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CHAPTER 13: STRATEGY, BALANCED SCORECARD, AND STRATEGY

PROFITABILITY ANALYSIS

TRUE/FALSE

1. Strategy describes how an organization matches its own capabilities with the

opportunities in the marketplace to accomplish its overall objectives.

Answer: True Difficulty: 1 Objective: 1

2. A product dierentiation strategy includes oering uni!ue and superior products orincreased prices.


". The cost leadership strategy is or products and services that are similar to competitor#sproducts and services.


$. The product dierentiation strategy is probably best or a company i the engineeringsta is more skilled at making process improvements than at creatively designing newproducts.

Answer: %alse Difficulty: 2 Objective: 1The cost leadershipstrategy is probably best or a company i the engineering sta ismore skilled at making process improvements than at creatively designing newproducts.

&. 'n general( proit potential increases with greater competition( stronger potentialentrants( products that are similar( and tougher customers and suppliers.

Answer: %alse Difficulty: 1 Objective: 1'n general( proit potential decreaseswith greater competition( stronger potentialentrants( products that are similar( and tougher customers and suppliers.

). *eengineering is the undamental rethinking and redesign o business processes toachieve improvements in critical measures o perormance such as cost( !uality(service( speed( and customer satisaction.


+. *eengineering beneits are most signiicant when they ocus on one business unctionrather than crossing unctional lines o the business process.

Answer: %alse Difficulty: 2 Objective: 2*eengineering beneits are most signiicant when they cut across unctional lines toocus on the entire business process.

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. Successul reengineering eorts generally involve changing the roles andresponsibilities o employees.


/. The primary purpose o the balanced scorecard is to obtain increased operating proits

or the current year.

Answer: %alse Difficulty: 2 Objective: "The primary purpose o the balanced scorecard is to implement both short0run andlong0run strategies.

1. To achieve success( it is important to set noninancial objectives as well as inancialobjectives.

Answer: True Difficulty: 2 Objective: "

11. ne valuable measure o the customer perspective o the balanced scorecard is marketshare.

Answer: True Difficulty: 2 Objective: "

12. The learning and growth perspective o the balanced scorecard evaluates theproitability o the strategy.

Answer: %alse Difficulty: 1 Objective: "Thefinancialperspective o the balanced scorecard evaluates the proitability o thestrategy.

1". 3mployee satisaction is a measure o the internal business perspective o the balancedscorecard.

Answer: %alse Difficulty: 2 Objective: "3mployee satisaction is a measure o the learning and growth perspective.

1$. An increase o operating income rom one year to the ne4t indicates a company#sstrategy was successul.

Answer: %alse Difficulty: " Objective: $perating income could have increased simply because the entire market e4panded andhave nothing to do with the implementation o a company#s strategy.

1&. To evaluate the success o its strategy( a company can subdivide the change in operatingincome into growth( price0recovery( and productivity components.

Answer: True Difficulty: 2 Objective: $

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1). The productivity component o operating income ocuses e4clusively on revenues.

Answer: %alse Difficulty: 2 Objective: $The productivity component o operating income ocuses e4clusively on costs.

1+. The price0recovery component measures the increase in operating income rom selling

more units o a product.

Answer: %alse Difficulty: 1 Objective: $Thegrowthcomponent measures the increase in operating income rom selling moreunits o a product.

1. ,ompanies that have been successul at cost leadership will show large avorable price0recovery and growth components when analyzing proitability.

Answer: %alse Difficulty: " Objective: $,ompanies that have successully differentiatedtheir products will show large

avorable price0recovery and growth components when analyzing proitability.

1/. 3ngineered costs have no measurable cause0and0eect relationship between output andresources used.

Answer: %alse Difficulty: 2 Objective: &Discretionarycosts have no measurable cause0and0eect relationship between outputand resources used.

2. 5iscretionary costs arise rom periodic 6usually yearly7 decisions regarding thema4imum amount to be incurred.

Answer: True Difficulty: 1 Objective: &

21. 3ngineered costs contain a higher level o uncertainty than discretionary costs.

Answer: %alse Difficulty: 2 Objective: &5iscretionary costs contain a higher level o uncertainty than engineered costs.

22. 3ngineered costs may be variable or i4ed in the short run.

Answer: True Difficulty: 2 Objective: &

2". 't is relatively easy to identiy unused capacity or discretionary costs.

