Strategy, balanced scorecard, service company. Westlake Corporation is a small information systems consulting firm that specializes in helping companies implement standard sales management software. The market for Westlake’s services is very competitive. To compete successfully, Westlake must deliver quality service at a low cost. Westlake presents the following data for 2010 and 2011.
|
2010 |
2011 |
||
|
Number of jobs billed |
60 |
70 |
|
|
Selling price per job |
$50,000 |
$48,000 |
|
|
Software implementation labor hours |
30,000 |
32,000 |
|
|
Cost per software implementation labor hour |
$60 |
$63 |
|
|
Software implementation support capacity (number of jobs it can do) |
90 |
90 |
|
|
Total cost of software implementation support |
$360,000 |
$369,000 |
|
|
Software implementation support capacity cost per job (row 6 ÷ row 5) |
$4,000 |
$4,100 |
Software implementation labor hour costs are variable costs. Software implementation support costs for each year depend on the software implementation support capacity Westlake chooses to maintain each year (that is the number of jobs it can do each year). It does not vary with the actual number of jobs done that year.
1. Is Westlake Corporation’s strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe key measures you would include in Westlake’s balanced scorecard and your reasons for doing so.