Session 7, Transworld Auto Parts Case Study

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Questions and Answers

Which attribute is regarded as the most important for mid-size customers?

Performance

Innovation

Comfort (correct)

Low cost

What is the primary attribute valued by OEMs in the economy category?

Price (correct)

On-time delivery

Customer service

Technical expertise

In the luxury category, which attribute ranks second in importance to the consumer?

Innovation

Low cost

High quality

Performance (correct)

Which attribute do OEMs prioritize after price in the luxury segment?

Product design Signup and view all the answers

What is the third most important attribute for economy category consumers?

Quality Signup and view all the answers

What is the total revenue from the Luxury (all segments) category?

$2,939 million Signup and view all the answers

Which product category has the highest Cost of Goods Sold (COGS)?

Luxury (all segments) Signup and view all the answers

What is the total Operating Income for all product categories combined?

$(357) million Signup and view all the answers

Which product category has the largest Selling, General and Administrative (SGA) expenses?

Moderately Priced Cars/SUVs/CUVs Signup and view all the answers

Which product category reported an operating loss?

Truck (all segments) Signup and view all the answers

What primarily differentiates the Economy Segment from the Luxury Segment in the competitive analysis?

Focus on low initial costs Signup and view all the answers

Which of the following is NOT a focus for the competitors in the Economy Segment?

High luxury features Signup and view all the answers

In the provided competitive analysis, which customer segment appears to prioritize low lifetime costs?

Economy Segment Signup and view all the answers

Which of the following customers is likely categorized as a competitor in the Luxury Segment?

Customer 1 Signup and view all the answers

What is a common feature of the competitors in the Economy Segment?

Emphasis on low initial costs Signup and view all the answers

What is the time frame mentioned for the use of the document?

Oct 2024 to Apr 2025 Signup and view all the answers

Which customer is expected to focus on low initial costs?

All customers in the Economy Segment Signup and view all the answers

What is implied about the relationship between initial costs and lifetime costs in the analysis?

Low lifetime costs can accompany low initial costs Signup and view all the answers

What was Ellen Bright's position at Transworld Auto Parts?

Chief Executive Officer Signup and view all the answers

Which division showed strong financial results?

Luxury division Signup and view all the answers

What significant concern did Ellen Bright have regarding her upcoming meetings?

Feedback on implementing strategies Signup and view all the answers

What aspect of the economy division's performance was noted despite disappointing financial results?

Good progress on non-financial goals Signup and view all the answers

What was the approximate revenue of Transworld Auto Parts?

$6.6 billion Signup and view all the answers

During which season did the events primarily take place?

Summer Signup and view all the answers

What is Transworld Auto Parts a manufacturer of?

Automobile parts Signup and view all the answers

Which stakeholder was Ellen Bright likely to meet with for feedback?

Heads of each division Signup and view all the answers

What has started to happen with the innovative products designed for high-end customers?

They are being made available to the economy segments. Signup and view all the answers

What is one of the main pressures affecting the manufacturing team?

Pressure to reduce costs, except for high-end products. Signup and view all the answers

What challenge does the unpredictability of raw material costs present?

It makes controlling COGS difficult. Signup and view all the answers

What strategic focus is highlighted as necessary to remain competitive?

Balancing cost-cutting with investments in process improvements. Signup and view all the answers

What aspect of supplier management is emphasized as important for cost savings?

Supplier pipeline management and raw material consolidation. Signup and view all the answers

Why is it challenging to meet capacity utilization targets?

OEM's fluctuating production schedules. Signup and view all the answers

What should Transworld Auto Parts aim for to sell new products effectively?

Being on time and on specification. Signup and view all the answers

What is a potential solution for controlling product costs mentioned in the statements?

Redesigning products to reduce material costs. Signup and view all the answers

What does a Strategic Theme represent in a Balanced Scorecard?

A diagram of cause and effect relationships between strategic objectives Signup and view all the answers

Which of the following best describes 'Objectives' in the context of a Balanced Scorecard?

Statements of what must be achieved in a strategy Signup and view all the answers

What is meant by 'Measures' in the Balanced Scorecard framework?

Indicators of success in achieving the strategy Signup and view all the answers

What does 'Targets' refer to in a Balanced Scorecard?

