Du Pont Kevlar Aramid Case
In Du Pont Kevlar Case, the most apparent disturbance is the inappropriate value preposition perceived by the customer. In other words, what Du Pont Company does wrong strategically is charging high prices for low-importance products, so that many customers avoid buying the product due to misperception. However, it is a fact that Kevlar is a miraculous product which combines strength and lightness. The superiority of Kevlar against its competitors is an extreme opportunity and should be assessed immediately. To do so, we will analyze 5C’s of the company.
Chemistry is a tool for Du Pont to serve many markets. They constantly experiment and produce new materials. Agriculture, nutrition, construction, electronics, transportation, safety and protection and apparel are the main industries that Du Pont competes. Kevlar, in particular, is in the apparel area, and is mainly used for protective purposes as a category. However, back in the 1960’s and 70’s, the main targets were the automobile and aircraft companies. Segmentation consisted of tire-related companies since Kevlar was thought to be an excellent tire-component with its abnormal strength. The initial segmentation was not successful enough. Du Pont might have changed their target market due to this factor.
The company’s self-esteemed approach to the market was daring because their competitors were actually quite strong. For the tire market, the most prominent competitor was steel-belted radials. Although the company managers insisted that customers would afford the high prices for higher quality, it is obvious that they did not agree on the subject with the customers. When necessary calculations are done, it is observed that the planned revenues could not be earned because their capacity did not allow that much production. In addition to this, 1 pound of Kevlar was to be sold at 6.6$, but steel was one-eleventh of that price, approximately 0.6$. This huge gap was the stone thrown to the way of success. They proposed a material which is 5 times stronger and 11 times more expensive. The company’s mistake was their blinded eyes to the perception of the customers. If the cheaper option was good enough, why would they spend more money on something better? This question was missed by the Fiber Department. In the composite materials market, fiberglass and boron fibers were the main competitors. Unlike the tire market, the prices Kevlar proposed were quite low compared to the competitors, however, it is not as stiff as others, and Kevlar seemed unlucky in this market for this reason.
The customer profile changes in Kevlar situation. The tire market contains automobile makers, whereas the composite materials market contains aircrafts and aerospace companies. The Du Pont Fiber Department targeted mainly tire market. Their superior product must have been seen as a breakthrough for tires. They had a point at a degree. If the tires were made for cars which quality is the main concern for, especially durability. What comes to mind is the Formula 1 Cars. F1 cars are famous for their high performances with extra quality components. Stronger tires may even cause the pilots to win the race. Therefore Kevlar might be an indispensable for those specific cars. However, F1 cars are a niche market and it is too small to build a plant for and spend millions of dollars. For the composites market, the lightness of Kevlar is its main advantage over competitors. The customers here especially pay attention to lightness because it is an important problem for them. The marketing efforts of Kevlar might be in this way.
On the other hand, consumer profile is different from the customer profile. The actual users of cars are the public, but for commercial and personal usage. What consumers do value is the prestige and durability, however pricing is another factor that drives preferences. The consumers would most likely to buy what is cheap and useful at the same time. If Kevlar puts too much burden on the cars’ selling prices, they would most likely to stay with the old habits. The consumers do not expect extra performance from their cars, because is it just a tool for transportation, not the goal itself. They just use cars to reach some place. As stated before, the value preposition was unacceptable by both the consumers and the customers.
As a company, Du Pont had enormous successes in the past. The Fiber Department had created new materials and let the company be a pioneer in the polymer market. They were generating money for most of the time that until recent years, they had never fallen short of cash. This rooted company has been on stage since 1800’s. Their motto “Better Things for Better Living… Through Chemistry.” suggests that their corporate culture permits and encourages innovation and this requires vision. Their 200 years old history may rely on their innovative minds. As the creator of Nylon, which penetrated the consumers’ daily lives, Du Pont has many other products. Nomex is the second honor product for the Fiber Department nowadays. Lycra, Teflon are other popular products that are trademarked by Du Pont. It is sad that 75% of the polymers used in the world are a creation of Du Pont teams. The company is perceived as one of the biggest science company in the world. Du Pont wants to maintain this place in the minds.
In the 1960’s the Fiber Department needed a breakthrough because they were facing financial problems with the so-called “problem children” Nomex, Reemay, Typar, Tyvek and Qiana. They, by curiosity, created a new fiber, Kevlar, and this magical innovation made them believe that they would finally reach success. However, the market they were targeting was not that excited by it. Their strategic problem was bigger than their strategic opportunity. What they should do was to reposition their product. Although Kevlar was excellent for tires and composites, this became the problem itself; Kevlar was too good for a regular car. However, the financial statements of the company also point out some problems. For instance, the operating investments in 1974 were below the average and this suggests that Du Pont, which is said to be an innovation-driven company, did not pay much attention on their investments. They planned to produce 50000 pound Kevlar, and earn $322 million; this led the company to charge high prices. The competitors, therefore, reserved their market share and put the company in a bad position.