Question

Ridgecrest 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 quickly after receiving customers’ orders. There are many other manufacturers who produce similar motors. Ridgecrest believes that continuously improving its manufacturing processes and having satisfied employees are critical to implementing its strategy in 2015.

1. Is Ridgecrest’s 2015 strategy one of product differentiation or cost leadership? Explain briefly.

2. Indicate a measure you would expect to see in Ridgecrest’s balanced scorecard for 2015.

Answer 1

1) Is Ridgecrest’s 2015 strategy one of product differentiation or cost leadership? Explain briefly

Ridgecrest’s 2015 strategy is a cost leadership strategy. Ridgecrest plans to grow by producing high-quality boxes at a low cost delivered to customers in a timely manner. Ridgecrest’s boxes are not differentiated, and there are many other manufacturers who produce similar boxes. To succeed, Ridgecrest must produce high-quality boxes at lower costs relative to competitors through productivity and efficiency improvements.

2) Also, indicate a measure you would expect to see in Ridgecrest’s balanced scorecard for 2015.

Financial Perspective

(1) Operating income from productivity gain, (2) operating income from growth, (3) cost reductions in key areas.

These measures evaluate whether Ridgecrest has successfully reduced costs and generated growth through cost leadership.

Customer Perspective

1. Market share in corrugated boxes market, (2) number of new customers, (3) customer satisfaction index. The logic is that improvements in these customer measures are leading indicators of whether Ridgecrest’s cost leadership strategy is succeeding with its customers and helping it to achieve superior financial performance.

Internal Business Process Perspective

(1) Productivity, (2) order delivery time, (3) on-time delivery, (4) number of major process improvements.

         Improvements in these measures are key drivers of achieving cost leadership and are expected to lead to more satisfied customers and in turn to superior financial performance

Learning and Growth Perspective

(1) Percentage of employees trained in process and quality management, (2) employee satisfaction ratings.

         Improvements in these measures aim to improve Ridgecrest’s ability to achieve cost leadership and have a cause-and-effect relationship with improvements in internal business processes, which in turn lead to customer satisfaction and financial performance.