The specific performance levels expected from the measures Signup and view all the answers

Which of the following describes 'Initiatives' in a Balanced Scorecard?

The key action programs necessary to achieve objectives Signup and view all the answers

Which component of the Balanced Scorecard helps outline customer expectations?

Customer service excellence objectives Signup and view all the answers

In a Balanced Scorecard, which aspect would NOT typically be included in the financial category?

Customer satisfaction metrics Signup and view all the answers

Which of the following correctly emphasizes a benefit of using a Balanced Scorecard?

It connects strategic objectives across various perspectives. Signup and view all the answers

Study Notes

Transworld Auto Parts (A)

Transworld Auto Parts (TAP) is a $6.6 billion subsidiary of a U.S. diversified manufacturing company.
TAP manufactures original and aftermarket parts for automobiles.
The company experienced significant financial difficulties in 2008 and 2009 due to the auto industry downturn.
Major customers are struggling, major car manufacturers like Chrysler and General Motors are on the brink of insolvency, and even robust car makers are selling fewer cars.
Ellen Bright, CEO of TAP, was tasked with reviving the company.
TAP had four customer divisions (luxury, economy, mid-priced, and truck) serving three geographic markets (North America, Europe, and Asia).
The luxury division was financially successful, while the economy division was underperforming.
A recent report highlighted challenges for auto part makers: high costs, price and volume pressure, and erratic production schedules.
The report also saw sales volume declining and negative outlook in the U.S. auto market.
TAP needed to focus on the most profitable segments, particularly luxury and economy cars.
A decision was made to close product lines and customer divisions that are struggling to focus fully on the luxury and economy car segments.
Significant investments in the plants of the U.S., leaving the majority of the facilities in Europe and Asia intact, resulting from plant shutdowns.
The company aims to increase its share in Europe and Asia, particularly in profitable market segments.
TAP's parent company has a target to achieve 8% return on capital employed (ROCE) by 2011, which is a significant increase from its current negative ROCE. Failure to meet this target might result in divestiture or closure.

Executive Staff Meeting: Defining a Strategy

Bright proposed a dramatic restructuring, to focus on the luxury and economy segments.
Financial reports (Exhibits 2 & 3) confirmed that future success depended on effective positioning in the most profitable segments.
A report indicated that luxury and economy car makers are the most profitable segments and that TAP should significantly invest in Asia, due to the market's potential for steady growth.
TAP was losing money in the truck and mid-range segments, pulling down the profitable segment performance.
The decision to shut down these underperforming segments was made after consultations and approvals at the corporate level and with union leaders.

Competitive Analysis and Strategy

An outside market research firm highlighted a differentiation strategy, emphasizing high quality, durability, and low maintenance costs for economy vehicles, while pursuing innovation for the luxury segment.
The focus is on meeting the increasing demand in Asia and other emerging markets.
The parent company has set a challenging 8% return on capital employed (ROCE) goal for 2011.
TAP needs to improve cost of goods sold by reducing costs.
The company needs to improve asset utilization, minimize cost structure, and compete to be in the lowest cost quartile.
Strategic objectives, measures, and initiatives should be as action-oriented, clear, and concrete as possible. Measures will improve behavior. Initiatives will outline action plans to close the gap between current and desired performance.

Balanced Scorecard

The Balanced Scorecard (BSC) is a tool for whole organization alignment, identifying financial, customer, process, and learning and growth perspectives.
The company now implements a BSC to manage the company's strategy and achieve their financial and strategic goals from the combined financial and non-financial metrics from all departments.
The BSC incorporates leading indicators to guide immediate action and lagging indicators to monitor long-term progress.
Specific targets and action plans were developed for the luxury and economy divisions using the BSC framework.
Quarterly review meetings using the BSC are held to track performance.

Six Months Later

The luxury division exceeded its financial and customer targets, but the economy division did not meet financial targets, leading to a dilemma of which division performed better.
TAP emphasized competitiveness in low-cost, high-quality products, and innovation.

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Description

Explore the challenges and strategies of Transworld Auto Parts, a $6.6 billion subsidiary in the automotive parts industry. This quiz covers the company's financial struggles during the auto industry downturn and the role of CEO Ellen Bright in revitalizing the company across different customer divisions and geographic markets.