Chat with AIExam 18: Business Strategy, Performance Measurement, and the Balanced Scorecard
While performing analysis of their overall performance, organizations will often evaluate both financial and nonfinancial factors. What are some ways that an organization can evaluate their performance from a financial perspective? What about from a nonfinancial perspective?
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VerifiedFor financial performance, results are compared to past performance for relevant metrics. These measurements are common because they are both objective and measurable. Some commonly used financial measurements include: the company's gross margin to determine a firm's ability to mark-up from cost; the company's earnings-per-share to evaluate the return on a single share of stock; and the company's turnover ratios to evaluate a company's effectiveness at collecting accounts receivables or selling inventory. There are many other values used as well. Nonfinancial performance is different than financial performance in that it focuses on what is happening right now as compared to what has already transpired. An organization can use different nonfinancial measurement for different departments to measure performance. For example, a Human Resources department could use employee training satisfaction to measure how satisfied employees are with the training provided, and an Accounting department could look at vacation days earned versus vacation days used to determine if employees are taking adequate time to relax.
After completing a SWOT analysis, a company begins to set its strategy to advance from its current position. Porter describes a strategy spectrum whereby a company has two choices: cost leadership and product differentiation. Which of the following is a company who selected a product differentiation strategy?
(37) VerifiedA
What is a strategic plan? How do businesses use strategic plans to achieve success? What are the five components of a strategic plan, and what do they entail?
(35) VerifiedA strategic plan is a comprehensive, potentially multi-year plan for an organization that also contains an operating plan. Businesses use strategic plans to set both the short-term objectives and the long-term goals that they strive to achieve on multiple levels. The first component of a strategic plan is "Mission and Vision." A business's mission comes first since it defines the business's purpose or reason for existence. A business's vision is a narrative that outlines a picture of what an organization will look like after it has achieved its objectives. The second component of a strategic plan is "Goals and Objectives." This is where the business sets its long-term goals. These long-term goals are broken into sets of tangible short-term objectives for the upcoming year. The third component of a strategic plan is "Strategies and Initiatives." Strategies and initiatives are the chosen methods and techniques the organization will implement to achieve both their short-term objectives and their long-term goals. The fourth component of a strategic plan is "Measures and Targets." This section involves taking information gathered from across the organization and putting that information into a meaningful and measurable form that the business can use to measure performance throughout the organization. The fifth and final component is "Results." This section summarizes a company's actual performance, whether financial or nonfinancial, and compares the actual performance to predetermined performance targets.
As part of the process of creating a strategic plan, management will have to decide what is most important to them. Although industries may vary, the general components of a strategic plan have the same general structure. Which of the following best represents the vision component for an art gallery?
(32) Turner Company sells new and used instruments and has a full-service instrument repair and maintenance department on site. Turner appreciates its customers, many of whom have remained very loyal over the course of Turner's existence. The company provides free guitar tuning for anyone that purchases a guitar from them. They also have a membership program available at a low cost that rewards customers with a free set of strings for their preferred instrument every month. When a customer chooses Turner for their repair and maintenance needs, the company ensures that all issues, known and potentially unknown, are addressed before the instrument leaves the repair department. Many customers have purchased a variety of instruments over the years from Turner, and others that bought their instruments elsewhere still utilize Turner for their top-notch customer service and maintenance offerings. With this in mind, please answer the following questions.
a. As it pertains to their operating strategy, which side of Porter's spectrum would Turner reside on: product differentiation or cost leadership? What led you to this conclusion?
b. What if Turner operated on the other side of the spectrum from what you selected for part (a)? How would their strategy be different, and what would distinguish this approach from your original choice?
c. How would either strategy identified in parts (a) and (b) provide an advantage for Turner in the marketplace? Do you have any other suggestions as to how they can improve their operations?
(41) A grocery store just finished another year of operations. As part of their annual wind-down process, they will compile the actual performance metrics to be used in their balanced scorecard (BSC). One of their objectives this year was to increase revenue as measured by total revenue. Which of the following could be a red flag that someone used unethical behavior to achieve this goal?
