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High Performance Tire Case Solution & Answer

High Performance Tire Case Solution

Introduction

High Performance Tire (HPT) Ltd. is a Canadian based tire retail chain, which was established by Harry and Edna Wallace in 1952. After the death of Harry and Edna Wallace in 1960s; the business was handed over to their daughter Jane Wallace, who ran the business effectively till the beginning of 2001. Jane Wallace handed over the business to her son William to continue the Family’s business legacy. HPT supplies tires and automotive maintenance services to various regions in Canada, through a number of outlets.

Problem Statement

Jenny Chen, CA, CFA, CMC has been employed by Jane Wallace of High Performance Tire. Jane, who acquired the firm from her folks, had effectively run the organization for a long time. At the point when she passed on the business to her son William in 2001; he started to roll out a few improvements to extend the quantity of the sources, expanding the item offering and cutting the expenses incurred by the organization. In 2004, the organization was experiencing issues and Jane chose to be more engaged with the privately-run company by and by. Jenny’s undertaking is to survey and break down the organizational activities as well as to make suggestions

Situational Analysis

Key Issues

Despite of being graduated in double MBA from a renowned university; William’s aptitude with his carefree attitude seems to be doubtful when it comes to running such a large business. Being a fresher with a little knowledge of industrial norms; Williams is more focused at expansion and cost cutting measures, without analyzing the future effects or consequences of these decisions. William is more concerned about the short term benefits as compared to the long term benefits. He follows an aggressive approach in what he wants to do for the business. Radical decision in such a short time period, shows his aggressive attitude towards the expansion and cost cutting measures.

No doubt, cost cutting is a crucial tool for businesses to achieve an operational efficiency and an increase in margins, but sometimes excessive cost cutting measures leads to sacrificed quality, which ultimately hurts the consumer base. Along with it, cost cutting measures in terms of rescuing wages and hiring unprofessional employees tend to lead towards operational inefficiency and higher employee turnovers.

Another pitfall in Williams’s attitude is lavishness. William focuses more on drawings for his personal home building and to buy a luxury car instead of paying dividends. This could hurt the investors and could create funding problems for the firm, in future.

Two Points Plan

William has planned a two point based plan for the business, including: huge expansion to small communities and product diversification through an inclusion of automotive maintenance services, such as: fluid changes, tune-ups etc. Although, there are numbers of successful suppliers in Canada with this diversification, but the diversification didn’t go well for HPT, with declining sales and customer dissatisfaction. Major reasons include the unavailability of proper mechanism for the provision of these services. Like, usually the fluid changing service takes a maximum of 2 minutes,where the drivers are not required to step out of their cars. But at HTP, it took a long time to perform these services and the customers were asked to wait in the waiting area. This led to massive customer dissatisfaction and a failure of diversification.

Alongside the unavailability of Proper setup; the unprofessional mechanics with their numerous public mistakes had hurt the reputation of the firm in terms of services.

Dissatisfied customers along with competitive pressures in terms of declining prices and improving the customers’ experience made the situation worse.

Besides the automotive maintenance services;the sales of HPT were also declined due to purchasing unbranded tires from overseas suppliers at lower prices, to increase the margins. Although, the strategy worked well in the beginning and helped in increasing the overall margins in the beginning, but soon the low quality tires started to blowout, leading towards a number of dissatisfied customers……………………..

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