EXPLAIN HOW THE CUSTOMER AND INTERNAL BUSINESS PROCESS PERSPECTIVES OF PIONEER COMPANY’S BALANCED SCORECARD MIGHT DIFFER

21 Jun EXPLAIN HOW THE CUSTOMER AND INTERNAL BUSINESS PROCESS PERSPECTIVES OF PIONEER COMPANY’S BALANCED SCORECARD MIGHT DIFFER

This Assignment is designed to provide an opportunity to demonstrate:

1. The application of management accounting concepts and frameworks to identify and solve complex

organizational problems creatively and practically to increase the effectiveness of management decision

making that provides solutions to real world problems

2. The application and use of management accounting concepts, with other evidence, to provide solutions

to real world problems

The Pioneer Company is in the construction and engineering business. The accountant of the company has

approached you to provide advice on the development of a Balanced Scorecard that will assist in the

evaluation of the company’s performance.

For the purposes of designing this Balanced Scorecard, you interviewed managers from many of the

company’s current and potential customers. You found that some customers were highly price-sensitive

and wanted to continue business as usual. These customers developed internally all the specifications for

their bids, put the detailed bidding document out to tender, and chose, from among all qualified suppliers

the one submitting the lowest bid. As one price-sensitive customer said during an interview:
We don’t have the resources of time for doing anything fancy with our suppliers. Our business has become

ruthlessly competitive, with price and margin reductions in recent years, and the need for us to cut costs

wherever we can. We can’t afford to choose anyone but the lowest-price supplier.

Historically, Pioneer Company competed by attempting to be the selected low-price bidder for price-

sensitive customers.

Your interviews also revealed that several large and important customers were looking for more than low

price from their most valued supplier of construction services. They said:

We have to cut costs wherever we can. But we are looking to our suppliers to help us in this goal. If it’s

cheaper and more effective for them to take over some of our engineering functions, we should let them do

that, and reduce our internal engineering staff accordingly. We don’t have any special capabilities in

engineering. We want suppliers that can suggest new ways of doing business, and who can develop

improved technologies for this new task. Our best suppliers of engineering and construction services will

anticipate our needs and suggest creative ways to meet these needs through new technologies, new project

management approaches, and new financing methods.

These companies acknowledged that rapidly changing technology and an increasingly competitive

marketplace for their final products had motivated them to look to their suppliers for innovative ways to

lower their costs. Although price would still be a factor, a supplier’s ability to offer innovative and more

cost-effective approaches would still be a strong influence on suppler selection. You refer to these

companies as those wanting differentiated services.

As part of your information gathering you also had the opportunity to discuss methods of performance

evaluation this with the CEO of Pioneer Company. You note the following comment made by the CEO:

“As managers we need to be wary of the fad-like innovations proposed by accountants. We know if our

company is in control if we earn at least the required rate of return on our assets. At the end of the day the

numbers don’t lie.”

You are required to provide written a report to the accountant of Pioneer Company. Your advice should include the following:

Respond to the CEO by explaining how the Balanced Scorecard can serve a useful purpose in assisting

Pioneer Company in assessing progress towards its objectives.

Design a Balanced Scorecard for Pioneer Company and consider the following:

Using the information that you have gleaned from the interviews, suggest two possible strategies that

could be employed by Pioneer Company. For each strategy, develop between two and four measures for

each dimension of the Balanced Scorecard, explaining how these measures support each strategy.

Explain how the Customer and Internal Business Process perspectives of Pioneer Company’s Balanced

Scorecard might differ, depending on whether the company selected the price-sensitive or differentiated

services customer types as the target for its future strategy. Be specific about how the measures would

differ depending upon which strategy Pioneer Company followed.

Suggest potential new internal business processes that Pioneer Company would have to perform very well

if it wanted to meet the expectations of its customers wanting differentiated services?