High Performance Tire Harvard Case Solution & Analysis

Problem Identification

The problem that High Performance Hire was facing includes the worse situation of the operations of the company and the mismanagement of the business activities. Another issue that the company had in identifying the reason was that why the things had depreciated so much and what actions the company should take in order to improve its business operations.

Recommendations

The HRT should review the profitability of their various products on a regular basis. By assessing where prices of the product can be increased will help the company to maintain or increase its profitability. The company can also adopt the principle of Just in Time (JIT). By following a multi-vendor sourcing approach, HPT can hold just enough inventories to satisfy consumers and free up a lot of its cash that went into stocking up. HRT can negotiate longer payment terms with their vendors whenever possible in order to stay the cash longer. It needs to monitor the amount of cash that is being taken out of the company for non-business purposes because taking too much money out can put an unnecessary cash exhaust on the business. The company also needs to monitor accounts receivables effectively in order to ensure that they are billing their clients properly and receiving prompt payments.

The company will need to put major focus on the improvement of its current ratio as it has $600,000 line of credit with the Toronto Dominion Bank, which is vital at a time when the company is in constraint. Secondly, by increasing both its cash and current ratio, the High Performance Tire can improve its collection practices. Finally, decreasing current liabilities by utilizing long-term debt can positively impact the current ratio of the company.

The company should focus on its marketing and innovation startgies in order to target more customers and enhance the awareness of their services among the customers. They should also expand their business into more demanding markets to increase the profitability of the business operations. The company can also develop the strategies that trained and increase the satisfaction level of their employees. In addition to this, HPT should develop the program that can strengthen the management of the company.

 

 

Analysis

This analysis is divided into three parts SWOT analysis, Porters’ Five Forces and financial ratio analysis

1. Porter Five forces Analysis
Porter’s five forces mo

del is designed by Michael E. Porter, which analyzes the five competitive forces that help to determine the effectiveness of an industry.

Intensity of Competition

The tire industry is highly competitive and the competition in the industry is increasing day by day because the total industry size is increasing. The high performance is facing threat of huge competition from its competitors. The competitors of HPT are competing in terms of the quality of the products, price of the products and customers’ knowledge related to the products adversely affects the competitive position of HPT.

Bargaining Power Suppliers

The Bargaining Power Suppliers in the industry is high because of the higher demand for the rubber. HPT has strong relation with their suppliers as they begin buying more no-name tires from overseas suppliers.

Bargaining Power buyers

Bargaining Power buyers is high as buyers purchase larger portion of the production of the company’s products. In addition to this, they also know the production cost of the products of the company.

Threat of new entrants

The threat of new entrant in the industry is low because the tire industry requires high capital investments and the level of technological expertise as well as knowledge required is also very scarce. In addition to this, the risk of Government regulation, the customer loyalty and the firms in the industry that have economies of scale will create substantial barriers for new entrants to enter the industry.

Threat of substitute

The threat of substitute is high for the company as the poor customers’ services by the HPT leads to an increase in customers’ dissatisfaction; which creates opportunities for other firms in the markets to target the customers by proving high quality services and this will threat the HPT as they have the risk of losing their strong market position.

2. SWOT Analysis
It is a strategic method that is used to analyze internal and external factors along with threats involved in a business. SWOT analysis instantly analyses the current position of the company.

Strength

High Performance Tire is a family owned business that has good relationship with its working partners. HPT has high market share in their industry as compared to its rivals. The company has leadership in market shares as compared to its rivals as it is a retail tire chain of company owned stores. In addition, the active involvement of Jane Wallace is strength for the company as it helps the company to increase its business operations profitably............................

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