Strategy, balanced scorecard, merchandising operation Oceano & Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Oceano wants to be known for its trendsetting designs, and it wants every teenager to be seen in a distinctive Oceano T-shirt. Oceano presents the following data for its first two years of operations, 2008 and 2009.

Administrative costs depend on the number of customers that Oceano has created capacity to support, not on the actual number of customers served. Oceano had 3,600 customers in 2008 and 3,500 customers in 2009. At the start of each year, management uses its discretion to determine the number of employees on the design staff for the year. The design staff and its costs have no direct relationship with the number of T-shirts purchased and sold or the number of customers to whom T-shirts are sold.

1. Is Oceano’s strategy one of product differentiation or cost leadership? Explain briefly.

2. Describe briefly the key elements Oceano should include in its balanced scorecard and the reasons it should do so.

2008 2009 Number of T-shirts purchased Number of T-shirts discarded Number of T-shirts sold Average selling price Average cost per T-shirt Administrative capacity (number of customers) Administrative cost Administrative cost per customer Design staff Total design costs Design cost per employee 250,000 200,000 2,000 3,300 198,000 246,700 2$ 25.00 $ 10.00 $ 4,000 $1,200,000 $1,162,500 300 $ 26.00 8.50 3,750 310 5 $ 250,000 $ 275,000 $ 50,000 $ 55,000