PPT Required
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OrganizationalEconomics-ExampleFinalCasePowerPoint2.pptxOrganizational economics – case study
New England College
Continental
German Automotive Company.
Founded in 1871.
Major Divisions -
Chassis and Safety
Power Train
Interior
Tires
ContiTech
Competitors –
Micheline
Bridgestone
Goodyear
Continental is a German automotive company. It was founded in 1871. Initially it was a rubber industry. In 1898, it started producing automotive tires. It was a big success for the company. At one point, they became the first in the world to produce grooved tires. The headquarters is located in Hanover Germany. The major divisions of Continental are:
Chassis and Safety
Powertrain
Interior
Tires
ContiTech
Since Continental is a huge company, I have chosen only tire division for my paper. Continental manufactures tires for bicycles, motorbikes, passenger vehicles and commercial vehicles. It is the fourth largest manufactures of tires in the world. The competitors of Continental are:
Micheline
Bridgestone
Goodyear
Tire industry market share is oligopoly. These four firms lead the industry. There are other smaller firms in the local market. But when we consider worldwide market share, these fours companies occupy the major shares. Continental is expanding its business to occupy third position and push Goodyear behind it. It is planning to open new manufacturing plants in Thailand and also expand the current manufacturing plants in various locations. In USA, they have two plants. One is Mount Vernon, IL and other one is Sumpter, SC. New plant is going to be opened soon in Mississippi.
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Topics to discuss
How continental is performing based on these analysis.
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Demand Analysis
Production Analysis
Pricing Analysis
Demand analysis
Every year, Continental gathers tires salesman and give an opportunity to them to test the tires and drive the testing vehicles with Continental Tires.
According to the thumb rule, getting a new customer is five times costlier than selling more to the regular customers.
Personal experience, I asked 15 – 20 customers who bought tires for their cars. In that, 13 of them told me that they will get whatever the auto-shop people suggest them, among remaining 7, 4 told me that they find Continental Tires are costlier and will not prefer them.
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Targeting
Tire Salesman
10 hours of testing and driving
Switching Costs
Auto-shop Owners
Gold Retailer Program
Positioning
Consumers
Failed to impress users.
Price elasticity of demand
Tire industry –
Short run – 0.9
Long run – 1.2
Need to talk about factors affecting price elasticity of demand and also about unitary elastic.
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Competitors
Consumer’s Budget
Time Period Adjustment
Production analysis
Explain how tires are manufactured and what are the things involve in producing the finished products.
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Variable Inputs
Raw materials
Number of shifts
Fixed Inputs
Number of machines
Head Counts
Optimal use of the variable input
Marginal Revenue Product and Marginal Factor Cost Calculation.
MRP>MFC
Fixed input Variable input
New expansions – Mount Vernon, USA
New Plants – Mississippi, USA and Thailand
Head counts, land, machines changed.
Talk about all the fixed inputs that are transformed to variable inputs in Continental. And also add about their expansion story.
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Pricing analysis
PRICE-BASED COSTING IS BETTER THAN COST-BASED PRICING
Talk how Continental failed in pricing analysis. Add about the techniques that should be done to improve their performance in this section.
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Techniques
Systematic - Analytical
Proactive
Value-Based
conclusion
Analyzed Continental Tire performance based on some topics in the text book.
Demand Analysis
Production Analysis
Pricing Analysis
x
CLIMBING TOWARDS THE THIRD SPOT IN TIRE MARKET
QUESTIONS
REFERENCES
Anderson. P.L, McLellan. R.D (November 1997). Price Elasticity of Demand. Retrieved from https://scholar.harvard.edu/files/alada/files/price_elasticity_of_demand_handout.pdf
Boston Globe (December 2012). Buying best tires for your vehicle pays off. Retrieved from https://www.bostonglobe.com/business/2012/12/30/consumer-reports-michelin-and-continental-tires-top-ratings/DZKLJZqrRFNySIyZNiqIbM/story.html
Continental Tire 2018 GOLD Retailer Program Brochure. Retrieved from https://advantageonetire.com/wp-content/uploads/2018/02/2018-Continental-GOLD-Brochure.pdf
McGuigan, J. R., Moyer, R. C., & deB. Harris, F. H. (2017). Managerial Economics Applications, Strategy, and Tactics. Boston: Cengage Learning.
Smart Advantage (August 2011). Retrieved from https://smartadvantage.com/blog/getting-to-know-your-relevant-target-market/
