Question 1 (15 marks)

1.Vic Corporation refines petrol and sells it through its own petrol gas stations. On the basis of market research, Vic Corporation determines that 60% of the overall petrol market consists of service-oriented customers, medium- to high-income individuals who are willing to pay a higher price for gas if the gas stations can provide excellent customer service, such as a clean facility, a convenience store, friendly employees, a quick turnaround, the ability to pay by credit card, and high-octane premium petrol. The remaining 40% of the overall market are price shoppers who look to buy the cheapest petrol available. Vic Corporations strategy is to focus on the 60% of service-oriented customers. Vic Corporations balanced scorecard for 2018 follows. For brevity, the initiatives taken under each objective are omitted.

Objectives

Measures Target

Performance Actual

Performance

Financial Perspective

Increase shareholder value Operating-income changes from price recovery

$80,000,000

$85,000,000

Operating-income changes from growth

$60,000,000

$62,000,000

Customer Perspective

Increase market share Market share of overall gasoline market

4%

3.8%

Internal-Business-Process Perspective

Improve gasoline quality Quality index 92 points 93 points

Improve refinery performance Refinery-reliability index (%) 91% 91%

Ensure gasoline availability Product-availability index (%) 99% 99.5%

Learning-and-Growth Perspective

Increase refinery process capability Percentage of refinery processes with advanced controls

94%

95%

Required:

1.Was Vic Corporation successful in implementing its strategy in 2018? Explain your answer. (3 marks)

2.Would you have included some measure of employee satisfaction and employee training in the learning-and growth perspective? Are these objectives critical to Vic Corporation for implementing its strategy? Why or why not? Explain briefly. (4 marks)

3.Explain how Vic Corporation did not achieve its target market share in the total gasoline market but still exceeded its financial targets. Is market share of overall gasoline market the correct measure of market share? Explain briefly. (4 marks)

4.Do you agree with Vic Corporations decision not to include measures of changes in operating income from productivity improvements under the financial perspective of the balanced scorecard? Explain briefly. (4 marks)