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Marketing Management - Marketing Strategy of

Bridgestone Corporation
Anjali Khurana

Bridgestone Corporation (, Kabushikigaisha Burijisuton?) (TYO: 5108, OTCBB: BRDCY) is a


multinational rubber conglomerate founded in 1931 by
Shojiro Ishibashi (, Ishibashi Shjir?) in the
city of Kurume, Fukuoka, Japan. The name Bridgestone
comes from a calque translation and transposition of
ishibashi, meaning "stone bridge" in Japanese.
Bridgestone is currently ranked No.2 tyre manufacturer in
the global tyre market[citation needed], with Michelin
leading, Goodyear third, and Continental fourth as of
January 2009. As of the end of 2005, production facilities
belonging to the Bridgestone Group have increased to
141 spread throughout twenty-four nations of the world.
In order to attain this level of globalization, the company
established a new set of corporate policies in the year
2001. In continuation of this, company's Brand
Vision[clarification needed] was also established in 2003.

Statistics:
Public Company
Incorporated: 1957
Employees: 2,591

Sales: $769 million (1996)


Stock Exchanges: New York; Midwest
SICs: 3011 Tires & Inner Tubes; 3559 Special Industry
Machinery, Not Elsewhere Classified

Company Perspectives:
"Our mission is to be the market leader in every market
served by offering our customers clearly outstanding and
unique products and services. As the market leader, we
are dedicated to constantly and forever improving quality,
service and customer satisfaction. We believe that
continually improving the system of production and
delivery of services and products will improve quality and
reduce costs. This ultimately will enhance our competitive
position, resulting in outstanding long-term growth and
profitability."

Company History:
Bandag, Inc. is the leading supplier of rubber used by its
franchisees for the retreading of tires, mostly for trucks
and buses. The company manufactures precured tread
rubber, equipment, and supplies for the retreading of
tires by means of a patented "cold" bonding process.
During the early 1990s Bandag outstripped 31 other
automotive parts companies in profitability, with a five-

year average return on equity of 30.2 percent. The


company and its licensees had 1,383 franchisees
worldwide in more than 120 countries in 1996.
Early Developments, 1957-1970
Roy J. Carver of Muscatine, Iowa, was the owner of a
family manufacturing firm named Carver Pump Co. when,
on a business trip to West Germany in 1957, he learned
about the "cold-cure" tire-retreading process invented by
Bernhard Nowak. This process cured tire treads in one
step and bonded them to old tire casings in another step.
Because it employed temperatures lower than those used
in other retreading processes, the casings were less likely
to be damaged, thereby allowing durability greater than
that of conventional recaps and thus cutting cost per
mile. Carver, who had learned the tire business by
changing flats in his father's shop, was an entrepreneur
willing to take a flyer on any number of schemes, and he
bought the U.S. rights to the process from Nowak. The
Bandag name combined Nowak's initials (BAN) with "D"
for his home town (Darmstadt) and "AG" for the German
abbreviation for "incorporated." (It also, probably not
coincidentally, approximated "bandage.")
Back in Muscatine, Carver opened Bandag in a
dilapidated former sauerkraut plant. He found that, given
the usual problems with a start-up business, particularly
one involving technical innovations, tire retreading was

no easy road to riches. Carver nearly bankrupted the


family pump company to develop the Nowak method
commercially. "More than once it was a case of 'get some
money or fold camp,"' a company executive later told a
Financial World reporter. This man remembered asking
suppliers for loans payable with notes that converted to
Bandag stock, adding that those who held on to the notes
eventually became millionaires.
One technical problem was finding a way to apply
uniform pressure on tire casings when retreads were
being bonded to them. Carver himself came up with a
solution by inventing a flexible rubber envelope capable
of fitting over tires of any size. Another problem was
solved when his research-and-development engineer
formulated a more effective rubber-gum mixture to
replace the bonding cement holding together the casing
and retread. Carver received U.S. patents on the coldrecapping process during 1961-1962.
By fiscal 1963 (ending May 31, 1963) Bandag had turned
the corner to profitability, earning $32,024 in net income
on net sales of $1,910,187. These figures rose steadily,
and by 1968, when the company went public, its facilities
included three plants in Muscatine and a fourth in
Shawinigan, Quebec. In that year Bandag had net income
of $1.3 million on net sales of $13.5 million and marketed
about one-quarter of its shares of common stock at $12 a
share. Soon three other plants were opened, in Oxford,

