Describes a meeting of an executive team to discuss strategy for a company turnaround. The exercise is to construct a strategy map and Balanced Scorecard to capture the new strategy.
Robert S. Kaplan
Harvard Business Review (105078-PDF-ENG)
June 03, 2005
Case questions answered:
How could Domestic Auto Parts management increase revenue, customers, and market share amidst the competitive automobile manufacturing industry?
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Domestic Auto Parts Case Answers
The Situation – Domestic Auto Parts
Domestic Auto Parts (DAP) is a multimillion-dollar subsidiary company that manufactures and distributes original and aftermarket parts of automobile producers in the USA.
The company also distributes automobile products to original automakers and other large retail chains. DAP has been among the top producers of automobiles, but it has recently dropped in the rankings and market shares.
The primary reason for the rank dropping is the lack of introducing new products in the market for the last three years.
Another reason is that the company has implemented cost-cutting to save the revenue being generated. Its competitors, Western Auto and Just In Time Automotive, have introduced high-value products in the markets with better technology, increasing their market share. Customers of competitors, like Western, are willing to pay premiums for improved products.
The balanced scorecard (BSC) is a management and strategic planning tool that businesses use to communicate their mission and carefully plan the day-to-day work as per the business strategy. Additional BSC is used to prioritize services, projects, and products and measure and track progress towards the business’s strategic goals.
Internal factors are the event that occurs within an organization. Internal environmental factors are, on average, easier to manage than external environmental factors. Domestic Auto Parts has limited plant technology upgrades and investment in the manufacturing sector. Although this has helped the plant maintain the gross and operating margins, it has affected the manufacturing. Lack of continuous manufacturing of new products has resulted in a decrease in revenue and market share.
The company cites poor inventory management as the leading cause of not manufacturing new products. Poor inventory management occurred because the company failed to fulfill its orders amidst the chaos of running the business. Failure to manage the inventory has directly affected the manufacture and sales orders of DAP.
For example, Domestic Auto Parts produced new items to stock rather than order, increasing the inventory cost. Another cause is unscheduled maintenance time, which has affected manufacturing. It means the company cannot manufacture new products during its regular time. However, DAP management has realized that cost-cutting has only helped them achieve their short-term goals and has dramatically affected its sales and revenue.
External environmental factors which occur outside of the company are more difficult to foresee and regulate. External environmental issues can be riskier for a company since they are unpredictable and frequently perplexing.
For instance, Domestic Auto Parts faces threats from its competitors Just In Time Automotive and Western Auto. They regularly produce high-value products in the market with advanced technology. Further, Western Auto has introduced premiums to its customers where they get improved products during the purchase.
Domestic Auto Parts management has taken several strategies to increase revenue, customers, and market share in the competitive automobile manufacturing industry.
First, DAP has decided…
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