Balanced Scorecard
The balanced scorecard is an evaluation method that allows the manager to consider both financial factors and operational factors when evaluating performance. The balanced scorecard is made up of four perspectives: financial perspective, customer perspective, internal business perspective, and learning and growth perspective. The financial perspective includes financial related data such as risk assessment and cost benefit data. Customers on the other hand should be analyzed in terms of kinds of customers and kind of processes they are providing. The internal business perspective entails all the metrics that enables the managers understand how the business is running. Sustainability-related KPIs may be integrated into the balanced scorecard.
DAP Background analysis
Domestic Auto Parts is a US based auto parts manufacturing company which has for a long time manufactured and marketed after-market parts for automobile producers. DAP position with competitors has slipped from number 2 to number 4 according to a recent survey. Similarly, its ROCE is 9%. According to their set goal they aim at increasing their ROCE to about 12%. Competitors introduced higher value products to the market with the use of new technology and manufacturing products. DAP has not produced new product in 3 years. DAP protected sales margin during revenue decline by cutting cost. Gross and operating margin maintained at the expense of their plant investment, technology upgrades in manufacturing. Increased downtime due to equipment failure lead to producing to stock vs. to order thus created an increase in inventory costs.
Timeline, Key Issues and Requirement to keep operation
DAP’s current product line was solid, but it has not introduced new products to the market during the past three years. This is associated with the company limited plant investment that has also caused its projected revenues to decline and its industry position to slip. Additionally, the company has had very minimal technological upgrades with aspects related to innovation and training lacking enough focus. DAP is maintaining revenue margin by Reducing cost in the short run. Company is facing competition from counter parts due to: Minimal Technological upgrades, limited plant Investment, lack of network between wholesalers and distributors, marketing in efficiency to communicate and reach out to customers. Customers want superior products, technology-sophisticated products from DAP. Domestic Auto Parts currently holds 4th place of 9 competitors within its market. The return on capital employed is currently at 9% which has been ranked as the lowest among the leading competitors. Therefore, to maintain its operation in the US market there is needed to meet the 12% ROCE. The strategy to be employed is to increase revenue by 50% by better utilization of capital assets through proper utilization of up to 90%. The company also aims at getting the lowest cost quartile from operating on above average cost. There is also a need to create a movement from 65-90% while minimizing their cost structure. Additionally, DAP needs to understand what their customers’ want which can be realized through continuous communications. This entails producing superior products and techno-sophisticated auto parts.
Desired Outcomes, Strategy Map and Balance Score Card Measures
The main goal of the shareholders of Domestic Auto Parts, is to increase the return on capital employed (ROCE) to a respectable 12%, which reflects a 3% increase over the current standing (Atkinson et al., 2021). Revenue growth can be accomplished through increased sales from existing customers and expansion to new customers and creation of complementing products to customers to increase purchasing. Through customer satisfaction survey, increase percentage of repeat customers, conduct a review of the current customer base to measures, attract and retain profitable customers and delivering products on time. The processes that are more important for creating value for DAP’s shareholders and customers are: Improved manufacturing efficiency and building relationships with the suppliers where trust is the main component.
Desired Outcomes
Some of the key desired outcomes for this strategic implementation include increasing the return on capital employed (ROCE) to a respectable 12%, which reflects a 3% increase over the current standing which was the main goal of the balanced scorecard. Additionally, the strategy aims at meeting customers and suppliers needs through ensuring on-time arrival of orders will in result in an improvement rating Customer feedback Process Streamline Distribution Process and delivering customer’s needs on time. The strategy also aims at realizing improved manufacturing efficiency, building relationships with the suppliers where trust is the main component and ensuring equipment upgrades on machines that are more than 5 years old. The last outcome is to equip workers with computer Engineering Skills which would cover knowledge of equipment, usage, maintenance and repairs.
SWOT Analysis and Recommendations
SWOT analysis of Domestic Auto Parts can be based to make important strategic decisions and accomplish the business objectives. Strengths of Domestic Auto Parts are the first element of the SWOT matrix. They include: The wide product portfolio can allow the organization to expand the customer base and offset the losses from one product category with benefits obtained from the other. Its weaknesses include losing efficiency due to poor inventory management practices. The shortage or excessive inventory can either result into the cash shortage or insufficient current assets negatively affect the liquidity position and harm the overall business performance. Opportunities include invention of new products and premium fee. Threats of Domestic Auto Parts come into the fourth column of the SWOT matrix and entail closure and no new products.
Recommendations
DAP should initiate premium fee on their products to facilitate a more competitive edge in the market. Similarly, there is a need to decrease the downtime activity by ensuring that all the fixed costs associated with high-capacity automated machines which are under-utilized can be incorporated to take on additional functions, thereby increasing the earning power of the unit. There is also a need for DAP to create value for customers by creating customer satisfaction survey, increase percentage of repeat customers, conduct a review of the current customer base to measures, attract and retain profitable customers, deliver products on time and understand needs and translate that by continuous dialogue, this will result in repeat customers.