(37) Global Dynamics is a large corporation with offices throughout the United States. They specialize in helping businesses grow and tackle issues with staffing and overall logistics. Global Dynamics has a variety of departments including accounting, human resources, sales, and customer service. Which of the following best represents a task for a staff accountant at Global Dynamics?
(41) To improve overall performance, the management of Bella, an Italian restaurant, has begun their yearly review process. They have gathered actual data and are working their way through the balanced scorecard to evaluate the progress toward their objectives for the year. One of the big objectives was to decrease time from order placement to meal service. Their goal was 18 minutes or less, but their average for the year came out to 21 minutes, and they have asked the floor manager for comments. What is a reasonable explanation for the difference between their target time and the actual timing they achieved?
(32) Karen is the sales manager for a local car dealership firm and is working on a balanced scorecard (BSC) to evaluate the firm's performance. Her current focus in on the financial perspective. Which of the following would be an appropriate initiative and measure if the firm's objective is to increase revenue?
(41) Kevin is an employee in the finance department at Easy Trader Co. and is performing some financial analysis on their current year's performance. Before he can begin looking at a variety of nonfinancial factors, including customer conversion rates and internal promotion scores, he will need to evaluate some financial performance measures. Which of the following provides the most accurate rationale for evaluating Residual Income?
(37) Once a company has identified various industry challenges and starts to overcome them, they may choose to use a SWOT analysis. Ideally, this will help the company determine important internal and external areas of concerns. Which of the following represents the correct breakdown of the acronym SWOT?
(31) Miguel's Pizzeria creates and sells handmade individual pan pizzas that are available with variety of sauce and topping options. The company is evaluating its key operating activities and has specified the following two objectives as internal business process goals on their balanced scorecard (BSC). 
Complete the above chart by identifying an appropriate initiative, measure, and target for each of these objectives. Please also explain why each is appropriate.
Complete the above chart by identifying an appropriate initiative, measure, and target for each of these objectives. Please also explain why each is appropriate. (31) Happy Occasions is a small florist slated to open later this year. In preparation for the business launch, the owner is evaluating strategies to optimize their potential for success. If the owner wishes to focus on maximizing customer satisfaction, then what would an appropriate customer perspective initiative be?
(45) Lana is the owner of Leafy Greens, a smoothie store slated to open within the next six months. Lana is in the process of creating her strategic plan and needs to identify her furthest-reaching goals. She knows that this process will take some time to get right and wants to do it properly. Which of the following is an example of a competitive rivalry for Leafy Greens according to Porter's Five Forces?
(39) Jones Corp. is a newly formed organization that will produce 10-key calculators that it intends to sell to office supply stores and directly from its own online platform. Jones is in the planning stages of their business and are formulating a strategic plan. As part of this initial planning, the owners know that they must first identify a mission and vision. Which of the following best represents a mission for Jones?
(36) To improve overall performance, the management of Bella, an Italian restaurant, has begun their yearly review process. They have gathered actual data and are working their way through the balanced scorecard to evaluate the progress toward their objectives for the year. One of the big objectives was to decrease time from order placement to meal service. Their goal was 18 minutes or less, but their average for the year came out to 21 minutes. How should management handle this situation?
(39) As part of the process of creating a strategic plan, management will have to decide what is most important to them. Although industries may vary, the general components of a strategic plan have the same general structure. Which of the following best represents the vision component for a coffee shop?
(35) Cameron would like to improve the overall performance for the factory where he works. He has decided to use a balanced scorecard (BSC) so he can take both financial and nonfinancial performance into consideration. Which of the following would be an appropriate objective to implement from the financial perspective?
(39) In an effort to balance financial and nonfinancial performance measures, an organization may choose a balanced scorecard (BSC). Manufacturers, service entities, and governmental organizations often use this tool to assess performance. Which of the following best represents the four traditional perspectives provided by BSC?
(36) As an organization fine-tunes its strategies and defines its objectives, management will disseminate these strategies and objectives to various levels of the organization. While distributing tasks to other employees, management should ensure that outcomes remain congruent with their intentions. Which of the following best represents an example of goal congruence?
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