Reference no: EM13936697

Balanced scorecard.

Lee SA manufactures various types of colour laser printer in a highly automated facility with high fixed costs. The market for laser printers is competitive. The various colour laser printers on the market are comparable in terms of features and price. Lee believes that satis- fying customers with products of high quality at low costs is key to achieving its target profitability. For 2008, Lee plans to achieve higher quality and lower costs by improving yields and reducing defects in its manufacturing operations. Lee will train workers and encourage and empower them to take the necessary actions. Currently, a significant amount of Lee's capacity is used to produce products that are defective and cannot be sold. Lee expects that higher yields will reduce the capacity that Lee needs to use to manufacture products. Lee does not anticipate that improving manufacturing will automatically lead to lower costs because Lee has high fixed costs. To reduce fixed costs per unit, Lee could lay off employees and sell equipment or use the capacity to produce and sell more of its cur- rent products or improved models of its current products.

Lee's balanced scorecard for the just-completed financial year 2008 is shown below. For brevity, the initiatives taken under each objective are omitted.

 

Objectives	Measures	Targetperformance	Actual performance
Financial perspective Increase shareholder	Operating profit changes	€1 000 000	€400 000
value	from productivity Operating profit changes from growth	€1 500 000	€600 000
Customer perspective
Increase market share	Market share in colour laser printers	5%	4.6%

Internal business process perspective

Improve manufacturing      Yield                                       82%                          85% quality

Reduce delivery time          Order delivery time                   25 days                    22 days to customers

Learning and growth perspective

Develop process skills        Percentage of employees           90%                          92%

trained in process and quality management

Enhance information          Percentage of manufacturing      85%                          87%

System capabilities            processes with real-time feedback

Required

1. Was Lee successful in implementing its strategy in 2008? Explain.

2. Is Lee's balanced scorecard useful in helping Lee understand why it did not reach its target market share in 2008? If it is, explain why. If it is not, explain what other measures you might want to add under the customer perspective and why.

3. Would you have included some measure of employee satisfaction in the learning and growth perspective and new product development in the internal business process perspective? That is, do you think employee satisfaction and development of new products are critical to Lee for implementing its strategy? Why or why not? Explain briefly.

4. What problems, if any, do you see in Lee's improving quality and significantly downsizing to eliminate unused capacity?