Christine L.

Tarlac
3ACT1

The company Transworld Auto Parts (TAP), a subsidiary of a US company

diversified manufacturing, is an automotive original equipment manufacturer (OEM) that is
facing great financial difficulties caused by a slowdown in the automotive industry. The CEO
of TAP Ellen Bright, embarks radical changes in the company, particularly in terms of
restructuring and redefinition of the strategy that will be decisive for the survival of TAP.

After several discussions it was decided that TAP, which produces two types of
product lines, electronics and interior, will now focus more on two of these divisions ;
economic division and luxury division.

Furthermore, TAP is now focused on the Asia market especially for the economy
division and in the European market for the luxury division. These two divisions must review
their respective strategy, their value proposition in relation to their customers and their
positioning in the automotive industry.

By answering the following five questions, we will try to better understand the work
in its two divisions through the analysis of strategy map and balanced scorecard to make
recommendations in the management of organizational performance of TAP .

1. Identify and describe business strategies division "economy" and "luxury" of TAP.
You must describe how each division adds value to its customers and differentiates
itself from its competitors.
Having previously established that the most profitable division of TAP are the economic
division and luxury division, it is interesting to know the new business strategy of these two
divisions and see how each proposes to add value to its customers and differentiates from its
competitors.

The division "economy" has decided to adopt a differentiation strategy in relation to its
competitors. Indeed, while these are all trying to have the lowest initial cost but do not
guarantee the quality and longevity TAP "economy" focuses on the sustainability and
quality by offering superior rooms with a term living much longer and does not require
exorbitant maintenance expenses.

The challenge for the new positioning of the division "economy" is to affirm this
repositioning for automobile manufacturers to acquire a certain reputation and a reliable
supplier of image that will propel TAP as one of the best manufacturer in Asia .

The "luxury" division , has also chosen to differentiate by focusing on innovation and
technology. While other vendors in this segment put all the frontline customer relationship
;TAP luxury division is trying to position itself as a pioneer of innovation in auto parts
luxury.

The challenge for TAP "luxury" is therefore to redouble efforts in terms of innovation,
creation and product design in order to be at the forefront of the technology compared to
existing competitors and therefore attract automotive equipment manufacturers of luxury
original ( "luxury OEMs").
Christine L. Tarlac
3ACT1

2. What factors in each division must excel lequels (key success factors) to properly
execute its strategy.
The strategy of each business division being explained, it is important to look now to the
key success factors of each division. However, it is above all necessary to clarify that TAP is
only a subsidiary, it depends on its parent company which imposes certain goals to achieve if
TAP wants to continue to exist. This is why we will begin by discussing the key success
factors incumbent on both divisions.

When a parent imposes requirements at one of its subsidiaries, the targets are mostly
financial. Indeed, here in the case of TAP, a target of 8% return on capital employed (ROCE)
and cash flow (cash flow) positive are imperatives to be achieved by 2011. To do this, some
key factors financial should be prioritized. First, the cost of goods sold should be reduced
gradually over a period of 3 years. Then, better use of assets (capital assets) must be made.
The ideal would be to use 90% of the asset base that would have been reduced and improved.
Finally, a reduction in the cost of the total structure appears to be crucial to compete with
competitors.

Also, to meet these requirements of the financial division, the two divisions of TAP
must be competitive in the underlying dimensions of it. It seems that efforts must be made to:
enhance product innovation, acquire new customers in markets in Asia and Europe, and
finally to improve internal processes and employee skill. Key factors that relate to operating
performance would be better coordination and management of supplier relations-
manufacturers-distributors to be "on time and we spec" considerable investment in terms of
information technology, process improvement and equipment, which also pass through
efforts in the training of employees and close collaboration with customers (suppliers).

With respect to the economic division only, special attention is paid to simplification
and reduction of the whole division process (lean division) and the perfect mastery of just in
time that would allow the division "economy" to have a leading position in the Asian market
as a reliable provider that works with its most important customers.

Concerning the luxury division, it must insist on innovation, creation and

development of new designs for the European market which tends to be very volatile and
unpredictable. For this, a reduction in product development time is critical. The "luxury"
division should therefore focus its investments on technology: more modern software,
prototypes and equipment acquisition and training of engineers or technicians.

3. What a leader does a better job of executing the strategy of their division?
In view of the preliminary results obtained six months after the introduction of strategic
map (CS) and Balanced Scorecard (TBE), it seems that the "luxury" division has done a
better job of executing its strategy. Indeed, it appears that it has excelled in the financial
dimension with a cash flow and profits protruding initial expectations of the company. But
while innovation still has an important place in the division, the quality criteria appear to
have significantly reduced.

The "economy" division for its part, appears to be lagging behind and far from
achieving the financial targets set by the Ellen Bright and the parent company. However,
Christine L. Tarlac
3ACT1
substantial work has been accomplished since the division recorded very encouraging results
in the process and learning dimensions.

