Module 8 : Balanced Scorecard

Question 1

What is a Strategy

Answer 1

• specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives

-describes how an organization can create value for its customers while differentiating itself from its competitors

Question 2

how can we formulate strategy?

Answer 2

To formulate a strategy, a company needs to understand its environment
–> industry analysis

Question 3

five forces

Answer 3

Competitors, Potential entrants into the market, Bargaining power of input suppliers, Equivalent products, and Bargaining power of customers.

Question 4

Porter‘s Generic Strategies

Answer 4

1. Product differentiation is an organization’s ability to offer products or services perceived by its customers to be superior and unique relative to the products or services of its competitors
    Competitive advantage: brand loyalty and the willingness of customers to pay high prices
2. Cost leadership is an organization’s ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.
    Competitive advantage: lower selling prices
3. Concentration on Market-Niche: Organizations that target a very specific kind of customer.  Competitive advantage: Reduced competition

Question 5

balanced scorecard : definition

Answer 5

translates an organization’s mission and strategy into a set of performance measures. These measures can then be used to develop a framework that supports strategy implementation

Question 6

BALANCED SCORECARD focus on what ?

Answer 6

achieving financial objectives, it also highlights the nonfinancial objectives that an organization must achieve to meet and sustain its financial objectives

Question 7

SCORECARD: definition

Answer 7

measures an organization’s performance from four perspectives

Question 8

The Four Perspectives of a Balanced Scorecard

Answer 8

1. Financial : profits and value created for shareholders
2. Customer: the success of the company in its target market
3. Internal business perspective: the internal operations that create value for customers
4. Learning and growth: the people and systems capabilities that support operations

Question 9

track performance

Answer 9

The particular measure a company uses –> depend on its strategy

Question 10

Strategy Maps

Answer 10

is a diagram that describes how an organization creates value. By connecting strategic objectives in cause- and-effect relationships, a strategy map visualizes the interdependence of the four perspectives

Question 11

Features of a Good Balanced Scorecard

Answer 11

• Tells the story of a firms strategy
• Helps to communicate the strategy to all members of the organization by translating the strategy into a coherent and linked set of understandable and measurable operational targets

-Must motivate managers to take actions that eventually result in improvements in financial performance

• Limits the number of measures, identifying only the most critical ones

-Highlights less-than-optimal tradeoffs that
managers may make when they fail to considermoperational and financial measures together

Question 12

Pitfalls in Implementing a Balanced Scorecard

Answer 12

• Managers should not assume the cause-and-effect linkages are precise: they are merely hypotheses
• Managers should not seek improvements across all of the measures all of the time

-Managers should not use only objective measures; subjective measures are important as well

• Despite challenges of measurement, top management should not ignore nonfinancial measures when evaluating managers and other employees