High Performance Tires
High Performance Tire is a retail tire chain and was formed by Harry and Edna Wallace in 1952. Around the 1960’s they passed it down to their daughter Jane Wallace. And then in 2001, Jane transferred her responsibilities to her son William for day-to-day management. However, William had always had a privileged and carefree life and it seemed that even with his MBA in both marketing and finance, he would not be able to run the company successfully. His actions led to Jane having to step in by early 2004. During William’s period of management, he had three major concepts that he wanted to implement. The first two things were part of his strategy of a major expansion plan into effect. The first was to expand the number of retail tire outlets in smaller communities. The second was to diversify the products provided at each of the outlets to include higher margin automotive maintenance services including fluid changes, tune-ups, alignments, batteries, and brakes. The third concept that he implemented was to cut costs in the company. Although not bad concepts, each one ultimately led to problems within the company. William was not able to implement them effectively and ultimately was a bad strategy. His strategy had many issues regarding their lack of awareness in regards to their customers and in regards to his employees. The article SWOT Analysis by James Manktelow, explains that it can also be useful to perform a SWOT analysis on your competitor. A SWOT analysis consists of evaluating a company’s strengths, weaknesses, opportunities, and threats. William Wallace should have done this to find out what aspects of his competitors create lasting customers and quality service. 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. Also, they had a number of accidents that High Tire Performance was at fault for and they wanted to fight the case in the court. This led to a bad image due to their lack of attention in their public relations. In regards to his employees, William Wallace did not factor in that if you cut costs in your employees pay then the quality will suffer. They could have been seen using PMI which stands for plus, minus, and implications. This is similar to a “pros and cons”
list, except that it gives value to your analysis. William would have had to really weigh whether cutting costs was worth cutting quality. Some problems that arose were that many of their experienced staff who had been there for years left because he had cut their wages and benefits. The experienced staff was replaced by more unexperienced staff with less customer service skills. William also implemented commissioned based sales, which actually scared customers away. When a company is service related, it is very important to focus on customer service. In William’s case he believed that cutting costs would produce more revenue. However, as seen in the article this is not the case. For example, High Performance Tires began buying more no-name tires from overseas suppliers. Initially, it lowered costs for the customers and generated a higher gross profit margin for the retailer, but the quality was not comparable. The tires they started using actually causes sales and margins to fall because the tires had a shorter tread life and blowouts.
Through his process of seeking low cost venues, William also converted High Performance Tires to a new accounting system to help fund the expansions. This was “in order to better automate the general accounting, billing, inventory, and payroll functions of the company” .The vendor that High Performance Tires chose was difficult for the clerical staff to work with. The new vendor had insufficient training and poor software and eventually went bankrupt. This resulted in a lot of overtime because they needed “to clear the backlog of clerical work, while customers, staff and suppliers were becoming alienated over delays and errors” .
In order to reverse the effects that William Wallace had upon the company through strategic planning. In Strategic Planning and Forecasting Fundamentals, written by Scott Armstrong, he details how to do this efficiently. Two guidelines appear to be of particular importance for the development of a strategy. The strategy should be comprehensive and it should provide slack. Commitment to objectives is expected to be higher if those who are affected by the strategic decisions participate in the objective-setting process. In other words, self-set objectives are more likely to be attained than objectives set by others. Planning is also
expected to be very useful for organizations facing major strategic decisions as these generally involve high task complexity, change, uncertainty, and inefficient markets.
The first plan of action would be to implement better management. Although Jane would like to keep the business within the family, it is obvious this is not going to happen with his bad management style. Jane needs to hire new management that will be able to run the company efficiently. What is Strategy, written by Michael E. Porter, explains the importance of good leadership. He explains that to have a good strategy the organization must have good leadership in order to make the difficult choices. Porter insists that the challenge of developing or reestablishing a clear strategy is often primarily an organizational one and depends on leadership. Strong leaders willing to make choices are essential in an organization where there are so many forces at work against making choices and tradeoffs. It is imperative to have a clear intellectual framework to guide strategy as a counterweight to those forces. With so many changes about to occur within the company, a strong leader will be able to steer the company in the right direction.
Once new management is established, the company should create new objectives. The first objective should be to reestablish a company dedication to excellent customer service. The second objective should be to use a quality accounting service. The last objective should be to establish a new plan for employees that creates a better working environment and makes it enjoyable to work for High Performance Tires. Once these objectives have been completed, High Performance Tires should begin to see a change in the right direction.