North Carolina; in Abilene, Texas; and in Lanklaar,


Belgium.
Impressive Growth in the 1970s
By 1971 Bandag held about ten percent of the U.S. truck
tire-retreading market and had a worldwide network of
more than 500 franchised dealers, with some one-third of
its sales being made abroad. The company sold its
franchisees precured rubber and auxiliary supplies and
equipment to retread worn tires in their own shops. It
also was manufacturing and selling buffers, pressure
chambers, and other equipment used by its franchisees.
In 1973 Bandag entered into the business of distributing
and remanufacturing replacement parts for the heavyduty vehicle industry by acquiring three companies for
stock. One of these was Master Processing,
manufacturers of specialty rubber compounds and hightechnology industrial hoses. Eight other companies were
subsequently acquired by 1978. In December 1973
Bandag also established a subsidiary, Heavy Duty Parts,
Inc., to sell replacement parts for trucks and buses
through its own distribution network. That year Bandag's
net sales reached $95.1 million. During the first half of
the 1970s the company achieved a five-year annual sales
growth rate of 32 percent and annual earnings growth
rate of 43 percent. It commanded about 75 percent of
the cold-rubber market and was retreading the tires on

about 20 percent of all U.S. trucks in 1975. That year its


sales came to $169.9 million and its earnings amounted
to $19 million.
Although passenger tires were accounting for only three
to four percent of its business, in 1976 Bandag launched
a national television advertising campaign with a 30second commercial running on all three national
networks. This attempt to carve out a share of the
passenger car, pickup, or van retreading market was not
successful. In 1980 Bandag held less than one percent of
the passenger car tire-retreading market.
Bandag's profits dipped in 1977, when it earned $18.4
million on revenues of $200.1 million, but the company
maintained that this was due to its policy that year of
encouraging its franchisees to reduce their inventories.
The following year brought a new surge in sales and
profits, partly because of the rise in popularity of radial
tires, a retreading market in which Bandag characterized
itself as dominant. The company treated its shareholders
well, raising the dividend each year after 1976, when
payments were first made.
By 1980 Bandag was the world's largest producer of
tread rubber and retreading equipment. It held an
estimated 20 percent of the retreading market and onethird of the bus and truck retreading market. This sector
of its business was being carried on by eight

manufacturing plants (including one in South Africa) and


about 1,000 franchised dealers, of which some 250 of
them were abroad in 92 countries. The company also
maintained 16 off-road tire-retreading centers in the
United States. Heavy Duty Parts was selling more than
60,000 different items and had 43 distribution centers in
the United States. Company revenues in 1980 totaled
$337 million and net earnings rose to $27.4 million, both
records. Heavy Duty Parts, however, while accounting for
about one-fifth of sales, was contributing only two
percent of profits.
Reorganization in the 1980s
Roy Carver had been leaving management to his
subordinates, enjoying the good life as he flew around
the world in his white Lear jet. He also owned two yachts,
a 25,000-acre ranch in Belize, and a villa on the French
Riviera. When he suddenly died of a heart attack in 1981,
there were no succession plans, but his widow, who
controlled most of the estate's 43 percent of the
company shares, backed her youngest son, Martin. The
32-year-old business school graduate was duly elected
chairman and chief executive officer.
Martin Carver later recalled, "Top management didn't
welcome me with open arms. I was surprised by the level
of resistance I got. It was fierce." This opposition was
understandable, for Carver promptly fired the managers

hired to carry out a plan to diversify Bandag that he


called "kind of stupid" and refocused the company on its
core business of retreading tires. He also sacked the
president, taking the title himself, eliminated employment
contracts, which he said made people lazy, and recalled
executive cars. In December 1981 Bandag sold Heavy
Duty Parts for $11.5 million in cash and securities. The
unprofitable two off-the-road retreading subsidiaries,
which accounted for about five percent of company sales,
were sold in 1982 for $2.5 million, principally in cash. In
1984 Master Processing was sold to a privately held
company for an undisclosed sum, and the Empex Hose
division was sold for $3.6 million.
By 1984 Bandag held about 40 percent of the U.S. truck
retreading market and 70 percent of the radial retreading
truck and bus market. High-quality radial retreads were
selling for only about 30 percent of the price of a new tire
and yet were said to perform much the same. Specialty
rubber compounds and industrial hoses accounted for
less than ten percent of company sales. Return on equity
averaged 22 percent in the first half of the 1980s. A stock
repurchase program reduced shares outstanding by 40
percent between 1982 and 1990. The Carver family
further solidified its grip on the firm by distributing
shares of a new Class B common stock, with ten times
the voting power of the old shares, in 1987. The action
immediately raised the Carver family's voting power from
37 to 65 percent of the total. Bandag's stock price rose

tenfold between the early 1980s and the early 1990s.


