Dunlop is a British tyre manufacturer. The company had a strong start at the early 20th century and was among the largest British companies. However, Dunlop would start to face challenges as other tire manufacturers from the United States and in Europe start to emerge and demonstrated competitive advantage over Dunlop. From then on, the company would start to struggle in the next decades. However, according to McGovern (2007), the reason for the company’ failure was “complex and inter-connected” (p. 899).
From this, the following are the identified reasons from McGovern (2007) as to why Dunlop failed: 1. Resistance to market competition – the government found that it would be important to protect its domestic market, and as a result, it implemented means to prevent free market competition. Dunlop found this threatening especially when the American tire manufacturers started to set its sights on the British market, especially as these American companies had a strong domestic force due to the local automotive market and industry that was booming.
The problem with this move by the government, and even by Dunlop which can be observed to have also wanted this, was that they saw the aspect of competition as a threat and not an opportunity. Evidently, as firms face competition, this would give way to the firms to become more innovative, thereby increasing its competitiveness and improving on its core competencies (Verhees & Meulenberg, 2004; Drejer, 2002). 2. Resistance to flexibility – Dunlop also demonstrated a “focus on orderly marketing and restricting competition became a core rigidity” (McGovern, 2007, p. 899).
In addition to resisting market competition, Dunlop’s management also wanted to operate along the lines of convention and resisted means that would make the company ready for global competition. Such organisational behaviour put the company in a position in which its behaviour was not managed well as the company was exposed to external factors encouraging change (Sims, 2002). These factors include the environmental factors such as the war and other economic elements, but in any case, the company’s lack of flexibility disabled Dunlop to address these forces effectively and constructively.
Hence, as these “environmental jolts” (McGovern, 2007) took place, Dunlop stuck with its “established routines, processes and strategies” (McGovern, 2007, p. 900). 3. Management’s lack strategic approach in its strategies – strategy plays a very significant role among firms; according to Lowson (2002), companies need to form and implement strategies in order to have a clear view of what the company must do for events and conditions that are anticipated and unanticipated.
Hence, when Dunlop faced a sharp reduction in production due to lower demand, Dunlop was ill-prepared especially as to how the company would address external and internal issues. 4. Lack of operational efficiency and innovation – as can be seen from Dunlop’s missed opportunity which Michelin took advantage of, Dunlop’s position was taken away by an imported car brand and struggled to catch up with the innovation and efficiency measures around it.
From the case study, it seems that Dunlop miscalculated innovation, and as a result, its investments in their innovation did not meet the expected market response. Innovation plays an important role in organisations especially as this would enable growth and competitiveness; at the same time, the company needs to have the right psychological perception and attitude in order to utilize its creativity and understand the importance of innovation (Kirton, 2003). Lessons from Dunlop
An important lesson from the Dunlop case that companies should be able to understand and accept is the importance of competition; the presence of the external environment which the company need to respond to such as changing market and economic conditions, and the continuous demand for environmental responsiveness and responsibility; and how value can be defined and redefined especially as how this plays in the company’s innovativeness and the perception of the market.
Many companies aim to take advantage of it available resources by means of imposing control as a means to ensure its edge. Such response can be attributed to the fact that some companies are not able to respond to the emergence of competition, especially as markets continue to expand significantly and globally. According to Rosenbaum (1998), it is usual for firms to aim for bigger market shares or at least, have a grasp of a significant amount of the market. Market dominance is interpreted as a sign of success, and it is regarded as a good means to improve economic welfare.
However, what happened in Dunlop is that since it initially had no competition and wanted to avoid competition, it had no reason to aim for market dominance in which the process in itself creates the means for economic welfare improvement. For several years, the translation of firm success to actual strategies has gone through different stages because the economies and the markets are dynamic; this is to say that the principles that may have governed for several decades may not be applicable now.
For instance, the emergence of modern capitalism has contested the classical notion that companies should work by means of concentrating on production and profits; although these remain true in modern capitalism, this time, the focus is on consumer’s sovereignty and the promotion of free market competition that would influence the form and structure of the organisation (Gianaris, 1996). Amable (2003) also brought up the importance of ‘institutional complementarity’ in terms of the complementary relations of the different firms especially as these would aim for cohesiveness.
Companies should therefore learn that as a part of strategy, firms need to complement each other especially if strategic alliances are aimed to be formed and companies are to be acquired or partnered with for a production venture. In the case of Dunlop, it was found that what would be a potentially successful company would fall into a trap of not being able to respond to change especially as the realities of the British and the world markets would start to affect it, in addition to other factors such as the restrictions and challenges imposed by the local and international trading policies and technological change.
Since Dunlop missed on these, it is evident that Dunlop did not know where to identify and associate value. This is something that firms need to learn from this case: innovation is a means to create value, and such value will be eventually translated into the market (Khan and An-Alsari, n. d. ). And innovation is encouraged if market competition is acknowledged, and innovation will be successfully implemented if the firm has a management that is strategic and adept to change.
References Amable, B. 2003. The Diversity of Modern Capitalism. Oxford University Press, Oxford, England. Drejer, A. 2002. Strategic Management and Core Competencies: Theory and Application. Quorum Books, Westport, CT. Gianaris, N. 1996. Modern Capitalism: Privatization, Employee Ownership, and Industrial Democracy. Praeger Publishers, Westport, CT. Khan, M. & Al-Ansari, M. n. d. ‘Sustainable Innovation as Corporate Strategy’. The TRIZ Journal. [Online] Available at: http://www. triz-journal. com/archives/2005/01/02. pdf accessed 28 February 2009. Kirton, M. 2003. Adaption-Innovation: In the Context of Diversity and Change. Routledge, New York.