By M Dana Baldwin, Senior Consultant
One ongoing threat that might harm a company more than it helps is loss of focus. Many very good companies make a lot of money by keeping their focus on a very limited number of products or services and on the way they go to market. When Goodyear changed how they went to market with their tires, they ended up losing focus, with results which have hurt them significantly.
The impact of losing focus can be huge. When a giant customer starts to push its wishes on the supplier, a number of things can happen. For example, according to Steve Minter, writing in Industry Week:
“In 1936, due to a Federal Trade Commission order, Goodyear Tire and Rubber Co. stopped selling its tires through Sears and began a decades-long strategy of selling through a vast network of company stores, franchise dealers and independent dealers. In 1989, 70% of those dealers sold only the iconic Goodyear brand of tires.
But unfortunately, the story doesn’t end there. Goodyear fought off a takeover bid by Sir James Goldsmith in 1986 and subsequently decided to strike up a new sales arrangement with Sears. In short order, Goodyear was also selling its tires through Walmart and Montgomery Ward.
The decision to sell its tires through mass retailers had two important consequences. First, Goodyear’s premium brand was eroded as its tires were sold, for less, alongside discount and private label brands. Second, Goodyear’s dealer network felt betrayed and began to carry other tire brands. By 2001, Goodyear was operating in the red and the company endured a decade of poor performance in its stock.”
What happened was that Goodyear lost its focus on the advantages it had in the market place which made it a premium brand. When they changed the way they went to market by expanding the number and types of sales outlets, they changed the perception of their markets that they were a premium brand and they morphed into being just another competitor in the everyday trenches of low price and extensive competition.
When they left their niche of being a high quality, exclusive brand with great dealers and service, they suffered from a loss of power in the marketplace. Now the big customers were telling Goodyear what to do and how to position itself in the market, as opposed to Goodyear determining how to best go to market. The big customers were calling the shots, and those shots were aimed at increasing the benefit to the big customers (Sears, Walmart, etc.) instead of Goodyear determining what was best for Goodyear. The results were diminished financial performance and lower stock price.
If your organization needs help in defining your focus, what makes you successful in the market place, having a good strategic plan which reinforces your commitment to success can be a major help. Please contact me at firstname.lastname@example.org or call me at 616-575-3193.
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M. Dana Baldwin is a Senior Consultant with Center for Simplified Strategic Planning, Inc. He can be reached by email at: email@example.com
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