Guidelines for Classroom Use

Guidelines for Classroom Use

There are several ways of presenting the case so as to generate maximum student interest and discussion. One approach is to assign the case as an individual assignment to be initially completed outside the class and subsequently used as a starting point for an overall class discussion. Another approach is to divide the class into two groups with about half the students assuming the role of Terry Merton and the other half assuming the role of Bill Andersen.

A third option is to assign students to small groups (containing students assuming both roles) for discussion of major points and possible solutions. Each small group could then present its possible solution(s) to the entire class.
Answers to Discussion Questions:

1. Bill Andersen is concerned with the ability of Startup, Inc. to make timely loan payments. Another concern is Startup, Inc.'s ability to stay in compliance with the loan agreement. According to the loan agreement, Startup, Inc. must maintain sufficient before depreciation operating incomes and working capital balances. Therefore, Bill would favor the alternative that is associated with the greatest possibility for meeting the loan requirements.

The differentiation strategy appears to be the "safest" from Bill's perspective. Its projected operating income before depreciation for 2008 of $10,400 ($8,800 + $1,600) exceeds by 270.8% the corresponding $3,840 ($2,240 + $1,600) amount for the cost leadership strategy. Also, Terry would become a full-time employee with the differentiation strategy, indicating a higher level of commitment compared to the absentee ownership arrangement of the cost leadership strategy.
2. From a managerial and strategic planning perspective, the cost leadership strategy is preferable for several reasons. The most important reason is financial. Although the operating income in exhibit 1 is greater with differentiation, the cost leadership strategy is preferred when opportunity costs are considered. To determine the opportunity costs, one must know the opportunity set: cost leadership or differentiation. The profit figures in Exhibit 1 for differentiation fail to indicate the $14,800 opportunity costs, namely the foregone $8,800 salary ($40,000 - $31,200) and $6,000 per year rental income. When opportunity costs are considered the projected operating income for differentiation becomes a negative $6,000 ($8,800 operating income less $14,800 in opportunity costs). Consequently, the cost leadership strategy is more profitable by $8,240 ($2,240 compared to a negative $6,000).

Finally, the question of absentee ownership could be addressed. Is the likelihood of substantial growth in sales and profits as great with absentee ownership (the cost leadership strategy) as it is with full-time involvement by the owner (with differentiation)? One thing is certain. Terry must continually be involved with Startup, Inc. regardless of the strategy chosen.

1. A class discussion of competitive strategy is likely to take many directions. The important thing is to develop a productive discussion, and to make sure that each idea is well supported, and not to insist on a specific conclusion. Some important points to raise, if they do not come up in the discussion are that RPI is known as a very high quality producer with features and prices higher than most in the industry (per the case) which suggest the differentiation strategy. The critical success factors are likely to follow the competitive strategyfocus on quality and innovative features. This means that the production costs will not be the first concern, but that the ability to install high quality manufacturing processes would be most important.

Teaching Strategies for Articles

2-1: “How to Report A Company’s Sustainability Activities”
This article explains the concept of sustainability and its role in the corporation. It describes how a firm can measure and report its outcomes and efforts regarding sustainability within a balances scorecard.

Discussion Questions:

1. What is meant by sustainability? What measures are included in a sustainability report?

The article states that “Sustainability reporting includes economic, environmental, and social indicators that help monitor progress toward sustainable practices.” Sustainability is the operating process for a company in which the company balances its responsibilities to shareholders, the local communities in which it operates, and the broad economic, social, and environmental effects of its operations.
2. How many companies issued sustainability reports in 2005? Cite your source for this information.

About 1,500 as reported by the Association of Chartered Certified Accountants, London, England.

3. Are sustainability goals important to shareholders of public companies? Why or why not?

Sustainability goals are important to a firm’s shareholders as they can help improve a firm’s operating processes, its efficiency, competitiveness, and its image.

4. How can sustainability be included within the balances scorecard? Base your answer on the Global Reporting Initiative (GRI) reporting guidelines and its three categories of indicators:

• 
  economic indicators
  
• 
  environmental indicators
  
• 
  social indicators
  

Sustainability can be included as a separate perspective in the balanced scorecard, as illustrated in the text chapter. Also, as the article shows in Tables 1, 2, and 3, sustainability measures also have a relationship with the four main perspectives of the BSC, financial, customer, internal business processes, and learning and growth.

1. 2-2 “Applying the Balanced Scorecard to Small Companies”

(Note: See also chapter 17, where this article is referred to in the text)
The use of the balanced scorecard for developing and evaluating progress for a strategy is illustrated in these examples of four different companies. Each firm was actively involved planning or implementing the balanced scorecard at the time of the study, and agreed to discuss its strategic goals, the relative importance of the goals (ranked by scorecard perspective), and the key performance measures for these goals. The results are shown in the Tables in the article. The firm’s perspectives are shown in order of importance from top to bottom in each table.

We can infer the firm’s strategy from studying each balanced scorecard. For example, consider the scorecard for the firm in the food ingredients industry. The firm puts the financial perspective first, and emphasizes market growth. This makes sense for a company in a commodity type industry (food ingredients) where profit margins are small and sales volume is important. Also, cost control is important for profitability, as noted in the strategic goals within both the customer and operations perspectives. In effect, the exhibit shows the outline from which a strategy map can be developed. Goals in the learning and growth perspective support goals in the internal perspective, which in turn support goals in the customer and financial perspective.

This article is covered in the text of chapter 17, where it is used in to show how the concept of the strategy map (the use of the balanced scorecard to describe the firm’s strategy in detail, using cause-and-effect diagrams) is used in performance evaluation.

Blocher, Stout, Cokins, Chen: Cost Management 4e ©The McGraw-Hill Companies, Inc., 2008

Directory: sites
sites -> Answer True False 2 points Question 2
sites -> 587 Return function, r i(X) r i(0) r i(1) r i(2) r i(3) 1 0 2 4 6 Thermal Station, I 2 0 1 5 6 3 0 3 5 6 10
sites -> Glossary for Chapter 1 Algorithm
sites -> North Carolina Inclusion Initiative Mapping Where Children with ieps are Being Served Purpose
sites -> Northern England’s set-jetting locations
sites -> Physical custody of 1033 program property accountibility form statement of Physical Custody: By signing for the below 1033 property I am a Law Enforcement Officer of the aforementioned Law Enforcement Agency
sites -> Nstructions for Acquiring Excess Equipment online, through the 1033 Program
sites -> Memorandum of agreement

Download 202.88 Kb.

Share with your friends: