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Strategic Management Class Presentation Outline October 11, 2000. Market Background DIFM Strategies. DIY vs. DIFM. % D-I-Y. % Installed. Quarts Based Total United States By Selected Time Periods. 12 Months Ending June, 1996 - 2000. Market Continues to Shift From DIY to DIFM.

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Strategic Management Class Presentation Outline October 11, 2000

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Strategic Management Class

Presentation Outline

October 11, 2000

  • Market Background

  • DIFM Strategies


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DIY vs. DIFM

% D-I-Y

% Installed

Quarts Based

Total United States

By Selected Time Periods

12 Months Ending June, 1996 - 2000


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Market Continues to Shift From DIY to DIFM

Factors Causing Shift From DIY To DIFM

  • Age - The aging population is more inclined to be DIFM’s

  • Convenience - Higher demand as less leisure time is available

  • Increased Installed Outlets - Emergence of new outlets and competitive pricing

  • Environmental Concerns - Public awareness on hazards of improper used oil disposal

  • Female Influence - Increased number of female drivers, decision-makers

  • Strong Economy - Increased disposable income decreases DIY activity

Conclusions

  • More Profitable Packaged Volume Declining While Less Profitable Bulk Volume Increasing

  • Less Brand Recognition / Influence in DIFM


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MOTOR OIL BRAND SHARE TRENDS

Installed Quarts

Total United States

12 Months Ending June, 1996 -2000

(0.5)*

(0.7)

(0.6)

(0.4)

(0.4)

(0.3)

* Share point change required for statistically significant difference between years, at the 90% confidence level.


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PURCHASES BY KEY CHANNELS - INDUSTRY

Installed Quarts

Total United States

12 Months Ending June, 1996 - 2000


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QuickCarRepair

LubesDealersGarages

Valvoline17.811.315.3

Pennzoil37.420.326.2

Quaker State19.817.815.5

Castrol8.08.610.2

Havoline7.13.47.5

Mobil3.04.27.9

Brand Share within Top 3 Installed Channels

Installed Quarts

Total United States

12 Months Ending June, 2000

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Top 10 Quick Lubes by Centers

(Fast Lubes Only)

Source: National Oil & Lube News, March 2000


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Top 10 Oil Change + Businesses

  • GM Goodwrench Quick Lube Plus4500

  • Midas Auto Systems Experts 1500

  • Firestone Tire & Service Center1363

  • Wal-Mart Lube Express 1200

  • Motorcraft Fast Lube 1000

  • DaimlerChrysler Mopar Express Lube970

  • Shell Auto Care900

  • Gemini Auto Service Center (Goodyear)806

  • Penske Auto Center (Kmart) 660

  • Meineke Discount Muffler 622

SOURCE: National Oil & Lube News / as of March 2000


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Service Center Growth

630

584

574

519

474

455

422

407

360


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Strategic Management Class

Presentation Outline

October 11, 2000

  • Market Background

  • DIFM Strategies


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Motor Oil Company

  • ChallengeResponse

  • Slow Market GrowthGrow market share in installed segment

  • and Shift to DIFMImprove bulk oil margins

  • Alliances with distributors / grow together

  • Outlets less Brand Loyal /“Controlled” Outlets

  • Switching Costs Low- Company-owned oil changes

  • - Franchised oil changes

  • - Mid-tier Program: Express Care

  • - Tougher Supply Contracts

  • DifferentiateUnderstand the oil change business

  • - Offer solutions

  • “Family of Brands”


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Valvoline Express Care


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Reasons for

Express Care Program

  • Accelerate Growth for Valvoline’s DIFM Business

  • Provides Offerings for Three Distinct Installer Groups: VIOC, Valvoline Express Care and the “We Feature” Program

  • Provides a “Branded” Program to a Customer Valvoline is not Currently Positioned to Sell

  • Competitive Program to Sell Against Texaco Xpress Lube, Pennzoil 10 Minute Oil Change and other Branded Independent Programs

  • Increased “Family of Brands” Purchases, Longer Term (10 Year) Contract, Consistent Marketing and Image Management of Independent Operators

  • Pulls Several Fragments into One Program


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Quick Lube - General

ChallengesResponse

Location, location, locationSite Selection Models

Labor expense and turnover“People. Cars. Greatness.”

(Become a ‘Most Admired’ Company)

Benefits

New Hiring Methods

Offering new products and Convenience

servicesAbility to sell / focus

Trust

Trade-offs between priceConstantly shop motor oil company deals

and brandUnderstand impact on customer base

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VIOC - Specifically

ChallengesResponse

Controlling ExpensesReal-time Management Systems

Labor Scheduling

Internal Benchmarking

Investment BaseGreater Percentage of Franchisees

Geographic Expansion Protect Existing Markets - 3 Tiers

Stay within Areas of Valvoline Brand Strength

Concentrate to Leverage Advertising

DifferentiateMVP Program

Service / Trust

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Competitive Interaction

  • Protect Your Markets

    • Concentrate / contiguous

    • Fill out existing markets

  • Stay in Areas of Strength

    • Good distribution (cost advantage)

    • High DIY market share

  • Areas Where You Compete Head-to-Head

    • Service (Employee Friendliness / Recognition)

    • Trust

    • Best Location / Convenience

    • Promotions

    • Service (Product and Service Offering)


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