Page 38 - Business Principles and Management

C HAPTER 1 A SSESSMENT

CASE IN POINT

CASE 1-1: Staying Competitive
The Kirk family came to this country early in the 20th century and made
a bicycle that soon developed a reputation for its quality. Through much
of the century, Kirk was the “Cadillac” of American bicycles. In the
1980s, it ran circles around numerous competitors; one in four bikes was
a Kirk. Throughout this time, three generations of the Kirk family man-
aged the company.
The success of Kirk’s line of bicycles gave the company great confi-
dence—perhaps too much confidence. During the last three years sales
dropped, slipping from 1 million bikes sold yearly to 800,000 the next
year and 650,000 last year. Three major competitors with well-designed
but much lower-priced bikes who sold through discount stores and
large sporting goods stores were stealing customers. When the Kirks
saw competitors offering new and innovative bicycle styles, they
ridiculed them as fads that only added to the companies’ costs.
To compensate for the lower sales, Kirk began to cut costs. Some long-
time employees were let go and lower-quality parts were bought from for-
eign firms. The company tried to keep its higher prices even as customers
complained, believing that people who really knew bikes would want to
buy Kirks as they always had done. Kirk managers made no attempt to
talk to biking customers. Neither did the managers listen to the hundreds
of dealers who sold Kirk bicycles in specialty shops. Loyal dealers started
adding competitors’ products to survive. Bike deliveries were running late.
The changes made to cut costs did not correct the situation. For the last
three years, Kirk operated at a loss. Something drastic had to occur.
Recently, Kirk was purchased by another company. Headquarters for
the company were set up in Colorado, where biking is popular. Kirk’s new
managers talked to customers and dealers. As a result, new products rolled
off the assembly line that satisfied loyal dealers and older bikers who re-
called the excellent quality of the Kirk two-wheelers. But can the new
Kirk adequately rebuild itself to compete in a tough market? Quality Kirk
bikes sold only at specialty shops cost $550 to $2,500, which is far more
than most bikes purchased at discount stores cost. Plenty of persuading will
be needed to convert price-conscious casual bikers or more serious riders
who put on 25 to 100 miles a week.
Signs of success appear on the horizon. A small profit is expected this
year for the struggling firm. Whether the new managers can re-establish
Kirk’s earlier lead in the marketplace is yet to be determined.

THINK CRITICALLY
1. What was the main reason the old Kirk company failed? Explain
your answer.
2. What should the new managers do to help improve Kirk’s effective-
ness?
3. What might the company do to help improve its efficiency?
4. Form a group with two other students to discuss and make recommen-
dations for how the Kirk company might regain its former success.

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