Reference no: EM132548487

Petrocal Limited refines petroleum and sells it through its own Petrocal petrol stations. On the basis of market research, Petrocal determines that 60% of the overall petroleum market consists of 'service oriented customers', medium- to high-income individuals who are willing to pay a higher price for petrol if the petrol 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 petrol. The remaining 40% of the overall market are 'price shoppers' who look to buy the cheapest petrol available. Petrocal's strategy is to focus on the 60% of service-oriented customers. Petrocal's balanced scorecard for 2019 follows. For brevity, the initiatives taken under each objective are omitted.

Objectives

Measures                                                         Target performance                    Actual performance

Financial perspective

Increase shareholder value

Operating profit changes from price recovery                $80 000 000                             $85 000 000

Operating profit changes from growth                            $60 000 000                          $62 000 000

Customer perspective

Increase market share

Market share of overall petroleum market                            4%                                       3.8%

                                       Internal-business-process perspective                    Improve petrol quality

Quality index                                                  92 points                                           93 points

Improve refinery performance

Refinery-reliability index (%)                                 91%                                                91%

Ensure petrol availability

Product-availability index (%)                                99%                                               100%

Learning-and-growth perspective

Increase refinery process capability

Percentage of refinery processes with advanced controls    88%                                        90%

Required

Question 1. There appear to be no measures of employee satisfaction and employee training in the learning-and-growth perspective. Assess the extent to which these objectives are critical to Petrocal for implementing its strategy and comment on whether these measures should be added to the balanced scorecard.

Question 2. Examine the measures of the internal-business-process and customer perspectives and comment on the cause-and-effect linkage between them. Advise on whether or not Petrocal should add other measures to the internal-business-process perspective or the customer perspective and support your advice with reasons