, providers, and patients. A large
hospital system tends to offer a greater breadth of services, which
often increases the clinician’s level of expertise. A physician at a
patients and patient referrals because of its reputation. Thus, the
University’s marketing and public relations departments are very
crucial to its success. It is also essential that the healthcare system
stay within its budget in order to continue operations.
2. The balanced scorecard goes beyond simply monitoring financial
performance. Because the four areas: financial performance,
on the measurements of these critical success factors.
3.
• Financial: operating margin, cost per patient-day, percentage of
overdue patient accounts, sales growth
• Customer: patient satisfaction, speed of service, number of
2-18
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
2-35 (continued -1)
• Learning & Growth: number of employee hours of training,
4. One of the hardest challenges is convincing employees that the
balanced scorecard is not simply a management tool. The reluctance
of employees to implement the balanced scorecard may prevent the
organization from achieving its strategic goals. In order to increase
buy-in from employees, management needs to educate them on the
personal and professional goals. The hospital had to work hard to
overcome the tendency employees had to dismiss the initiative as
simply the “latest management tool.”
2-19
2-36 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
becoming more critical for successful farming, and this appears to be
at the top of Kelly’s agenda.
Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-37 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
Varied terrain in the farm’s fields
Opportunities
More efficient farming operations, through Kelly
More leisure time for Dad
Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-38 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
2-22
2-39 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
and performance – it requires a quantitative measure.
Operations
crop rotation; number of fields in rotation
inventory of supplies and parts, by type of equipment, cost
and date purchased
Financial
sales; trend
monthly earnings trend
Employees
turnover (number and percent)
2-23
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
2-39 (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)
2-24
2-40 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
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
Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-41 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
Weaknesses
Drop in demand for the Classic Line (except in Northeast),
Threats
Ability to replace skilled workers in the Classic line?
Order backlog – effect on customer satisfaction?
Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-42 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
craftsmanship
Scheduling production
A critical step because of long
lead times and tight labor
resources
Cutting and trimming materials
Importance of quality
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
strategy
Warranty returns and allowances
Treat these as opportunities for
product redesign and
improvement, i.e., on-going
redesign
Customer satisfaction follow-up
Important to Tartan’s
differentiation strategy
Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-42 (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
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
is especially tight and those where there is some slack, to draw
appropriate attention where it is needed. Is the capacity problem
primarily in cutting and trimming, assembly, shipping…?
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
Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-43 The Balanced Scorecard (20 min)
An example of a balanced scorecard for Tartan Corp follows:
Financial
Sales, sales growth, by product and region
Earnings, as above
Activity-based product costs
Return on investment, by product line
New investment, by product line
Internal
Cycle time
Waste of materials
Rework
Productivity measures; hours per product,
materials per product
Inventory levels
Customer
Lead time
Retention
Satisfaction, in specific categories: quality, etc
Number of new customers
Employee
Training hours
Retention
Satisfaction
New product development
Employee suggestions
Chapter 2 – Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-44 Strategy Map (20 min)
There are a variety of possible answers to this question. Here is
an example.
Financial
Customer
Internal
Processes
Learning and
Growth
Increase number of
new features and new
products
Improve
customer
satisfaction
Improve skills
needed for product
development
Improve
quality
Retain highly
skilled employees
Enhance
employee
skills
Reduce
order filling
time
Revenue
growth
Reduce cost for
each unit and for
each value stream
REturn
Return on
Investment
Enhance
product
innovation
Increase number
of new
customers
Ownership Equity
Sales Growth
Return on
Investment
ABC-based product
costs
Improve
customer
lead time
Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-45 Strategy Map, Balanced Scorecard; Dell Computer (25 min)
1. The following BSC was adapted from Peter Brewer, “Putting Strategy
into the Balanced Scorecard,” Strategic Finance, January 2002,
pp44–52.
Learning and Growth
• Training dollars per employee
• Number of emerging technologies evaluated
• Number of new manufacturing processes developed
• Number of new manufacturing processes under development
Internal Processes
• Product manufacturing time
• Raw materials inventory
• Order processing time
• Manufacturing defects
Customer
• customer perception of order taking convenience and accuracy
• customer perception of product quality
• customer retention
• customer satisfaction with speed of service
Financial Perspective
• revenue growth
• gross margin
• operating cost ratio
• selling expense to sales ratio
2. Strategy Map for Dell Computer
This is one example of a possible strategy map, that can be
inferred from the BSC in part 1 above.