Strategy, balanced scorecard. Meredith Corporation makes a special-purpose D4H machine used in the textile industry. Meredith has designed the D4H machine for 2007 to be distinct from its competitors. It has been generally regarded as a superior machine.
Aleredith presents the following data for the years 2006 and 2007.
2006 2007 1. Units of D4H produced and sold 200 210 2. Selling price $48,000 $50,400 3. Direct materials (kilograms) 300,000 310,000 4. Direct materials cost per kilogram $9.60 $10.20 5. Manufacturing capacity' in units of D4II 250 250 6. Total manufacturing conversion costs $2,400,000 ' $2,430,000 7. Manufacturing conversion costs per unit of capacity $9,600 $9,720 8. Selling and customer-service capacity' 100 customers 95 customers 9. Total selling and customer-service costs $1,200,000 $1,128,600 10. Selling and customer-service capacity' cost per customer $12,000 $11,880 11. Design staff 12 12 12. Total design costs $1,440,000 $1,454,400 13. Design costs per employee $120,000 $121,200 Meredith produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2007. Manufacturing conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units of D4H produced. Selling and customer-service costs depend on the number of customers that Meredith can support, not the actual number of customers Meredith serves. Aleredith has 75 customers in 2006 and 80 customers in 2007. At the start of each year, management uses its discretion to determine the number of design staff for the year. The design staff and costs have no direct relationship with the quantity of D4H produced or the number of customers to whom D4H is sold.
Required 1. Is Meredith’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly key elements that you would include in Meredith’s balanced scorecard and the reasons for doing so.