A company produces and supplies small electrical appliances to retail department stores. Due to labour shortages, costs of production have been increased significantly. To improve profits, a CEO considers increasing sales revenues and/or reducing costs of sale. He is advised by the senior executives that the operating expenses have already been at their lowest and therefore, cannot be reduced.

He has some options now: 1. Switch to less expensive suppliers for some of their components and at the same time, buy from these new suppliers in large quantities to take full advantages of all trade discounts 2. Increasing average selling prices 3. Imposing minimum order requirements for both existing and new customers.

Question:

1. (No need to answer this) What is the financial and non-financial risks and rewards associated with each of the changes proposed?

2. (No need to answer this) How the balanced scorecard could be used to shape the strategic direction of this company? (Please focus on the current problems of the company and how the proposed changes fit into the four perspectives of the balanced scorecard).

3. (Please help this one) One potential advantage and one potential problem that this company might encounter in implementing the balanced scorecard.