NBH Company, a small electronics firm, buys circuit boards and manually inserts various electronic devices into the printed circuit board. NBH sells its products to original equip¬

ment manufacturers. Profits for the last two years have been less than expected. Natalie Henson, owner of NBH, was convinced that her firm needed to adopt a revenue growth strategy to increase overall profits. To help in building a viable strategy, Natalie hired a lo¬

cal consultant. After a careful review, the consultant told Natalie that the main obstacle for increasing revenues was the high defect rate of her products (a 5% reject rate). She was told that revenues would grow if the defect rate was reduced dramatically. By decreasing the defect rate, customer satisfaction will increase. With increased customer satisfaction, NBH's market share should increase. The following suggestions were made to help ensure the suc¬

cess of the revenue growth strategy:

1. Improve the soldering capabilities by sending employees to an outside course.

2. Redesign the insertion process to eliminate some of the common mistakes.

3. Improve the procurement process by selecting suppliers that provide higher quality cir¬

cuit boards.

Required:

1. State the revenue growth strategy using a series of cause-and-effect relationships ex¬

pressed as if-then statements. It is possible to have a compound if-then statement (more than one cause for one effect).

2. Illustrate the strategy using a flow diagram like the one shown in Exhibit 14-14.

3. Explain how the revenue growth strategy can be tested. In your explanation, discuss the role of lead and lag measures, targets, and double-loop feedback.