Week 10 - Intro to Performance Measurement

Question 1

What is a strategy?

Answer 1

A course of action, including the specification of resources required, to achieve a specific objective.

Question 2

What is the cost leadership strategy?

Answer 2

Aim to be lowest cost producer compared to competitors to increase market share & growth.

Question 3

What is the product differentiation strategy?

Answer 3

◦ Aim to differentiate products.
◦ Leads to brand loyalty and the willingness of customers to pay high prices.

Question 4

True or False: Product differentiation increases the willingness of customers to pay higher prices.

Answer 4

True.

Question 5

True or False: Cost leadership can be sustained through economies of scale.

Answer 5

True.

Economies of scale: A proportionate saving in costs gained by an increased level of production.

Question 6

What is a balanced scorecard?

Answer 6

• An example of a report that incorporates both financial and non-financial measures.
• An example of performance measurement system.

Question 7

What is the purpose of the balanced scorecard?

Answer 7

Translates an organisation’s mission and strategy into
a set of performance measures that provide a
framework for implementing the strategy.

Question 8

Managers select measures to track performance from four important perspectives: ________, ________, ________ ________ _______, and ________ ___ ______.

Answer 8

financial, customer, internal business process, and learning and growth.

Question 9

What is the focus of the financial perspective?

Answer 9

Focuses on how to create value for the shareholders.

Question 10

What is the focus of the customer perspective?

Answer 10

Focuses on how to create value for existing & new customers.

Question 11

What is the focus of the internal business perspective?

Answer 11

Focuses on what internal processes create value for shareholders and customers.

Question 12

What is the focus of the learning and growth perspective?

Answer 12

Focuses on the capabilities the firm must excel at to achieve superior internal processes that create value for customers and shareholder.

Question 13

What should managers consider when implementing a balanced score card?

Answer 13

• Not assume the cause-and-effect linkages are precise: they are merely hypotheses.
• Balance costs and benefits of taking some actions
• Use both objective and subjective measures
• Include nonfinancial measures when evaluating employees
• Articulates a sequence of cause-and-effect relationships
• Motivates 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 lower-level managers may make when they fail to consider operational and financial measures together

Question 14

What is the purpose of strategic analysis of profit?

Answer 14

It breaks down the profit figure into 3 specific sources:
1. Growth
2. Price recovery
3. Productivity