DuPont-Strategic Change.ppt

1、Agenda,Time 0,Time 1,Time 2,Time 3,Background on DuPontTM and Teflon,Development of Teflon non-stick cookware market in China,Evaluation of available options,Case Update, 1989,1989 - 1995,1996, 1996,DuPontTM is a global industrial company as a major producer of oil, natural gas and petroleum product

2、s and a leader in high-performance materials, specialty chemicals, pharmaceuticals, and agricultural products. DuPontTM operated in approximately 70 countries world wide, with about 175 manufacturing and processing sites that included 135 chemicals and specialties plants, five petroleum refineries,

3、and 25 natural gas processing plants. DuPontTM has about 2000 trademarks and brands.,Time 0,Time 1,Time 2,Time 3,Background on DuPontTM,Teflons ability to shrug off whatever came into contact with it led to the application of protective non-stick coatings to pots and pans. This made cookware featuri

4、ng Teflon easy to use and easy to clean. In 1960s, Tefal first introduced non-stick cookware, using DuPontTM technology. The first markets were North America and Europe. As non-stick cookware was accepted, it became popular in Japan and other parts of Asia. DuPontTM acts as a raw material supplier t

5、o cookware manufacturers by providing Teflon brand non-stick coatings. In this approach, DuPontTM supplies non-stick technology to licensees who used Teflon brand coatings on their cookware.,Time 1,Time 2,Time 3,Time 0,Teflon for cookware,In 1989, Teflon brand was first introduced to the Chinese ret

6、ail market DuPontTM started licensing agreements with cookware companies that manufactured their own cookware featuring Teflon non-stick coatings and used the Teflon label on their packaging,Time 0,Time 2,Time 3,Time 1,Introduction of Teflon in China,LicenseeManufacturers,Right to add Teflon label t

7、o packaging,Regular licensing payment,Time 0,Time 2,Time 3,Time 1,Introduction of Teflon in China,Spent US $1 million marketing non-stick cookware in China Sold 3 million units of non-stick cookware in China (1995) But occupied less than 2 % of the domestic cookware Experienced an unexpectedly low g

8、rowth rate,Time 0,Time 2,Time 3,Time 1,Result after 6 years of investing and developing in China,China,Japan,US,3 million,15 million,50 million,Units of non-stick cookware sold,Time 0,Time 2,Time 3,Time 1,Comparison on sales of non-stickcookware in China, Japan and US (1995),Cost of market developme

9、nt for Teflon products exceeded the revenue from the sales Developing the Chinese non-stick cookware marketinvolved significantly high investment with low return,Time 1,Time 0,Time 2,Time 3,DuPontTM Dilemma in China,Cultural Difference,Customers perceptionof cookware,Relatively highretail price,Diff

10、erent cooking processes,Not the Root Problem !,Time 0,Time 1,Time 3,Time 2,Evaluation of DuPontTM unprofitable investment in China,Licensee Manufacturers,Teflon Technology,Final customers,Wholesaler,Wholesaler,Wholesaler,Wholesaler,Retailer,Retailer,Teflon Marketing Program,Time 0,Time 1,Time 3,Time

11、 2,Root Problem:Problematic distribution channels used by local manufacturers,Retailer,Retailer,Time 0,Time 1,Time 3,Time 2,Too many middlemen involved ! Inefficient Lose of control Higher costs thus higher retail prices Create barriers for DuPont to understand the local Chinese market,Root Problem:

12、Problematic distribution channels used by local manufacturers,Given the role of raw material supplier and the lack of experience of manufacturing cookware, should DuPont continue relying on those “local guides” or create its own brand with the establishment of a whole business system ?,Time 0,Time 1

13、,Time 3,Time 2,Key issue facing DuPontTM in China,Option 1,Continue with current licensing strategy,Option 2,Responsible for Teflon marketing programs while keeping licensing partnership,Option 3,Produce its own brand of non-stick cookware,Time 0,Time 1,Time 3,Time 2,Evaluation of options available,

14、Teflon Technology,Time 0,Time 1,Time 3,Time 2,Option 1 Continue with current licensing strategy,Licensee Manufacturers,Chinese distribution channels,Teflon Technology,Final customers,Pros,Cons,No changes in operations No significant changes in financial commitment,Difficult to extend market coverage

15、 to boost sales Little control over the distribution channels Licensees unwillingness to develop marketing programs for Teflon non-stick cookware Competitors also used Teflon technology No guaranteed rewards for marketing effort,Time 0,Time 1,Time 3,Time 2,Option 1 Continue with current licensing st

