Question
Jessica is a graduate of a Universitys business school entrepreneurship program. As part of her final year of studies, she developed a business plan for
- Jessica is a graduate of a Universitys 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:
- Based on the information above, does Jessicas business compete on the basis of low cost or product differentiation? Explain.
- 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.
- 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.
- 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.
- Evaluate the change in Jessicas 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.
- Make a recommendation as to the one thing Jessica should concentrate her efforts to improve her business in 2020.
- 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.
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