Problem Definition: Which of the two balanced scorecard approaches better illustrates how Transports Auto Parts can improve their ROCK by given the current economic downturn? Situational Analysis: Transports Auto Parts belongs in the automobile manufacturing industry. This industry is very susceptible to industry trends and changes because much of the industry’s sales depends on the external environment which affects both consumer and supplier behavior. During 2008 when the economy experienced a global recession, many auto makers such as Chrysler and General Motors were on the brink of insolvency due to the decline in car sales, Utilizing the
PESTLE framework to better understand the macro-environment, the recession reflects economic factors in the external environment which can influence the industry. The recession affected consumers in the sense that they possessed less disposable income, causing them to be less inclined to purchase new cars during this time. However, other aspects of the external environment can benefit firms within this industry gore example, faith the rising automobile production in Asia, many suppliers can consider global expansion and developing sales in international markets.
Many car manufacturers in Asia possess low labor costs ND a great demand in local markets, so suppliers within the industry have this opportunity to expand. Not only is it important to consider the industry and external environment in which TAP operates in, it is also important to analyze its internal resources and capabilities in order to better understand the company. TAP currently has operations in four different customer-centered divisions: luxury, economy, medicine, and truck.
However, TAP decided to only focus on improving their luxury and economy division because these two divisions will allow TAP to compete aggressively and make the most profit, according to their search. Each of the separate divisions is managed by a separate manager and supporting staff. This allows Ellen Bright, CEO of TAP to distinguish results from each division and form her own board of directors to make strategic decisions. TAP flourishes with this hierarchical structure because it allows the company to micromanage each separate division’s profitability for the company and for it to implement any changes when necessary.
Strategy: Tater Bright decided to cut the other two divisions, each manager from the luxury and economy division respectively were assigned to create a balanced score card to describe their objectives on how to improve their division and what must be done to achieve their parent company’s target goal of an 8% return on capital employed GROCER). Gerhardt, president of the luxury division presented a balanced score card that was simple yet with focused objectives for each aspect of the balanced score card. For example, the financial perspective contained 4 main goals: increase ROCK, increase cash flow, increase revenue, and increase gross margin.
The customer perspective simply included: improve customer satisfaction, manage innovation, and initiation customer R;D partnerships. Similarly, the process perspective included two main goals: reduce raw materials cost and maintain quality leadership. Lastly, the learning and growth perspective only included one objective: increase employee engagement. On the other hand, Swoon, president of the economy division took a more complex and descriptive approach with the balanced score card. He went into detail about each of the four perspectives and proposed very specific, action-oriented goals.
He had similar financial perspective objectives, but each of the other perspectives contained about four or five different objectives. For example, the learning and growth perspective contained six objectives: train buyers on low cost procurement, enhance electronic interchanges with customers and suppliers, transform workforce into CIT/lean experts, make CIT/lean a priority for all workers, alight IT to support TTS and CIT, and enhance workforce capabilities in TTS. Both approaches of the balanced score card aim to attain similar overall goals.
Below are some pros and cons for each approach: Luxury Division- Pros: focusing goals in broad chunks make it easier to attain, with attainable goals employees are happier, creating healthier company morale Cons: too impel without specifically stating what actions must be taken in order to meet objectives, might cause confusion among employees Economy Division- Pros: very detailed with specific measures and actions on how to achieve Objectives Cons: may seem to expect too much from employees, Which makes goal appear to be and discourage employees Action Plan: After analyzing both approaches to the balanced score card, the economy division presented a more well thought out and action specific plan to reach the company’s target goal.