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Connor Company Strategy: Advance Managerial Accounting

The Connor Company manufactures a specialized piece of manufacturing equipment. Its machine has always been distinct from its competitors' machines and is considered to be superior to their products, too. However, its competitors are catching up both in terms of features and quality. Connor has refined its manufacturing to the point that it never produces defective machines, relying on well-trained workers and highly-complex manufacturing equipment. Without these workers and this equipment, Connor would have a difficult time producing its products without defects. Since a large amount of materials are wasted in production, however, one of its goals is to reduce the amount of direct materials used to produce the machines. Given the unique and specialized nature of the machines, Connor often needs to provide a significant amount of support to its customers.

a) Based on this information, what type of strategy to you believe Connor is pursuing? Be sure to back up your claim with specific evidence.

b) List and justify eight metrics (2 in each of the Balanced Scorecard perspectives) that you believe Connor should include in its Balanced Scorecard.

c) Connor calculates the following figures:

2011 operating income $2,700,000
2012 operating income $3,319,500
Growth component $280,000
Price-recovery component $247,500
Productivity component $92,000

In 2012, Connor sold more units and charged a higher price than in 2011. Connor also paid more for raw materials in 2012 than it did in 2011.

Based on this information, do you believe Connor's increase in operating income in 2012 is consistent with its goals and strategy? Be sure to justify your answer with specific information.

Solution Preview

a) Based on this information, what type of strategy to you believe Connor is pursuing? Be sure to back up your claim with specific evidence.

Connor is pursuing "product differentiation" strategy because they have unique special equipment and special institutional knowledge (how-to of workforce) to offer customers and that means they are likely charging a premium to the market for their products and related post-sale customer service.

b) List and justify eight metrics (2 in each of the Balanced Scorecard perspectives) that you believe Connor should include in its Balanced Scorecard.

Here are three in each perspective to choose from:

Financial:
Return on assets (important with large fixed costs such as with complex equipment)
Material scrap as a percent of sales
Profit by product line

Customer:
Number of repeat customers
Market ...

Solution Summary

Your tutorial is 360 words and gives the strategy used, offers three measures in each of the three balanced scorecard perspectives (financial, customer, internal business process and learning and growth) and explains how the three components indicate that their goals and strategies are being met.

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