The case “Du Pont Kevlar Aramid Industrial Fiber (Abridged)” states the development history of Du Pont’s products, and focuses on investing and marketing of Kevlar.
Kevlar is a fiber which Howard W. Swank, general manager of Du Pont’s Textile Fibers Department, and other Textile Fibers Department’s managers were keen on. Kevlar is based on the former products of Du Pont, such as nylon, and Nomex Aramid fiber. Kevlar’s development was closely related to that of Nomex. It is a much stronger and stiff fiber than nylon and steel, and can be stable at high temperatures. After the Fiber-B first came out in 1960s, Du Pont found some problems with it. Two years later, Fiber B-1, which is also called Kevlar Aramid fiber, came out with better properties. The Textile Fibers Department thought Kevlar could meet the potential needs of both existing and potential customers. Actually, Du Pont needed new products like Kevlar, because its major products’ earnings were softening under increased competition.
Many assumptions have been made before Kevlar was put into the market. First, Du Pont still sustained initial operating losses, high pre-commercial R&D costs, and comparatively high plant investment. Second, more capacity can eliminate the mass production issue. Third, Textile Fiber Department managers assume that Du Pont can generate a net return on investments of between 10%-20%, if operating at 90% sales/ capacity ratio. The investing and marketing decision are made based on those assumptions. But there are some problems with those assumptions. Some of the assumptions are based on the experiences of former products. Those assumptions may be helpful, but also may lead to mistakes. Some of them do not reflect the reality. For my perspective, the return on investment may be reasonable, but the sales/ capacity ration should be considered. Even though Du Pont planned to break even within five years, 90% is hard to receive and maintain at the beginning. In addition,...
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