1.            ABC’s operating income gain is consistent with the cost leadership strategy         identified in requirement 1 of Exercise 13-16. The increase in operating income in    2016 was driven by the Rs 140,000 gain in productivity in 2016. ABC took    advantage of its productivity gain to reduce the prices of its boxes and to fuel        growth.  It increased market share by growing even though the total market size             was unchanged.

                        2.         The productivity component measures the change in costs attributable to             a change in the quantity and mix of inputs used in a year relative to the            quantity and mix of inputs that would have been used in a previous year      to produce the current year output. It measures the amount by which        operating income increases and costs decrease through the productive     use of input quantities. When comparing productivities across years, the         productivity calculations use current year input prices in all calculations.       Hence, the productivity component is unaffected by input price changes.

The productivity component represents savings in both variable costs and             fixed costs.  With respect to variable costs, such as direct materials, productivity improvements immediately translate into cost savings. In the case of fixed costs, such as fixed manufacturing conversion costs, productivity gains result only if management takes actions to reduce unused capacity. For example, reengineering manufacturing processes will decrease the capacity needed to produce a given level of output, but it will lead to a productivity gain only if management reduces the unused capacity by, say, selling off the excess capacity.

1-            Financial perspective (Operating income from higher margins and by growth)

                                Customer perspective (Market share and customer satisfaction)

                Internal business perspective ( Manufacturing quality, Order delivery time, New product             features added, development time for new products, improvements in manufacturing                   process)              

                Learning and growth perspective (Percentage of employees trained in process and         quality management, Management and Employee satisfaction)               .

2.