Domestic Auto Parts1
The motor vehicle industry has in the recent past experienced tremendous growth in terms of technology, and new inventions. The growth in technology has on the other hand brought a lot of competition in the motor vehicle industry, firms have been forced to invent new products or risk going out of business due to lack of clients to buy their products. One such firm in the motor vehicle industry is the Domestic Auto Parts.
Domestic Auto Parts Background
Domestic Auto Parts, with a subsidiary of about $1 Billionthe Company has been manufacturing and manufacturing original auto parts for a number of automobile producers. For the period DAP has been in business it has been one of the top producers of original spare parts. The management however made some erroneous decisions that brought the firm to the current situation where the firm is experiencing reduction in orders, and clients. The firm reduced the amount of money allocated to upgrading of the firms technology, as a result the firm has not been able to launch any new product in the market. The aftermath of the lack of new products was the reduction of the clients and new orders. The firm reduced the amount of money allocated to maintenance of the production unit which resulted in numerous mechanical breakdowns, which reduced the level of production as the firm was not operating fully.
Major Challenges Facing DAP
About two years ago the firm was ranked number two among the other nine firms or competitors in the business, but currently the firm has gone down to position four. The reason for the decline was as a result of the major clients reducing on their orders and instead placing orders on new products from other firms that are manufacturing auto parts.
Some of the other competitors have introduced new line of products; firm such as Western Auto has turned on technology to help in manufacturing of superior products. The repercussion for such a move is the decline in sales of the Domestic Auto Parts Company. Another major issue that is facing the company is that the technique that was put in place so as to keep the firm afloat. After realizing that the firm was not doing well, the management resulted in initiating some cost cutting measures.
The firm reduced the amount of money that was to be invested in upgrading of technology and also the manufacturing plants. The result of the move by the management was disastrous, the firm ended up having problems maintaining the manufacturing plants which resulted in unwarranted closure of the production unit. The lack of money to upgrade the technology resulted in the firm producing goods for customer who needed to restock, but could not receive new orders from new clients.The lack of new orders led to the rise in inventory costs. The cost cutting measures were not appropriate as they were only helpful for a short period but would have negative effects that would be felt for a very long time.
So as to make the firm go back to the position that the firm was initially, the parent company of the firm decided to hire anew CEO by the name of Ellen Bright.Her mission was clearly set out for her, she was given a directive that she was to turn the firm’s subsidiary within two years or take the next option which is closing down the business. The minimum requirement set by the major shareholders was for the CEO to achieve a minimum of 12% return.
The goals set for the new CEO can only be achieved by the use of the appropriate strategy: the first strategy ensuring growth, getting more intimate with the customers, and lastly operating exceptionally. The three vital issues have to be attended to all at the same time to ensure success. The strategies proposed are good but more emphasis should be put in ensuring that the firm is at par with the other firms, cutting down on costs does not give the firm an edge over the others. The firm should invest more on upgrading their technology so that the products can be of high standard.
Suggested BSC (Balance Score Card)
The strategies can only succeed if all sectors are balanced such that emphasis is not done on one issue and some other issues ignored. The CEO and the executive should emphasize on the need to balance cost cutting and the need for investments, the strategy will ensure that the firm is able to run on minimum costs but at the same time upgrade its facilities so as to compete with other firms that have already upgraded.
The upgrade will help in reducing costs as production will be consistent unlike at the moment when numerous breakdowns have caused shut downs. The last aspect to be looked into is making sure preventive maintenance is done. The main aim for a firm to produce goods is so that customers can buy, and when the products are not being bought the company will be running at a loss. On the other hand a firm that is always having breakdowns will make it redundant as it will not be reliable.
Why Suggested Strategy Will Help DAP Achieve Its Goals
The strategy that have been suggested alongside with the proposed BSC will be very vital in ensuring that DAP is able to achieve its growth. The strategy proposed will ensure that all the vital sectors of the firm is taken care of as they will all be attended to at the same time thus ensuring that none is left lagging behind. Production of new products without gaining back clients confidence may not succeed on the other hand trying to gain the confidence of the clients without appealing products cannot also be successful. The suggested BSC will see to it that the firm will not run at a loss as a result of the upgrade of the various sectors of the firm. The firm will be able to run on a limited budget but will experience growth in all sectors with minimum spending.
People should learn from mistakes, thus it is very vital that the firm learns from the previous mistakes so as to be able to prevent any recurrence in the future. In business having an edge over the other competitors is the key to success.Introducing of new and more superior products ensures that customers will always come back as they will always expect superior products. The suggested strategies if put in place will see to it that DAP gains back its lost glory as one of the top producers of motor vehicle spare parts.
Kaplan, R. S., & Norton, D. P. (2008). The execution premium: linking strategy to operations for competitive advantage. New York: Harvard Business Press.