By the end of the 1980s Bandag had doubled the size of
its dealer force and held nearly 50 percent of the U.S.
truck tire-retreading market. Carver's style of
management won him widespread recognition. He
expected managers to know the names of all of their
workers, regardless of how many they supervised. Carver
himself visited every Bandag dealer in the United States.
A Formula Ford driver in his youth, he set a world land
speed record for diesel trucks in a specially prepared
vehicle to promote Bandag's retreads. Financial World
gave him an award in 1989, the year he vowed to make
Bandag "the best company in the world." That year the
company achieved a 41 percent return on equity, with
net income of $75.9 million on revenues of $535 million.
Forty-two percent of its sales were abroad.
Developments in the 1990s
During this period Bandag shook up its European
franchising network, replacing exclusive distributors who
charged high prices and never worried much about
volume with aggressive new entrepreneurs paying about
$150,000 apiece for their units who even made "house
calls" in $60,000 Mercedes trucks filled with tires and
equipment. By 1992 Bandag's share of Western Europe's
retread market had risen from five to 20 percent. That
year the company's stock reached an all-time high and

was split 2 for 1.


For the first time since 1977, Bandag's sales and profits
dipped in 1993, although only slightly. Carver blamed the
problem on the high costs of developing a tougher,
higher-priced new retread called the Eclipse, molded to
curve onto tire casings in a relaxed state. Initially
forecast to account for half of company sales by 1995,
the Eclipse was slow to reach the market and was only
being produced by the Muscatine and Oxford plants by
that year. European earnings continued to be
disappointing despite the company's larger market share.
Net sales rebounded to $650.6 million and net income
totaled $94 million in 1994, levels surpassed once again
in 1995.
In 1992 Carver adopted for Bandag the total-quality
management principles developed by the late Edwards
Deming. This formula included long-range planning,
statistical monitoring of process control to make
manufacturing more predictable, just-in-time delivery of
inventory, greater responsibility of individual workers for
their output, and more attention to customer needs.
Among the changes was a pay plan that eliminated
bonuses for executives, managers, and salespeople. "The
concern is that if I'm working my butt off, I should get
paid more than a slacker," Carver told Financial World.
"But a system that's well designed will not have
slackers."

Bandag's revenues rose from $755.3 million in 1995 to


$769 million in 1996, but its net income fell from $97
million to $81.6 million. Carver attributed this
development to soft sales trends and higher operating
expenses. One of the company's problems was a legal
dispute with Treadco, the largest U.S. tire retreader and
formerly Bandag's largest franchisee. This company was
in the process of terminating its 26 franchises. In
addition, Tredcor, Bandag's largest franchisee in South
Africa, did not renew its roughly 30 franchise contracts
because of disputes over pricing and its marketing of a
competing retread. During the year Bandag introduced a
new tire-management system and two new product lines.
Of Bandag's 1996 revenues, tread rubber, cushion gum,
and retreading supplies constituted 91 percent. Sales in
the United States accounted for 64 percent and European
sales accounted for 17 percent. About 50 European
franchisees were retreading tires using the Vakuum Vulk
Method, another cold-process precured retreading system
for which Bandag owned worldwide rights. The company
was manufacturing precured tread rubber, cushion gum,
and related supplies in manufacturing plants that it
owned in the United States, Belgium, Brazil, Canada,
Indonesia, Malaysia, Mexico, New Zealand, and South
Africa. It was also manufacturing pressure chambers,
tire-casing analyzers, buffers, tire builders, tire-handling
systems, and other items of equipment used in the

Bandag and Vakuum Vulk retreading methods.


At the close of 1996 Bandag had no long-term debt. As of
March 1997 the Carver family owned shares of common
stock constituting 75 percent of the votes entitled to be
cast in the election of directors and other corporate
matters.
Principal Subsidiaries: Bandag A.G. (Switzerland);
Bandag B.V. (Netherlands); Bandag de Mexico, S.A. de
C.V. (Mexico); Bandag do Brasil Ltda. (Brazil); Bandag
Canada Ltd. (Canada); Bandag Europe N.V. (Belgium);
Bandag Incorporated of S.A. (Proprietary) Limited (South
Africa); Bandag Licensing Corporation; Bandag New
Zealand Limited (New Zealand); VV-System AG
(Switzerland).