Question 

Audio Tech is a company that designs, develops and sells audio equipment. Audio Tech is best known for its home audio systems and speakers, noise-cancelling headphones, professional audio systems and automobile audio systems. Audio Tech sells audio equipment to consumers through its large network of retail outlets in its home country and via the company's website. Audio Tech purchases the materials and components that it needs to manufacture audio equipment from a number of different suppliers. All of the purchases are delivered to a company's godown at its factory and are held there until they are needed for production and assembly. Finished products are transported from the factory to Audio Tech's retail outlets by the company's own trucks. The trucks follow the same schedule each week irrespective of the load they are carrying. Audio equipment that is required for sale via the company's website is transported to Audio Tech's distribution centre. The company believes that it can attract more customers by offering quality products at reasonable prices. Each unit is tested for quality with a real-time analyzer iPad app and a calibrated microphone to measure how consistently each sound system reproduced various frequencies. A bass-test sweep tone allows checking how well the subwoofer managed low-end frequencies. Finally, they drive each in car briefly to see how sound quality changes while on the move. The company aims to build customer loyalty also through a high level of customer service and value chain analysis. The customers can return the product if quality specifications are not met. There is a separate department to handle such complaints. Audio Tech had implemented Balanced Scorecard as a performance measurement and management system. Company has been doing great on financial parameters and customer satisfaction parameters. Market capitalization of the company has been increased considerably over the years. Of late, the company has witnessed high employee turnover ratio. Though the company has a formal exit interview process for the resigning employees, the input received from these interviews is rarely considered in improving HR practices. One of the common feedbacks from employees was that working hours are too long and they have to frequently work on weekends also and there is so much pressure to improve customer service without adequate support of system and processes. Also the truck drivers have been on strike thrice in the last one year demanding better pay, retirement benefits and good working conditions.

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Audio Tech is keen to address the above issues and recently held a meeting to discuss the performance of the company. The Management Accountant suggested to the Managing Director to use an alternative performance measurement mechanism which considers all the stakeholders instead of just shareholders and customers. The Managing Director is sceptical of the Management Accountant's suggestions and is unclear as to whether they are suitable for the company or not. Therefore, the company seeks your assistance.

Required:

(i) IDENTIFY and EXPLAIN the various primary activities of Audio Tech in its value chain. Also SUGGEST, if there is any scope for cost reduction in these activities. (10 marks)

(ii) RECOMMEND an alternative performance measurement mechanism considering all stakeholders instead of just shareholders and customers. Also, INDICATE the performance measures as applicable to the situations of Audio Tech in the alternative mechanism suggested by you.

(10 marks)

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