QUESTION 3

SMC is a large company which. for many years, operated solely as a pay.tv broadcaster. However, five years ago, it started product bundling, offering broadband and telephone services to its pay-tv customers. Customers taking up the offer were then known in the business as 'bundle customers' and they had to take up both the broadband and telephone services together with the pay-tv service. Other customers were still able to subscribe to pay - tv alone but not to broadband and telephone services without the pay-tv service.

All contracts to customers of SMC are for a minimum three-month period. The pay-tv box is sold to the customer at the beginning of the contract: however, the broadband and telephone equipment is only rented to them.

In the first few years after product bundling was introduced, the company saw a steady increase in profits. Then, SMC saw its revenues and operating profits fall. Consequently, staff bonuses were not paid, and staff became dissatisfied. Several reasons were identified for the deterioration of results:

I. In the economy as a whole. discretionary spending had been severely hit by rising unemployment and inflation. In a bid to save cash, many pay-tv customers were cancelling their contracts after the minimum three-month period as they were then able to still keep the pay-tv box. The box comes with a number of free channels, which the customer can still continue to receive free of charge, even after the cancellation of their contract.

2. The company's customer service call centre, which is situated in another country, had been the cause of lots of complaints from customers about poor service, and in particular, the number of calls it sometimes took to resolve an issue.

3. Some bundle customers found that the broadband service that they had subscribed to did not work. As a result, they were immediately cancelling their contracts for all services within the 21 day cancellation period permitted under the contracts.

In a response to the above problems and in an attempt to increase revenues and profits. SMC made the following changes to the business:

1. It made a strategic decision to withdraw the pay-tv-broadband-telephone package from the market and, instead, offer each service as a standalone product.

2. It guaranteed not to increase prices for a 12-month period for each of its three services.

3. It transferred its call centre back to its home country and increased the level of staff training given for call centre workers.

4. It investigated and resolved the problem with customers' broadband services.

It is now one year since the changes were made and the finance director wants to use a balanced scorecard to assess the extent to which the changes have been successful in improving the performance of the business.

Required:

a) For each perspective of the balanced scorecard, identify two goals (objectives) together with a corresponding performance measure for each goal which could be used by the company to assess whether the changes have been successful. Justify the use of each of the performance measures that you choose.(20 marks)

b) Discuss how the company could reduce the problem of customers terminating their pay-tv service after only three months.

(10 marks)