16、rategy,Teflon Marketing Program,Time 0,Time 1,Time 3,Time 2,Option 2 Responsible for Teflon marketing programs while keeping current licensing strategy,Teflon Technology,Licensee Manufacturers,Chinese distribution channels,Teflon Technology,Final customers,A wider variety of marketing programs for T

17、eflon products developed Increased control over implementation of marketing programs Closer relationship with local manufacturers,Incurred higher marketing expenditure with uncertain returns A cap on return on the revenue from the sales of Teflon non-stick cookware Difficult to decide to what extent

18、 DuPont helped the manufacturers develop the marketing programs,Time 0,Time 1,Time 3,Time 2,Pros,Cons,Option 2 Responsible for Teflon marketing programs while keeping current licensing strategy,Time 0,Time 1,Time 3,Time 2,Option 3 Produce its own brand of non-stick cookware,Teflon Technology,Final c

19、ustomers,Own distribution channels,Teflon Marketing Program,Decisions to make: Role of DuPontTM? Length of channels? Channel members? Channel ownership? Cost?,Complete control over developing the Chinese market Full ownership on the revenue from the sales of Teflon non-stick cookware Allow DuPont to

20、 extend the brand to other types of non-stick kitchen appliances,Substantially increase business risk as DuPont is inexperienced in establishing a whole business system in China DuPonts brand awareness among final customers is at doubt and thus it is not a good differentiator Ruin the relationships

21、with local manufacturers as they are now competitors,Time 0,Time 1,Time 3,Time 2,Option 3 Produce its own brand of non-stick cookware,Pros,Cons,Time 0,Time 1,Time 3,Time 2,Factors affecting choice of option,Ease of Operation,Capability Requirement,Potential Profitability,Relationship with licensee m

22、anufacturers,Easy No changes in operation,Medium Cultural barriers might present when working more closely with local manufacturers,Very Hard DuPont had no experience in manufacturing cookware Lots of uncertainties present if creating a whole new business system,Time 0,Time 1,Time 3,Time 2,Option 1,

23、Option 2,Option 3,1st Factor Ease of Operation,Very low No extra effort in boosting sales of Teflon non-stick cookware among Chinese customers,Low Only get a fraction of increased sales revenue in the form of licensing payment if the marketing programs are successful,High Own all revenue from the sa

24、les of its own non-stick cookware brand,Time 0,Time 1,Time 3,Time 2,2nd Factor Potential Profitability,Option 1,Option 2,Option 3,Low DuPont maintained low involvement in developing Chinese market,Medium With DuPonts strong marketing skills, it would be relatively easy to develop marketing programs

25、on behalf of local manufacturers,Very High Developing its brand could require establishing a whole business system,Time 0,Time 1,Time 3,Time 2,3rd Factor Capability Requirement,Option 1,Option 2,Option 3,Distant - Just licensor-licensee relationship,Good - More collaboration opportunities between Du

26、Pont and local manufacturers,Terrible -Manufacturers see the DuPonts entrance as a threat to its own brand,Time 0,Time 1,Time 3,Time 2,4th Factor Relationship with licensee manufacturers,Option 1,Option 2,Option 3,Time 0,Time 1,Time 3,Time 2,Suggestion to Lin: Option 2,Option 2, DuPontTM being respo

27、nsible for developing marketing programs for Teflon non-stick cookware products, provided fair return with acceptable risks Option 2 best matches internal capabilities of DuPontTM and utilizes the Teflon brand recognition among Chinese customers. While it might take some time to reach final customer

28、s, there is higher possibility to achieve a more satisfying growth rate Although Option 3 provides DuPontTM with higher potential profit and entire control over distribution channels, the damaged relationship with those “local guides” could be problematic. Without the support of local manufacturers,

29、 it may be very challenging for DuPontTM to overcome barriers set by Chinese government alone.,Time 0,Time 1,Time 2,Time 3,Case update: DuPontTM chose Option 3- Launched its own brand Masterchef in China (1997),DuPontTM created a new brand Masterchef under a licensing agreement with Foshan Nanhai He

30、feng Electro-Chemical Works Ltd as the only licensee manufacturer for Masterchef non-stick cookware From 1997 1998, DuPontTM launched a series of large-scale promotion activities across provinces, featured with various sales promotion events during Chinese New Year, point-of-sale and product demonstrations in big cities including Shenyang, Beijing, Shanghai and Guangzhou