Management Acoouting Summary

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Tutorial notes:

- Two divisions: Luxury (strong financial results) and Economy (Achieving non-financial goals)

- Page 2: Four Divisions: How are they related?

- Got rid of Mid-priced and Truck because of negative profits

- Geographical locations: Growing economy in Asia

- Page 3: Differentiate economy > high quality with lowest lifetime cost and luxury division strategy > innovative and quality parts

- Page 4

- 5:

[pic 1]

Prepare answers to the following questions:

- Draw a diagram of the organization structure of Transworld Auto Parts?

[pic 2]

- What is Transworld’s overall objectives and corporate strategy?

- ROI – 8%

- Expand in Asia

- Positive cash flow* (because they were struggling)

- Multi business – portfolio -

Industry analysts (Page 2)

Transworld’s overall objectives and corporate strategy is to go for the segments that give them potential for the most profit like Luxury and Economy car makers division primarily focussed in Asia because it is a growing market.

Balance scorecard is the main tool used by Transworld auto parts to design overall objectives and corporate strategy. Ellen uses this system because she believes that the Balance Scorecard could help the executives team describe the objectives that must be accomplished. She needs the Balance scorecard to review the performance of each division. She needs to compare the divisions’ results and BSC targets. Moreover, she also has to provide feedback in the quarterly meeting about the implementing progress.

Objectives are segmented into four departments: Financial, Customer, Process and learning and growth.

- Financial objectives are to increase revenues, gross margin, ROCE and cash flow.

- Customer objectives are to initiate customer R&D partnerships, manage innovation and improve customer satisfaction.

- Process objectives to reduce raw materials cost and maintain quality leadership.

- Learning and growth to increase employee engagement.

- How does Transworld Auto Parts plan to compete in its chosen market(s), that is:

- What is the intended competitive strategy of the Economy division?

Page 3

Differentiating themselves in the economy division by producing high quality car parts that will be known for durability and low maintenance cost with lowest lifetime price.

- Competitive strategy: Cost leader vs differentiator vs Niche

- Differentiator (Here)

- What is the intended competitive strategy of the Luxury division?

Page 3

The strategy will be to produce the most innovative, quality parts on the market.

Bringing something new to the market with improved products

- Competitive strategy: Cost leader vs differentiator vs Niche

- Differentiator (Here because they want to make innovative products)

- How could we define ‘performance’ for: > OUTCOME

- Transworld overall?

- Cash flow

- Profitability

The overall performance can be measured in contribution made by two segments; Luxury and Economy. Luxury division by meeting its financial targets added to company’s overall financial health and allowed Transworld auto parts to report better results than previous years. On the other hand, economy division contributed to Transworld’s long term financial performance by taking advantage of anticipated growth in the economy segment.

- High return on assets

- The Economy division?

- Link performance to strategy

- Eg no. of customer complaints or products returned

- Meaning of performance for economy division can be measured in terms of success and in learning and process dimensions, though the division was not able to attain its financial targets.

- Get better deal from suppliers in term of price, capture a large market share

- The Luxury division?

- Meaning of performance for luxury division can be measured in terms of surpassing cash flow and profit targets though the quality indicators dropped slightly but it continued to rate highly on innovation.

- Reputation and customer satisfaction

- What management accounting information and systems appear to be used currently in Transworld Auto parts?

Meaning of management accounting: Techniques for managers to increase customer and

Shareholder value.

- BSC: The strategy map is a visual representation of their strategy and the cause-and-effect relationships that will enable us to reach their goals.

- Will help TAP in achieving long-run goals that will position TAP for success years from now, like developing partnerships with our customers

- Use management accounting information to shut or run factories, expansion (capital investment decisions)

- Why does the company need this information? Identify and explain 3 different benefits of management accounting information in Transworld.

The company need this information