Answer: %alse Difficulty: 2 Objective: )'t is difficultto identiy unused capacity or discretionary costs because o the lack o acause0and0eect relationship.

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2$. ne way to eliminate unused capacity is to downsize.

Answer: True Difficulty: 1 Objective: )

2&. 5ownsizing discretionary costs is easier than downsizing engineered costs.

Answer: %alse Difficulty: 2 Objective: )5ownsizing discretionary costs is more diicult because the unused capacity odiscretionary costs is generally unknown.

2). 5ownsizing oten means eliminating jobs( which can have an adverse eect onemployee morale.

Answer: True Difficulty: 2 Objective: )

2+. -roductivity measures the relationship between actual inputs used 6both !uantities andcosts7 and standard outputs produced.

Answer: %alse Difficulty: 1 Objective: A-roductivity measures the relationship between actual inputs used 6both !uantities andcosts7 and actual outputs produced.

2. -artial productivity e!uals !uantity o output produced divided by !uantity oindividual input used.

Answer: True Difficulty: 1 Objective: A

2/. Total actor productivity 6T%-7 is the ratio o the !uantity o output produced to the

costs o all inputs used( where the inputs are combined on the basis o current periodprices.


". Although total actor productivity 6T%-7 measures are comprehensive( operationspersonnel ind inancial T%- measures more diicult to understand and less useul thanphysical partial productivity measures in perorming their tasks.


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MULTIPLE CHOICE

"1. 8888888888 describes how an organization matches its own capabilities with theopportunities in the marketplace to accomplish its overall objectives.a. Strategyb. -lanning

c. 9earning and growth perspectived. ,ustomer perspective

Answer: a Difficulty: 1 Objective: 1

"2. hich o the ollowing is ;T a orce that shapes an organization#s proit potential5.b. provide products at a higher cost than competitors.c. ocus on productivity through eiciency improvements.d. bring products to market rapidly.

Answer: c Difficulty: 2 Objective: 1

"+. 8888888888 is the undamental rethinking and redesign o business processes toachieve improvements in critical measures o perormance such as cost( !uality(service( speed( and customer satisaction.a. Strategyb. ,ustomer perspectivec. 9earning and growth perspectived. *eengineering

Answer: d Difficulty: 1 Objective: 2

". Successul reengineering involvesa. cutting across unctional lines to ocus on the entire business process.b. redeining the roles and responsibilities o employees.c. using inormation technology.d. all o the above.

Answer: d Difficulty: 2 Objective: 2

"/. 8888888888 translates an organization#s mission and strategy into a comprehensive seto perormance measures that provide the ramework or implementing its strategy.

a. -roductivity componentb. -roduct dierentiationc. ,ost leadershipd. The balanced scorecard

Answer: d Difficulty: 1 Objective: "

$. The purpose o the balanced scorecard is =3ST described as helping an organizationa. develop customer relations.b. mobilize employee skills or continuous improvements in processing capabilities(

!uality( and response times.c. introduce innovative products and services desired by target customers.d. translate an organization#s mission and strategy into a set o perormance

measures that help to implement the strategy.

Answer: d Difficulty: " Objective: "

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$1. The %'*ST step to successul balanced scorecard implementation is clariyinga. the organization#s vision and strategy.b. the elements that pertain to value0added aspects o the business.c. the owner#s e4pectations about return on investment.d. the objectives o all our balanced scorecard measurement perspectives.

Answer: a Difficulty: " Objective: "

$2. The balanced scorecard is said to be ?balanced@ because it measuresa. short0term and long0term objectives.b. inancial and noninancial objectives.c. internal and e4ternal objectives.d. all o the above.

Answer: d Difficulty: 2 Objective: "

$". =alanced scorecard objectives are in balance whena. debits e!ual credits.

b. inancial perormance measurements are less than the majority o measurements.c. the measurements are air.d. the measurements relect an improvement over the previous year.

Answer: b Difficulty: " Objective: "

$$. The internal business processes perspective o the balanced scorecard comprises threesubprocesses that address all o the ollowing 3,3-Ta. innovative processes used to create new products( services( and processes.b. motivating current employees.c. providing service and support to the customer ater the sale.

d. delivering e4isting products and services to best meet the needs o customers.Answer: b Difficulty: " Objective: "

$&. 'dentiy the =3ST description o the balanced scorecard#s inancial perspective. Toachieve our irm#s vision and strategy(a. how can we obtain greater proits or the current year

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