Meredith Ltd makes a special-purpose machine D4H used in the textile industry. Meredith has designed the D4H machine for 2008 to be distinct from its competitors. It has been generally regarded as a superior machine. Meredith presents the following data for the years 2007 and 2008.

Meredith produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2008. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units of D4H produced. Selling and customer-service costs depend on the number of customers that Meredith can support, not the actual number of customers Meredith serves. Meredith has 75 customers in 2007 and 80 customers in 2008. At the start of each year, management uses its discretion to determine the number of design staff for the year. The design staff and costs have no direct relationship with the quantity of D4H produced or the number of customers to whom D4H is sold.
Required
1. Is Meredith's strategy one of product differentiation or cost leadership? Explain briefly.
2. Describe briefly key elements that you would include in Meredith's balanced scorecard and the reasons for doing so.

2007 2008 1 Units of D4H produced and sold 2 Selling price 3 Direct materials (kilograms) 4 Direct materials cost per kilogram 5 Manufacturing capacity in units of D4H 6 Total conversion costs 7 Conversion costs per unit of capacity 8 Selling and customer-service capacity 9 Total selling and customer-service costs 200 40000 300000 f8 250 2000000 8 000 100 customers 1000000 210 42 000 310000 8.50 250 2025 000 8 100 95 customers 940 500 10 Selling and customer-service capacity cost per customer 11 Design staff 12 Total design costs 13 Design costs per employee 10000 12 1 200000 100000 9 900 12 1 212000 101 000