Transcript Market Strategy Case Study Goodyear Tire and Rubber Company

Goodyear Tire and Rubber
Company
Kate Rego
Nicole Montanaro
Outline of presentation
Overview
• Goodyear was founded in Akron, Ohio in 1898 by Frank and
Charles Seiberling.
• In 1992 Goodyear Tire and Rubber Company were
reconsidering a proposal from Sears, initially denied in 1989,
to sell their Eagle brand tires.
• Two factors contributed to the reconsideration of the sears
proposal
– decline in market share
– Goodyear brand tires were being replaced annually at
Sears Auto Centers.
Industry Summary
• Tire production of 850 world wide
• Ten tire manufacturers account for 75% of
world wide production
• 3 largest account for 60%
• Two types of markets
– Original equipment tire market (20% -25%)
– Replacement tire market (70%-75%)
Problem:
Should Goodyear accept the proposal from sears
to sell their tires?
Secondary Problems
• Selling Goodyear tires through sears will represent a
significant change in distribution policy and create conflict
with franchise dealers
• If they accept the proposal, should they sell only the
Goodyear Eagle brand or multiple Goodyear brand tires
through Sears?
• Possible cannibalization of company owned Goodyear Auto
Service Center and Franchised Goodyear Tire Dealers
SWOT Analysis
Strengths
• Broadest line of tire products of any tire
manufacturer.
• They are the second largest producer of tires in
the world.
• Market share leader in U.S. for original
equipment tires and replacement tires.
• They are one of the leading national advertisers
in the U.S.
Weaknesses
• Goodyear has not sold through a mass
merchandiser since the 1920’s.
• Sears customers will buy the eagle brand rather
than the Goodyear brand due to being more
price-sesative
Opportunities
• Tire dealers run frequent price promotion ads in
the local newspapers.
• The growing want for full service stations by
consumers.
• Growth of discount multi brand independent
dealers increased from 7 percent in 1982 to 15
percent in 1992
Threats
• Independent tire dealers carry several different
brands for replacement buyers.
• Department stores focus on marketing their own
private label brands.
• Consumers have become more price conscious
and less brand loyal
• Replacement tire sales do not rely on the original
equipment tire market as much as it used to.
• Canalization of company owned Goodyear Auto
Centers and franchised Goodyear tire dealers if
they accept Sears’ offer.
Consumer and Competitor Analysis
• Competitors
– Groupe Michelin, Bridgestone Corp., Pirelli, Cooper Tire and Rubber,
and Sumitomo, and Continental A.G.
• Competitor strategies
– sell tires through other distribution channels, such as retail tire outlets
and service stations.
– Have broad product lines that appeals to most buyer segments for
different types of vehicles.
• Consumers
– They are becoming more price conscious and less brand loyal.
– When shopping for replacement tires, most consumers are confused
due to the amount of choices. Majority buy on the basis of price, while
knowledgeable buyers choose based on dealer recommendations.
Questions
1-How would you characterize the competitive
environment in the tire industry in 1991?
• Very intense in both OE tire manufacturers and
replacement tire manufacturers. The top 3 brands of
tires, advertise heavily through T.V. and print media.
• Reliability of a strong brand name, and OE tire
manufacturing to secure replacement tire sales is
slipping due to customers becoming more price
sensitive.
• Although Goodyear is a large powerful brand, they
need to compete on the basis of what consumers want.
Questions
2-What is Goodyear's relative competitive position
within the tire industry?
• They compete on the basis of quality and are known
as a premium brand of tires and therefore are more
expensive.
Questions
3-Does it make strategic sense for Goodyear to
broaden its distribution beyond company-owned and
franchised Goodyear tire retailers as a matter of
channel policy? Why?
• Goodyear brand is traditionally positioned as one of
the best known brand names in the world of
premium quality tires.
• Creating a new distribution channel to Sears will:
– Attract their loyal and new customers to lead them to buy
the Goodyear brand.
– Attract already brand informed customers to Sears
Questions
4-What are the strategic implications of broadened distribution
of Goodyear-brand passenger tires through Sears Auto
Centers?
• With more locations of Goodyear tires being sold, It
will increase revenues with cannibalizing their
franchise stores
• Broader distribution channels gives customers easier
access and closer locations to buy Goodyear tires
– Goodyear franchise stores= around 100
– Sears stores= 850
Recommendations
• Goodyear should accept Sears’ proposal
– Although Goodyear’s methods have worked in the
past channels of distribution are changing due to
changing consumer preference.
• Goodyear should sell Eagle brand tires
through Sears, in addition they should sell
their lower priced options such as T-Metric
Follow-Up
• To create awareness of Goodyear tires being sold
at Sears
– Create Ads for Television, newspapers, billboards,
radios, and racing events.
– promotions and coupons to lure price-sensitive
customers to be less brand loyal and try the Goodyear
brand.
– Corporate ads will benefit both companies and can
save on ad expense
– Build strong relationships with the franchise dealers
and do special promotions to eliminate conflict and
increase there revenue