Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 50

Balanced Scorecard and Strategy: Food Ingredients Company The balanced scorecard for a small food-ingredients company is shown below. The information is based on an actual company, and detailed information about its operations and strategy is confidential. You may assume that the firm’s products and services are used by a diverse set of customers, including different types of food processors (Kraft, Heinz, Unilever, . . .), restaurant chains, bakeries, supermarkets, and the like. The company is located in a large city.

BALANCED SCORECARD FOR A FOOD INGREDIENTS COMPANY
Goals	Scorecard Measures
Financial Perspective
Capture an increasing share of industry growth	Company growth versus industry growth
Secure the base business while remaining the preferred supplier to our customers	Volume trend by line of business; revenue trend by line
	of business; gross margin
Expand aggressively in global markets	Ratio of North American sales to international sales
Commercialize a continuous stream of profitable new ingredients and services	Percentage of sales from products launched within the past five years; gross profit from new products
Customer Perspective
Become the lowest-cost supplier	Total cost of using our products and services relative to total cost of using competitive products and services
Tailor products and services to meet local needs
Expand those products and services that meet customers’ needs better than Competitors	Percent of products in R&D pipeline that are being test-marketed by our customers
Customer satisfaction	Customer survey
Internal Perspective
Maintain lowest cost base in the industry	Our total costs relative to number one competitor; inventory turnover; plant utilization
Maintain consistent, predictable production Processes	First-pass success rate
Continue to improve distribution efficiency	Percentage of perfect orders
Build capability to screen and identify profitable products and services	Change in customer profitability
Integrate acquisitions and alliances efficiently	Revenues per sales dollar
Learning and Growth Perspective
Link the overall strategy to reward and recognition system	Net income per dollar of variable pay
Foster a culture that supports innovation and growth	Annual preparedness assessment; quarterly report

Source: Chee W. Chow, Kamal M. Haddad, and James W. Williamson, “Applying the Balanced Scorecard to Small Companies,” Management Accounting, August 1997, pp. 21?27.

Required Based on the information provided, determine what you think is the competitive strategy of the company. Does the balanced scorecard shown above reflect this strategy? Why or why not?

Step 1 of 3

Balance Score Card:

Balance Score Card is a performance measurement system wherein the performances are measured in terms critical success factors as decided by the management from time to time. Balance scorecard classifies the critical success factors is 4 categories as below:

- Financial Perspective

- Customer Perspective

- Internal Process Perspective

- Learning & growth Perspective.