Chapter 12, Problem 12.20E

Analysis of growth, price-recovery, and productivity components (continuation of 12-19). An analysis of Pineway’s operating-income changes between 2016 and 2017 shows the following:

Operating income for 2016	$1, 500,000
Add growth component	91,000
Deduct price-recovery component	(82,000)
Add productivity component	145,000
Operating income for 2017	$1, 654,000

The industry market size for electric motors did not grow in 2017, input prices did not change, and Pineway reduced the prices of its motors.

1. 1. Was Pineway’s gain in operating income in 2017 consistent with the strategy you identified in requirement 1 of Exercise 12-19?

Required

1. 2. Explain the productivity component. In general, does it represent savings in only variable costs, only fixed costs, or both variable and fixed costs?

12-19 Balanced scorecard. Pineway Electric manufactures electric motors. It competes and plans to grow by selling high-quality motors at a low price and by delivering them to customers in a reasonable time after receiving customers’ orders. There are many other manufacturers who produce similar motors. Pineway believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy in 2017.

1. 1. Is Pineway’s 2017 strategy one of product differentiation or cost leadership? Explain briefly.

Required

1. 2. Ramsey Corporation, a competitor of Pineway, manufactures electric motors with more sizes and features than Pineway at a higher price. Ramsey’s motors are of high quality but require more time to produce and so have longer delivery times. Draw a simple customer preference map as in Figure 12-1 for Pineway and Ramsey using the attributes of price, delivery time, quality, and design features.
2. 3. Draw a strategy map as in Figure 12-2 with at least two strategic objectives you would expect to see under each balanced scorecard perspective. Identify what you believe are any (a) strong ties, (b) focal points, (c) trigger points, and (d) distinctive objectives. Comment on the structural analysis of your strategy map.
3. 4. For each strategic objective indicate a measure you would expect to see in Pineway’s balanced scorecard for 2017.