Chapter 9 Flashcards
1. Summarize corporate strategy and the possible strategic avenues. 2. Describe a performance management system. 3. Explain how a modified balanced scorecard is prepared and used to measure company performance. 4. Distinguish between responsibility centres (revenue centres, cost centres, profit centres, and investment centres). 5. Explain common key performance indicators used to measure performance for various responsibility centres. 6. Explain a management reporting cycle. 7. Prepare managemen
what is a corporate strategy
describes a company’s long-term future vision (i.e., what does it want to become?), its purpose (i.e., why does the company exist?), outlines a company’s target customers, and the product and/or services it offers.
how can a company provide better value than its competitors
- product differentiation
- cost leader
- customer experience
what is product differentiation
Offer better products and/or services (e.g., more user friendly, better technology etc.), typically at higher price points that customers are willing to pay
what is a cost leader
Offer better prices for its products and/or services than its competitors (e.g., similar products and/or services at lower price points), typically at lower price points
what is customer experience
Offer better customer service than its competitors
what is a performance management system
system that monitors and measures a company’s overall performance.
what does a company need to know from a strategy perspective
1.Industry key success factors include the things a company must do really well to gain a competitive advantage in the industry in which they operate.
- Strategic avenue management is taking to differentiate its product and/or services from its competitors.
- Business model, which essentially outlines how the company will make money.
what are key performance indicators
are important metrics which help executive management teams understand a company’s overall performance.
what is a goal or objective
is what the company targets the KPI to be over a short or long-term period
what are employee reward systems?
refer to programs which companies put in place to motivate employees to achieve company targets. If targets are met or exceeded, the programs within the employee rewards system should reward employees to encourage them to continue delivering good results.
what is included in the modified balanced scorecard
- KPIs
- set goals
- measure performance
- employee reward system
what is a modified balanced scorecard
a tool that is used by management teams to understand company performance from the following perspectives: financial, customer, environmental, internal business processes, and learning & growth (including social).
what are the 5 perspectives of the modified balanced scorecard
- Financial – measures and monitors business performance from a financial perspective (i.e., how is the company doing from a financial statement analysis perspective?)
- Customer – measures and monitors business performance from a customer perspective (i.e., how satisfied are the customers with the company’s products and/or services?)
- Environmental – measures and monitors business performance from an environmental perspective (i.e., how is the company doing at being eco-friendly, achieving net zero and operating sustainably)
- Internal business processes – measures and monitors business performance from an efficiency perspective (i.e., how efficient are the company’s internal processes?)
- Learning and growth – measures and monitors business performance from an employee perspective, including the ‘social’ aspect of ESG (i.e., how happy and engaged are the company’s employees?)
what are responsibility centres
are segments within a company that are expected to effectively manage revenue, profit, investments and/or costs
what is a revenue centre
If management can only control and influence revenue
metric = # of products sold
