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Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-56
2-57 (continued -2)
Weighting
Financial 40%
Customer 30%
Chapter 2 - Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-57
2-58 Value Chain: Multiple Industries (20 min)
An example for the boating industry is shown below, and is taken directly
from the example in the text.
Industries that serve the boating customer
Industries that serve the boat manufacturer
Financing
Insurance
Boat
Repair
Used
boat
Sales
Boat
Manufacturer
Boat
component
manufacturer
First level
parts
supplier
Second
level parts
supplier
Product
Design
Materials;
metal, fabric
Components
Rigging
systems
Parts
supplier
Parts
supplier
Assembly
Boat Retailer
Boat Customer
Boat parts
retailer
Purchaser of Used Boat
Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-59 Follow up to Problem 2-58: Value Chain for Financing Auto
Purchases (30 min)
Steps in the value chain for obtaining a loan for a car purchase. This is a
short example, and other variations would be acceptable. Emphasize the
importance of both speed and comprehensive analysis in this process.
Speed is necessary to compete effectively for the loan with other financial
institutions, and is desirable for the auto dealer, a related party in the
Step
Description of the step
Receive
application
Log in the application and file it appropriately into the loan
application database
Research credit
Research the credit worthiness of the applicant by using the FICO®
score produced by Fair Issac Corp or by using one of the credit
reporting systems - Experian, Equifax or TransUnion -- the three
national credit bureaus that maintain and sell credit reports and
profiles.
Evaluate credit
Determine whether the credit score determined in the above step
meets the criteria for granting a loan of the type and terms (number
of years, amount of down payment,…) requested by the borrower
Respond to the
applicant
If credit is OK, inform the applicant and begin the process of
disbursing the loan amount and creating the loan documents; If
credit is not OK, inform the applicant and indicate what is lacking;
encourage the applicant to reapply when conditions are changed, if
appropriate.
The following assumes the loan has been approved:
Prepare loan
documents
Usually from the software system used to log in and maintain the
applicant’s information
Prepare cashier’s
check made out
to auto dealer
Use careful cash controls in this step to avoid employee fraud
Deliver loan
documents and
cashier check to
auto dealer
Make sure loan documents are properly signed, dated, and returned
promptly to the finance office.
Chapter 2 - Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-59
2-60 Foreign Exchange Rates (20 min)
1. For 2008 through January 2012, many Asian currencies have been
generally stable relative to the U.S.$, particularly the Korean won, India’s
rupee and Taiwan’ dollars. The Chinese Yuan was slowly appreciating
relative to the dollar during the period as was Japan’s yen. The New
these countries. For countries where the dollar is falling, General Motors’
products become more competitive abroad, while the products of its Asian
competitors become less price competitive in the U.S.
2. Since falling against the dollar in late 2008, the Euro rose against the
dollar in mid-2009 and since then has fluctuated less than 5% up and
down versus the U.S. dollar into early 2012. The fall in the dollar against
the Euro helps U.S. companies as the effective cost of U.S. products and
For Walmart there is the trade-off between the low-cost U.S. supplier
versus the cost of transporting the product to its global markets. The
overall effect on Walmart might be a shift in sources of supply and an
increase in transportation costs.
Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-60 (continued -1)
3. Mexico’s peso, stable relative to the U.S. $; Canadian dollar also
relatively stable to the U.S.$
These relatively stable exchange rates support, in part, the strong
trade relationships among these 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 is
See Also: Chana R. Schoenberger, “Weak Dollar Boosting Quarterly
Earnings,” The Wall Street Journal, May 4, 2011, p B7; James R. Hagerty,
“A Falling Dollar 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.
Chapter 2 - Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-61
2-61 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
services. Sustaining innovation could involve added features,
improved quality, lower cost, etc.
2. The five value chain activities mentioned in the article are:
a. Market analysis
b. Product development and design
c. Sales and marketing
important in innovation. For example, a company that succeeds on
differentiation will likely spend more effort on innovation in the market
analysis and product development activities. In contrast, a firm that
succeeds on cost leadership will likely spend more effort to innovate
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
with other companies can help broaden the reach of the company’s
own R&D efforts.
Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-61 (continued -1)
6. Innovation in sales and marketing might use for example, integrated
include such ideas as iPhone apps, web sites, and the use of
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,
business process improvement some of the techniques commonly
used.
8. Innovation in the after-sale customer service activity could also
benefit from the application of web-based resources and business
Chapter 2 - Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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2-62 Research Assignment; Sustainability (30 min)
1. The three options are:
a. Adding a fifth perspective to the BSC
visibility for sustainability efforts that firms such as Ford, Shell and
Nike are looking for. So for these firms, a separate scorecard is more
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
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
objectives of the firm. As for other elements of the BSC, all of
the sustainability measures can be linked to strategy and goals.
Chapter 2: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
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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
2-62 (continued -1)
f. firm will choose to use a combination of both leading and
lagging indicators.
g. The measurements should be used to track performance
