High Performance Tire

High Performance Tire

Amber White

High Performance Tire

BUS 485

11/15/2014

Executive Summary

High performance Tire was formed in 1952 by Edna and Harry Wallace. It was passed onto their daughter Jane in the 1960’s. In 2001 Jane passed responsibility to run the business to her so William. William had a double MBA in marketing and finance but was unsuccessful at managing operations. He implemented his own business strategy which led to a gradual decrease in net profits, a decline in their creditworthiness, and a decline in their reputation in the community. This strategy consisted of 1) a major expansion of the number of retail tire outlets in smaller communities 2) diversify the products and services provided to include higher margin automotive maintenance services including fluid changes, tune-ups, alignments, batteries, and brakes. In 2004 Jane had to intervene. She hired Jenny Chenn CA, CF, CMC of the accounting firm of Dexter, Matthews, and Jones to assist her with analyzing the condition of the operation, how it got into its current state, and to make recommendations on how to improve operations. This is a critical step to retain staffing, to restore its reputation with its lenders, with the community, and to implement a new strategic plan for a successful future.

Identification

Although the strategy William chose to implement was not bad conceptually, it lacked the overall focus on key issues that would lead to the success of the company. The main issues can be defined by the following key points:

1.) Customer service was not a priority. Quality was compromised. Cost were cut.

2. William implemented an expansion of location and services without performing a customer analysis or a competitor analysis.

3.) There was a lack of regard for the employees. Compensation for staff was reduced and the qualification and competence of staff declined.

Analysis 

The article SWOT Analysis by James Manktelow discusses an important step that can also be useful to get High Performance Tire back into good standing. A SWOT analysis consists of evaluating a company’s strengths, weaknesses, opportunities, and threats. William Wallace could have done this when he took over the company prior to implementing is strategy in order to find out what aspects would create lasting customers and quality service. Although part of William’s strategy was to diversify the product offering and services, the customers found problems with the inconvenience of having to make an appointment and also did not like that they had to wait for a long time for their car to be finished. This coupled with the fact that they could visit a competitor with no appointment, receive quality tires or service in twenty minutes or less without even needing to leave their vehicles caused High Performance Tire to lose their competitive advantage.  A SWOT analysis can also be performed on the competitors.

William wanted to cut costs so he decided to compromise quality by purchasing no name tires thinking that he would turn over a greater profit however he lowered prices temporarily but ended up losing profits over time. This was largely due to the fact that the quality merchandise that was normally sold at HPT was replaced with a lower quality product that caused customers to lose faith in HPT when they experienced a much lower tread life, drastic wear and tear, and even damage to their vehicles. There were even law suits to recover their losses which cost HPT even more in court fees and costly repairs to fix damages. They also alienated their customers because of their tarnished reputation.

Another way William chose to cut costs was to pay his mechanics commission only. Prior to his arrival HPT had experienced mechanics who performed quality work and brought a high level of customer service and satisfaction to the organization. Most experienced mechanics are going to be older, more mature, with families to support and need to rely on a living wage. They inevitable leave organizations that pay commission only and look for a steady wage. Younger, less experienced mechanics step into these positions and lack both the skill and the customer service to maintain the reputation that HPT had established in the community. The competence of the mechanics was questionable and even made the news.

Along with the shift in the labor department, the clerical staff had to adjust to the new automated accounting system that William purchased for HPT in 2002. The purpose was to cut positions and spend more money on the expansion. An automated system can be a very rewarding, time saving, and positive step for an organization. However, the clerical staff at HPT experienced that the system was challenging, the software was poorly installed, and the training was less than adequate. They ended up with a backlog and had to put in many hours of overtime to keep up. The company they purchased the system from eventually went bankrupt.