Question

1. Jessica is a graduate of a University’s business school entrepreneurship program.  As part of her final year of studies, she developed a business plan for a business that develops websites for individuals and commercial businesses.  She put her business plan into action with the help of start-up funding from family and friends, and has been operating for two and a half years.

Jessica has decided to apply the concepts in a balanced scorecard to evaluate and improve her business.  Her vision for this business is to provide clients with high quality websites that receive a relatively high number of hits. Recently, word-of-mouth advertising has led to more requests for websites with creative animated graphics.  As part of her balanced scorecard, she tracked the following measures over the last two years for her individual clients.

	2018	2019
Average revenue per individual client	$2,000	$1,500
Average time from start to finish (business days)	10	13
Average site ranking on top two search engines	15	21
Total revenue	$80,000	$78,000
Total labour cost	$20,000	$22,000
Total electricity and phone costs	$2,100	$2,400
Number of individual clients	40	52
Employee turnover	1	0

50       Required:

1. Based on the information above, does Jessica’s business compete on the basis of low cost or product differentiation?  Explain.
2. Your job is to assist Jessica in interpreting the data she has collected, so that she can determine where her business’ performance is satisfactory, and where she needs to concentrate her efforts in order to improve its performance.  
   1. For each performance measure, indicate how it should be classified on the balanced scorecard. There must be at least one performance measure for each classification.  There are, however, measures that can be included in more than one classification.  Select the classification that you believe is most appropriate.  Fore each performance measure, explain the reason for selecting the category chosen.
   2. Analyze the change in each performance measure from 2018 to 2019, but do not consider each performance measure in isolation.  Provide one possible explanation for the change that has been observed, making sure it is reasonable given all the information available to you.
   3. Evaluate the change in Jessica’s business as a whole from 2018 to 2019.  Identify one or two pieces of additional information needed to be able to complete this evaluation.  Describe why this information is needed.
   4. Make a recommendation as to the one thing Jessica should concentrate her efforts to improve her business in 2020.
3. Provide three reasons why a company could implement a balanced scorecard successfully but see no improvements in its profitability.   Make sure your explanation is sufficiently detailed that it is clear why improvements in profitability were not seen.

Answer 1

a.

	2018	2019
Clients	40	52
Total labor cost	80000	78000
Cost per client	2000	1500
Total electricity &phone cost	2100	2400
Per client	52.5	46.15

Based on above we can conclude that cost in 2019 is less than 2018.

However product differentiation means making product or service different from its competitors, different from own product. No question indicates any differentiation activity of the product or service.

Therefore we conclude that Jessica's business compete based on low cost basis.

B

I)

Balanced score card

Financial perspective	Profitability of the company
Customer perspective	Average revenue per client
Learning and growth	Employee satisfaction and retention
Internal business perspective	improved operational efficiency. Average time from start to finish

Ii)

Change in cost from. 2018 to 2019, decreas in cost is the financial performance indicater. However in 2019 revenue decreases.

In 2019 average revenue per client also decrease. Employee turnover in 2019 is nil.

iii)

In 2019 growth in the no.of clients of the company but thr revenue per client decreases. There is also increase in start to finish time increased. However good thing.

Additional information required is the initial investment by company. And also required that all other financial data. Balance sheet, income statement

IV)

Currently Jessica s business cost per client is , concentrate on that not to increase. However revenue per client is low therefore it's necessary to focus on increase no of clients, more clients generate more revenue in total.

C.

Reasons for implementation of Balanced score card

1. Accurate measurement of performance and goals

2. Balanced view of the company's performance

3 translating strategy in to actual results

4. Helps us to identify any key factor missing

But the profits are not seen because

1. It gives historical picture.
2. Balanced score card require investment. And this is long term rather than short term. Company required to manage actively.
3. Lack of external focus. i.e not focus on competitors, no focus in change in business environment and other performance indicators
4. It requires accurate data and support of top management. And the employee also have to doing well.
5. If not get strong leadership support then profit are not seen
6. Not provide risk analysis so the profits get lower.

Above are possible reasons that clear why no improvement in profitability.