Two examples where the difference in the costs of two products or services is much smaller than the differences

in their prices follow: 1. The difference in prices charged for a telephone call, hotel room, or car rental during busy versus slack periods is often much greater than the difference in costs to provide these services. 2. The difference in costs for an airplane seat sold to a passenger traveling on business or a passenger traveling for pleasure is roughly the same. However, airline companies price discriminate. They routinely charge business travellers those who are likely to start and complete their travel during the same week excluding the weekend a much higher price than pleasure travelers who generally stay at their destinations over at least one weekend. What are three benefits of using a product life-cycle reporting format? Three benefits of using a product life-cycle reporting format are: 1. The full set of revenues and costs associated with each product becomes more visible. 2. Differences among products in the percentage of total costs committed at early stages in the life cycle are highlighted. 3. Interrelationships among business function cost categories are highlighted. Describe the five key forces to consider when analyzing an industry. The five key forces to consider in industry analysis are: (a) competitors, (b) potential entrants into the market, (c) equivalent products, (d) bargaining power of customers, and (e) bargaining power of input suppliers. What is a customer preference map and why is it useful? A customer preference map describes how different competitors perform across various product attributes desired by customers, such as price, quality, customer service and product features. What are four key perspectives in the balanced scorecard? The four key perspectives in the balanced scorecard are: (1) Financial perspective?this perspective evaluates the profitability of the strategy and the creation of shareholder value, (2) Customer perspective?this perspective identifies the targeted customer and market segments and measures the company?s success in these segments, (3) Internal business process perspective?this perspective focuses on internal operations that further both the customer perspective by creating value for customers and the financial perspective by increasing shareholder value, and (4) Learning and growth perspective?this perspective identifies the capabilities the organization must excel at to achieve superior internal processes that create value for customers and shareholders Describe three features of a good balanced scorecard. A good balanced scorecard design has several features: 1. It tells the story of a company?s strategy by articulating a sequence of cause-and-effect relationships. 2. It helps to communicate the strategy to all members of the organization by translating the strategy into a coherent and linked set of understandable and measurable operational targets. 3. It places strong emphasis on financial objectives and measures in for-profit companies. Nonfinancial measures are regarded as part of a program to achieve future financial performance.

What are three important pitfalls to avoid when implementing a balanced scorecard? Pitfalls to avoid when implementing a balanced scorecard are: 1. Don?t assume the cause-and-effect linkages are precise; they are merely hypotheses. An organization must gather evidence of these linkages over time. 2. Don?t seek improvements across all of the measures all of the time. 3. Don?t use only objective measures in the balanced scorecard. 4. Don?t fail to consider both costs and benefits of different initiatives before including these initiatives in the balanced scorecard. 5. Don?t ignore nonfinancial measures when evaluating managers and employees. Describe three key components in doing a strategic analysis of operating income. Three key components in doing a strategic analysis of operating income are: 1. The growth component which measures the change in operating income attributable solely to the change in quantity of output sold from one year to the next. 2. The pricerecovery component which measures the change in operating income attributable solely to changes in the prices of inputs and outputs from one year to the next. 3. The productivity component which measures the change in costs attributable to a change in the quantity and mix of inputs used in the current year relative to the quantity and mix of inputs that would have been used in the previous year to produce current year output.