Practice Question - Balanced Scorecard - Exam S2-2020

Life Happens Ltd (LH), a home improvement store with 4 branches across Tasmania, has a strategic objective stated as: "We will build LH into a dominant brand in Tasmania, by clearly understanding our target customer and differentiating ourselves in meeting their needs." At the beginning of 2020, LH developed an image of who its targeted customers were; (1) 25 to 65-year-old males, (2) Works full-time, (3) Enjoy 'Do it yourself' (DYI) projects.

It then communicated this targeted customer image externally, through a variety of advertising and in-store promotional materials during 2020. By communicating a clear image to potential customers, the store wishes its existing and future customers to imagine themselves as fitting an image associated with purchasing DIY materials at LH. During 2020, LH developed its customers' objective by defining a customer strategy:

1. LH must increase its customer share in their target market

2. Increased market share be achieved by customer loyalty: "We want the customer to visit us throughout the year and come to LH for the complete range of their DIY needs."

3. To create this loyalty:

• Our Merchandise must define our customer, his needs, and his DIY projects
• Our Brand must satisfy the customer's aspirational and lifestyle goals
• Our Shopping Experience must promote customer loyalty

4. We must do a superb job of defining who our customers are and their buying behaviour.

The shopping experience dimension was considered extremely important. Key attributes were availability of merchandise and the in-store shopping experience. The in-store shopping experience dimension was captured by an explicit vision of the five elements of the "perfect shopping experience":

1. Great looking stores with DIY impact

2. Customer welcomed by knowledgeable salespeople with smiles on their faces

3. Clear communication of special sales

4. Branch managers with good product knowledge

5. A sincere thanks and an invitation to return soon

During the year, a major national brand opened a number of stores in Tasmania with promotional events such as breakfast rolls for trades people early in the morning. The competitor also offers a wide range of merchandise for hobbyists, the majority of which are female, and builders who are mostly self-employed.

LH has noticed a decline in the number of people visiting their stores and have decided to reduce their number of stores to 3 only, and to embark on a voluntary employee redundancy program.

The table below summarises the target and actual performance for 2020.

Objectives	Measures	Target performance	Actual performance
Financial perspective
Increase shareholder value	Operating profit changes from productivity improvements	$1,000,000	$400,000
	Operating profit changes from growth	$1,500,000	$600,000
Customer perspective
Increase market share	Market share in sale of home improvement merchandise	65%	40%
Internal-business-process perspective
Improve DYI impact of stores	Number of stores	82%	85%
Communication of special sales	Days' notice	5 days	2 days
Learning and growth perspective
Develop product knowledge skills	Percentage of employees trained in product knowledge	90%	92%
Enhance customer service	Percentage of employees trained in customer service	85%	87%

Required

1. Explain if LH was successful in implementing its strategy in 2020. If not, offer possible reasons why not. Write half a page.

[7 marks]

1. Analyse LH's balanced score card and offer a critique of why the company did not reach its target market share in 2020? Explain what other measures you might want to add under the customer perspective and why. Write half a page.

[7 marks]

1. Evaluate the learning-and-growth perspective. Do you think employee training and satisfaction are critical for LH? In your answer consider the redundancy program. Why or why not? Explain fully. Write half a page.

[6 marks]

[Total marks for Question 5: 20 marks