Actual Target Performance Performance Measures Objectives Financial Perspective Operating-income changes from price recovery Operating-income changes from growth Increase shareholder value S80,000,000 S85,000,000 S60,000,000 $62,000,000 Customer Perspective Market share of overall gasoline Increase market share market 4% 3.8% Internal-Business-Process Perspective Improve gasoline quality Improve refinery performance Ensure gasoline availability Learning-and-Growth Perspective Increase refinery process capability Quality index Refinery-reliability index (%) Product-availability index (%) 92 points 93 points 91% 91% 99% 99.5% Percentage of refinery processes 94% with advanced controls 95% 1. Was Petrocal successful in implementing its strategy in 2017? Explain your answer. 2. Would you have included some measure of employee satisfaction and employee training in the learning-and-growth perspective? Are these objectives critical to Petrocal for implementing its strat- egy? Why or why not? Explain briefly. Required 3. Explain how Petrocal 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. Is there a cause-and-effect linkage between improvements in the measures in the internal-business- process perspective and the measure in the customer perspective? That is, would you add other measures to the internal-business-process perspective or the customer perspective? Why or why not? Explain briefly. 5. Do you agree with Petrocal's decision not to include measures of changes in operating income from productivity improvements under the financial perspective of the balanced scorecard? Explain briefly.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 90PSB

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Question

Balanced scorecard. (R. Kaplan, adapted) Petrocal, Inc., refines gasoline and sells it through its own Petrocal gas stations. On the basis of market research, Petrocal determines that 60% of the overall gasoline 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 gasoline. The remaining 40% of the overall market are “price shoppers” who look to buy the cheapest gasoline available. Petrocal’s strategy is to focus on the 60% of service-oriented customers. Petrocal’s balanced scorecard for 2017 follows. For brevity, the initiatives taken under each objective are omitted.

Actual
Target
Performance Performance
Measures
Objectives
Financial Perspective
Operating-income changes from
price recovery
Operating-income changes from
growth
Increase shareholder value
S80,000,000 S85,000,000
S60,000,000 $62,000,000
Customer Perspective
Market share of overall gasoline
Increase market share
market
4%
3.8%
Internal-Business-Process Perspective
Improve gasoline quality
Improve refinery performance
Ensure gasoline availability
Learning-and-Growth Perspective
Increase refinery process capability
Quality index
Refinery-reliability index (%)
Product-availability index (%)
92 points
93 points
91%
91%
99%
99.5%
Percentage of refinery processes
94%
with advanced controls
95%
1. Was Petrocal successful in implementing its strategy in 2017? Explain your answer.
2. Would you have included some measure of employee satisfaction and employee training in the
learning-and-growth perspective? Are these objectives critical to Petrocal for implementing its strat-
egy? Why or why not? Explain briefly.
Required

3. Explain how Petrocal 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. Is there a cause-and-effect linkage between improvements in the measures in the internal-business-
process perspective and the measure in the customer perspective? That is, would you add other
measures to the internal-business-process perspective or the customer perspective? Why or why not?
Explain briefly.
5. Do you agree with Petrocal's decision not to include measures of changes in operating income
from productivity improvements under the financial perspective of the balanced scorecard? Explain
briefly.

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