At first glance, so it seems fair to say that the division "luxury" filled with brilliance the
short-term objectives of the company while the "economy" division has sought to address the
long-term goals, more deep and qualitative, which would explain its poor financial results.
The "luxury" Division therefore chose to implement its strategy from above while the
"economy" division has fostered an implementation from the bottom, longer and more
expensive.

If one refers to what was said earlier about the business strategies of the two divisions
and the key factors needed to deploy these strategies, it seems that the luxury division was
more effective in a shorter time lapse , which gives it a certain legitimacy to convince and
reassure the leaders of a promising future. The "economy" division for its part in addressing
the lower dimensions of the company (and learning process), gives the impression of wanting
to lay the essential foundation for the future and thus have crucial advantages for the -ci but
not convincing in the short term from the perspective of financial sustainability.

If we refer to Table 6 below, the report M.Hermitage Howard and Cameron Scholey on
the use of CS to increase the performance, we can say that the "economy" division has
chosen a proposal dominant value halfway between the product in terms of leadership and
operational excellence which would explain why the most affected dimensions are the
internal dimension (process) and size formation and growth.

4. What is the motivation of TAP to implement a strategy map and balanced scorecard?
How a balanced scorecard would be beneficial for the company and its divisions?

The literature on organizational performance measures often touted the benefits of CS

and TBE. McMann and Orlando (1998) established a list of reasons leading to the creation of
a new system of performance measures. Applied to the case of TAP, it appears that these
circumstances are adopting new strategies for the divisions "luxury" and "economy", the
adoption of a new structure (reduction of 4 divisions 2 divisions) and finally the fact the
company is facing a sharp downturn in the automotive industry.

Motivation APR for the implementation of a strategic plan and a TBE is explained by
the words of Ellen Bright (CEO TAP). The latter says that these tools would help to describe
the objectives to be achieved for the company to realize its strategy. A visual map showing
the strategy and the causal links would be of great help to clarify the objectives of the
company. TBE, meanwhile, is interesting because it is "balanced". Indeed, this term indicates
that the TBE includes both financial measures but also non-financial measures which would
prevent the company from focusing too much on short-term vision or long-term.

The use of indicators and performance drivers for Ellen Bright is also a beneficial
source for the company and its divisions, because understanding that performance indicators
can not be improved only after the strategy was executed during some time, the presidents of
the two divisions will focus on the development of performance drivers who themselves have
immediate effects. In fact, it is reaching the "inducer targets" that leaders can achieve the
"indicative targets".
Christine L. Tarlac
3ACT1
Furthermore, as the use of TBE know the benefits in terms of transparency of the
strategy in all levels of the company which allows people at the bottom of the hierarchy to
understand what the strategy of the company and therefore to work at their level to it
(Application and implementation balanced Scorecard p. 20).

Finally, TBE can see the evolution of the strategy over time and can see the differences
between expected performance and the performance achieved (Application and
Implementation Balanced Scorecard p. 20).

4. Which of the two leaders developed better strategic map and a better balanced
scorecard? What changes would you propose the strategy and balanced scorecard of
the two divisions?
Question 3 and Question 5 are closely related. By quoting brought in Question 3, it
would seem that both divisions have performed well, but at different levels. The luxury
division has managed to surpass the financial targets imposed in a very short period of time
(6 months), while the economics division performed better in lower hierarchy dimensions
such as processes and learning objectives which are longer term. It is therefore difficult to
decide for one or the other division. For this, analyze CSs and TBES made by the two
divisions.

The division "Economy" adopted "one thing at a time" method and has opted for a
smaller number of indicators and performance drivers. It would be tempting to say that this
method is good in the sight of the financial performance achieved. However, putting parralèle
TBE and the CS with the proposal of dominant value chosen by the division "economy", we
can see that this value proposition is not clearly transcribed in CS or in TBE. It is therefore
difficult to understand by what cause and effect that division was able to achieve such
significant financial results. Similarly, the key success factors proposed by TAP leaders for
this division are very present in the TBE, with the exception of the innovation factor.

The "luxury" division atConversely, adopted the method of "better too much than not
enough." Indeed, the CS of this division recognizes a multitude of causal links that are crucial
levers for realizing its strategy. Although financial results is not convincing, the proposed
chosen dominant value seems to be more in line with the CS and TBE on which it is easy to
recognize the key success factors mentioned above for the division. These are clearly
readable on both tools, we understand why the financial results are not at the rendezvous.
Indeed, the investments made by the division "economy" in the process of sizes and growth
and learning are important and take longer to be felt in the financial results.

To summarize, the division "economy" has made better use of tools of organizational
performance measures by better recognizing the cause-effect relationships and the
performance drivers needed to conduct its strategy. It is important to remember that these
results are preliminary and that the achievement of financial targets must be done by 2011.
The two divisions therefore have 3 years to achieve ROCE of 8%. The division "economy"
which still slightly improved its ROCE (-15% to -12%), so still has the time to let the
performance drivers do their job to improve their financial results. However, for the division
"luxury" that does not really even aware of all the links of cause and effect,