Page 321 - Introduction to Business

CHAPTER 8 Marketing Basics 295

Technology and Business

Michelin Uses High Tech in Its Quest to Become the Leading
Tire Manufacturer

Tire manufacturers Michelin, there is a flat; a monitor indicates that there is a
Bridgestone, and Goodyear together problem and asks the driver to reduce speed to
account for about 20 percent of the world’s tire 50 miles per hour. Upscale models like the Audi A8
market. Michelin, however, wants to become the sedan and Cadillac’s roadster will include the PAX on
leader, “with a comfortable lead over rivals.” A high- new models.
tech strategy is at the heart of the company’s plans
Source: Christine Tierney, “Michelin Rolls,” Business Week,
for achieving this objective. The firm hopes to September 30, 2002, pp. 53–62.
develop various new, advanced tires that will
enable it to charge premium prices. One such
high-tech tire—the PAX “run flat” tire—was Questions
introduced at the Paris auto show in the fall of 2000. 1. Do you believe Michelin’s high-tech strategy will
The PAX can go for 125 miles after it has been be successful?
punctured. The tire’s gel-filled interior ring gives such 2. Should Michelin’s high-tech tires be developed
a smooth ride that drivers are not even aware that only for upscale cars?

• The new CEO of toymaker Mattel, Robert A. Eckert, wants to improve the firm’s
performance by emphasizing such tried-and-true products as Barbie dolls, Hot
Wheels cars, and Fisher-Price toys. 34
The marketing group of a firm needs to decide on strategies to achieve its objec-
tives. For example, a better system of routing for the sales force might be introduced
in order to reduce its travel costs as a way to obtain a 20 percent reduction in the
cost-per-sales call. In order to increase the number of customers, a new advertising
campaign might be developed. A lower price might be charged in order to increase
revenues. There are some guidelines that many companies follow in developing
their various strategies. One is the need to obtain a sustainable competitive sustainable competitive advantage
advantage (SCA). An SCA is a strategy that gives a firm a significant edge over com- (SCA) A strategy that gives a firm a
significant edge over competition and
petition that can be maintained over an extended length of time. It might be a bet-
can be maintained over an extended
ter product, a more efficient distribution system, a better trained sales force, and length of time
so on. Whatever it is, it must resonate with the firm’s customers. An example of an
unsuccessful attempt to obtain an SCA is Saks Fifth Avenue, which began empha-
sizing low-riding jeans that were targeted to women in their twenties. This strategy
alienated older shoppers, causing a former Saks executive to remark, “Saks Fifth
Avenue has ‘been forced to look for another advantage for the customer and I don’t
think they’ve found it yet.’” 35
Competing directly with a successful, large firm does not usually work, unless
you can provide the market with a significant benefit that the entrenched company
can’t. Firms are becoming increasingly wary about trying to be all things to all cus-
tomers. As a result, they are emphasizing a return to their core competency, that is, core competency The aspects of a
the aspects of their operations that they are best at doing. Patrick Richard, chair- company’s operations that it is best at
doing
person and CEO of Pernod Ricard, the U.S. subsidiary of the world’s largest spirits
and wine company, said, “Everyone in the world now understands the strength of
36
staying within a core competency. Ours, obviously, is wine and spirits.” Often, a
reemphasis on a core competency means getting rid of noncore products. For
example, it has been recommended that Sony needs to get out of such noncom-
petitive products as computer chips and peripherals. 37

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