Case Study #1: Breezy Air Filters – Redefining the Business

Coming up for air

Breezy Auto Parts has been supplying the North American automobile industry with carburetors and air filters for more than half a century. With revenues of about $100 million a year, it is a significant player in the parts industry. Initially, it supplied carburetors and filters to each of the Big Three domestic manufacturers. When foreign car manufacturers entered North America to set up manufacturing operations, Breezy also developed relationships with the newcomers. It redesigned some of its products to fit the foreign models. It also introduced electronic data interchange (EDI) to support just-in-time deliveries to all of its customers. As a result, it successfully realized its
original corporate vision of becoming North America’s leading supplier of carburetors and air filters, a position it has occupied ever since.

For the past 30 years, Breezy has counted on steady customers and steady revenues. The past two years, however, have raised significant concerns about the company’s future. The price of crude oil has been soaring as have gas prices at the pump. There have been temporary dips in price, but the overall trend is unmistakable: it will be far more
expensive to drive in the future. As a result, car sales have flattened and in some cases declined. This is especially true of the big gas guzzling SUVs upon which the North American industry had staked its future. But the slump is affecting pretty much all makes and models except for hybrids and the newly introduced Brainy Car. The contraction
is even affecting the Asian and European car manufacturers that have located in North America.

In the past, Breezy could always count on respectable profit margins, but this is no longer the case. Sales are anemic and because of the company’s fixed costs, tied to its manufacturing plant, profits are getting razor thin. To avert further deterioration, the company’s CEO…