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Abstract:
The case describes the evolution and operations of Firestone East Africa (1969) Limited. It describes how Firestone operated as a monopolist producer and seller of tyres and tubes, under a government-controlled and regulated trade regime, up to the time when the market changed due to liberalisation of Kenya's economy. Firestone was quite successful as a monopolist in the production and selling of tyres and tubes, under a controlled trading regime. The change in modus operandi challenged the firm in a way it had never been challenged before. The market was flooded by second hand tyres and tubes, as well as by new tyres and tubes that were dumped into the market by importers who avoided paying duty. Many of the importers were former distributors of Firestone tyres and tubes. This meant a marked reduction in Firestone profits and increased competition from cheap imports. It forced Firestone management to rethink the competitive strategy of the firm. The case provides a good overview of Kenya's tyre industry under a trade-regulated regime and how Firestone maintained growth and profitability through exploitation of its monopoly power and use of a well-guarded and selective dealership. The case deals with two issues. The first issue is whether to stop production of tyres and tubes and become an importer, in a bid for Firestone to remain competitive. The second issue is how to deal with dealership problems when the distribution system is challenged, and existing arrangements begin to break down because of changing fortunes in the market.
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