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Chapter 02: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-1 © 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
CHAPTER 2: IMPLEMENTING STRATEGY: THE VALUE CHAIN, THE
BALANCED SCORECARD, AND THE STRATEGY MAP
EXERCISES
2-28 Execution; Competitive Strategy (20 min)
- The critical aspect of the analysis of this special order is how it will
affect the brand image of Deaine’s clothing. Deaine appears to compete on the basis of product differentiation, that is, its clothing is perceived to be of higher quality, attractiveness, etc. DEI is thus able to sell its clothing in upscale designer clothing retail stores, probably at a premium price. Sale of the same or similar clothing to department stores could dilute the brand image, and thus hurt the sales in the upscale retail stores. Customers who are willing to pay the premium to purchase the clothing in the designer stores may not be willing to do so if the same or similar clothing is available in department stores. Thus, while the special order might be very profitable in the short run, in the long run it is potentially very damaging for the company.The main point of this case, and a pervasive theme of strategic cost management, is that cost analysis from a strategic perspective can often provide a different answer from the cost analysis which has a short-term point of view. In practice, many cost systems have a short-term focus, and the strategic emphasis of strategic cost management is used to bring the firm’s operations and decision making back to consistency with the firm’s strategic objectives.
- A SWOT analysis would be useful to Joel to help him more
thoroughly understand the key critical success factors of his strategy and to therefore help him more effectively implement the strategy. Also, a value chain analysis would help him to understand his overall strategy and the linkages of the critical success factors in a more systematic and detailed manner. A balanced scorecard would provide Joel a means to organize Cost Management A Strategic Emphasis 6th Edition Blocher Solutions Manual Visit TestBankDeal.com to get complete for all chapters
Chapter 02: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-2 © 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
these critical success factors and to regularly measure progress on each of them.
2-30 Value Chain; Currency Fluctuations (15 min)
The increase in the value of the Brazilian currency relative to that of one of its chief trading partners, China, will likely have a significant impact on Brazilian companies, particularly those that require parts for products or other materials that are commonly sourced from China. The increase in the value of the Brazilian currency (theReal) will mean that these companies will find it increasingly cheaper to outsource production or purchase of these items from China, and the effect will be that local Brazilian producers of these items will not be able to compete with the lower (foreign exchange adjusted) products from China. Some Brazilian companies will benefit as the purchase of parts or materials at lower cost from China will bring the overall cost of their products down, and thus make the company more price competitive. On the other hand, the Brazilian companies that manufacture these parts will suffer the loss of the business.Thus those companies whose value chain requires the acquisition of the parts of materials will benefit, while those whose value chain involves the production of these parts and materials will suffer.Note that the reverse would be true if the value of the Real were to fall relative to the Yuan or other currencies. Then, the advantage would be to local producers.
Source: “Brazil Opts for Deeper Rate Cut to Stoke Recovery,” Reuters,
March 7, 2012; John Lyons and Tom Barkley, ”Brazil Leader Slams U.S.Money Policy,” The Wall Street Journal, April 10,2012, p.A8; Arnaldo Galvao and Iuri Dantas, “Brazil May Ask WTO About Possible Action on Weak Currencies, Official Says,” Bloomberg.com, January 18, 2011; Matthew Bristow, “Latin Currencies Keep Rising – Until They Don’t,” Bloomberg Businessweek, August 15, 2011, pp 12-13; Jeffrey T. Lewis, “Brazil’s Currency Unlikely to See Respite After Rate Cut,” The Wall Street Journal, September 1, 2011; Tom Lauricella, Alex Frangos and John Lyons, “Emerging Markets Tumble,” The Wall Street Journal, September
Chapter 02: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-3 © 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
23, 2011, p. C1; John Lyons, “The Dark Side of Brazil’s Rise,” The Wall Street Journal, September 13, 2011.
2-32 Value Chain; Sustainability (15 min)
The example of a hypothetical company, CleanTech, is based on an actual example reported by Julie Lockhart, Audrey Taylor, Karl Thomas, Brenda Levetsovitis, and Jason Wise, “When Higher Price Pays Off,” Strategic Finance, January 2011, pp 29-35.
- The role of the value chain is to assist the company in identifying
- The sustainability issues associated with the disposal of the
- Whether or not CleanTech purchases the new system, since it
opportunities for adding value and reducing cost. In this case there is an opportunity for both adding value and reducing cost for both CleanTech and its customers. The complete value chain analysis for the new system illustrated in the article shows that the new system would save the cleaning company several thousand dollars per year.Moreover, it would avoid the disposal of harmful waste products, because the system is designed to simultaneously clean the tank and the waste fuel in the tank. Thus, there is no need to dispose of the waste fuel. This saves the cost of replacing the fuel, but perhaps more importantly, it avoids the environmental damage of having to dispose of the waste fuel, as would be required in CleanTech’s current cleaning system.
environmentally harmful waste fuel could be included both financially and non-financially. It could be included financially in cost measures (cost of replacing the waste fuel for example) and in non-financial measure (for example, gallons of fuel that were saved from disposal).The consequences of preventing waste fuel from being disposed of could be measured by environmental engineers, and these measures could also be included. Some consequences might be difficult to quantify, such as the long-term effect on plants and wildlife, but these consequences should also be included in the decision analysis.
handles environmentally harmful materials, it would be a benefit to the company and its community for CleanTech to adopt the sustainability scorecard. In this way, the company can keep track of the environmental effects of different choices the company must
Chapter 02: Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map
2-4 © 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
make, including the potential purchase of the new cleaning system.Some examples of scorecard measures include gallons of fuel recycled, gallons of fuel disposed of in a waste facility, and carbon emissions.
2-34 Ethics; Sustainability (15 min)
This exercise is intended primarily for class discussion, and since ethical issues are addressed, the students’ answers must be treated with proper understanding of the student’s ethical position and perhaps the student’s looking for guidance. The answers for each case are based on actual responses from an academic study using 97 coffee drinkers (cases A and B), 84 different coffee drinkers (case
- and 218 participants (case D)
Case A: a)$9.71
b)$5.89 c)$8.31
Case B: a)$11.59
b)$6.92
Case C: a)$9.90
b)$8.44
Case D: a)$21.21
b)$20.44 c)$20.72 d)$17.33 e)$20.04
Taken together, the results suggest that the participants valued ethical standards and sustainable production methods. However, the premium paid for high ethical standards or for sustainability was not nearly as great as the penalty (lower price) for known unethical behavior or lack of sustainability. Note also the very small difference between the prices paid for the shirts with different levels
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