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CA Intermediate · Financial Management and Strategic Management · Strategy Implementation and Evaluation

Kaveri Pharma's strategy is to become the lowest-cost generic producer. In its balanced scorecard review, the CFO notes that cost per tablet has fallen, but customer complaints about delayed deliveries have risen, and the number of staff trained on the new automated line is very low. A board member says the low training numbers will eventually hurt delivery performance and then cost. Which reasoning about the balanced scorecard best reflects the board member's view?

Learning and growth measures are drivers that influence internal processes, customer results and finally financial outcomes. The board member's chain from low training to poor delivery to higher cost follows this cause-and-effect link. Financial measures are lagging results, not drivers, so the other statements reverse or ignore the linkage.

  1. AFinancial perspective measures are leading indicators that drive the learning and growth perspective
  2. BLearning and growth measures are drivers that influence internal process, customer and finally financial outcomesCorrect
  3. CThe customer perspective is independent of internal processes and learning measures
  4. DInternal process measures are the final outcome measures and financial measures are the drivers

Explanation

In the balanced scorecard, learning and growth capabilities drive internal business processes, which drive customer outcomes, which in turn produce financial results. The board member's chain of training, then delivery, then cost matches this cause-and-effect logic. The other options reverse or deny that linkage, treating financial measures as drivers or perspectives as unrelated.

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