DuPont Kevlar Aramid Fiber: Strategy Under Uncertainty

Introduction

DuPont is the world's leader in many different industry segments and has a strong dedication to research and development. This focus is embedded in the company's history and culture, which has a foundation built in science. The company was once a major supplier to the tire industry until the development of the radial tire. During this industry transition, DuPont considered developing its Kevlar product for use in the next generation of tires. Although other materials were available for this application at far lower cost, DuPont believed that the superior qualities of Kevlar would be competitive if its price could be brought within a comparable range. This paper provides a background and analysis of the uncertainties inherent in DuPont's position.

Company Background

DuPont's scientific history can be traced back to the 18th century, beginning in France with Antoine-Laurent Lavoisier, who is often referred to as the "father of modern chemistry" (DuPont, 2012). Eleuthere Irenee du Pont, one of Lavoisier's students, founded the DuPont Company in 1802 based on Lavoisier's technology for the manufacture of black gunpowder. DuPont's product mix was broadened in the late 1800s with the introduction of nitroglycerine and nitrocellulose. Once the company developed the expertise and engineering capabilities required for manufacturing its products in mass quantities, this led to a significant expansion of the company.

Today, DuPont is a highly dynamic organization that operates across many different product niches. The organization has developed into five market-oriented product groups: Agriculture and Nutrition, Coatings and Color Technologies, Electronic and Communication Technologies, Performance Materials, and Safety and Protection. DuPont invests over $1 billion per year in research and development across a wide range of technologies and is home to one of the world's largest industrial R&D facilities, the Experimental Station. Research is conducted by these groups individually but is also coordinated by Central Research & Development (CRD), which monitors long-term research projects in particular. This organizational structure has helped the company develop many state-of-the-art materials products used in a wide array of applications.

Case Overview

The original development of Kevlar grew out of earlier work on Nomex. DuPont had a long history of working with different materials that could be developed into fibers. Although Nomex was remarkably strong, it was also very stiff and difficult to work with. This set the stage for the company to explore other fibers — an effort fully consistent with its mission statement, "Better Things for Better Living. Through Chemistry." Although Nomex was largely a financial disappointment, it prepared the company to continue developing other products.

Pressure on DuPont stemmed from General Motors, which was looking to move to radial tires by 1975. This was problematic for DuPont because the company was producing much of the cord used in various tire applications across the industry. An industry-wide shift to radial tires would effectively cut DuPont out of the materials market, since radial tires were developed using steel or fiberglass. DuPont therefore set out to develop a material that could be used in radial tires while outperforming both steel and fiberglass. Despite the fact that Kevlar was four to five times stronger than steel pound for pound, it was also significantly more expensive.

The advantages Kevlar offered the tire industry were clear: it was lighter, more energy efficient, and provided a smoother ride. However, DuPont estimated that the material could not be priced more than four to five times higher than steel without losing its sales potential. Therefore, the company not only had to produce a superior product, but had to do so efficiently enough to hit a viable price point in the market. Management recognized at the time that developing this niche would most likely result in several years of operating losses.

The future of the so-called miracle fiber was far from certain. Kevlar had strong opportunities in the aerospace and aircraft markets, as well as many potential applications not yet imagined. Meanwhile, the company was running low on cash reserves and needed to keep a close eye on capital expenditures. This created a difficult situation: on one hand, DuPont needed a breakthrough product to offset diminishing returns in some of its other product lines. On the other hand, the company could not afford to invest another three hundred million dollars in a product that might be ill-received by the market.

Conclusion

With DuPont's financial performance less than favorable at the time, the decision to develop Kevlar for the radial tire market was a genuinely risky proposition. Competing materials such as steel and fiberglass offered cost efficiencies that Kevlar could not match. That DuPont was willing to consider taking this risk reflects the company's entrepreneurial approach to management and new product development. It appears the company may have discounted the market pressures exerted by competing materials — a tendency undoubtedly driven by its desire to remain in the tire materials market and by the broader entrepreneurial culture that had defined its success throughout its history.

Works Cited

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DuPont. (2012). Lavoisier medalists are extraordinary scientists and engineers. Retrieved August 18, 2012, from

Wu, B., & Knott, A. (2006). Entrepreneurial risk and market entry. Management Science, 52(9), 1315–1330.