Good-Year

CASE STUDY GOODYEAR : The Aquatred Launch

INTRODUCTION• HISTORY

• TAKE OVER

• INTEREST PAYMENTS

• 1991 Stanley G Gault

• INNOVATIVE

ASSESS GOODYEAR’S POSITION IN TIRE INDUSTRY?

• POSITION IN WORLDWIDE SALES

• OPERATED 84 PLANTS- 41 PLANTS IN U.S,43 PLANTS IN 25 OTHER COUNTRIES, SIX RUBBER PLANTATION, AND MORE THAN 2OOO DISTRIBUTION OUTLETS.

• INVESTMENTS – $1.5 BN

• 105000 EMPLOYEES

• NATURAL GAS & OIL TRANSMISSIONS

• STRONG IMAGE IN PRICE FOCUSED CUSTOMERS

• BRAND LOYAL CUSTOMERS

1975 1980 1985 1990 1991

Replacement Market( includes larger brands only)

Good year 14% 14% 15.5% 15% 15%

Michelin 2.5 7.0 8.0 8.5 8.5

Firestone 10.5 10.0 9.5 8.0 7.5

Sears 10.0 10.0 9.0 6.5 5.5

General 2.0 3.0 2.5 4.0 4.5

Bridgestone 0 2.0 2.0 3.0 3.5

Copper 1.0 1.5 2.5 3.0 3.0

Kelly 3.0 4.0 3.0 3.0 2.5

Uniroyal 3.5 3.5 3.0 3.0 2.5

Dunlop 2.5 2.5 2.5 2.5 2.0

Pirellis 0 0 1.0 2.0 2.0

others 42.5 34.0 35.0 35.5 37.5

Brands replaced Bridgestone firestone Good year Michelin minor Brands

Private label

total

Bridgestone 29 4% 8% 8% 7% 43% 100

Firestone 2 27 11 6 7 45 100

Goodyear 2 5 39 5 9 38 100

Michelin 3 3 7 44 6 36 100

Minor brands 2 4 10 7 32 42 100

Private labels 2 5 8 5 7 70 100

HOW DO CONSUMERS BUY TIRES?• GRUDGE PURCHASE

• AVG. TIME BETWEEN PURCHASE IS 2.5 YRS.

• PURCHASE OF TIRES BY CONSUMERS

• GREATER IMPORTANCE TO PRICE

Sales

1 TIRE

2 TIRE

3 TIRE

4 TIRE

TYPES OF CONSUMER

QUALITY CONCIOUS-18 %• Quality & Performance AttributesTREAD LIFEWET TRACTIONHANDLINGSNOW TRACTIONDRY TRACTION•Michelin image was stronger

VALUE CONSCIOUS-23%• Quality & Performance AttributesTREAD LIFEWET TRACTIONHANDLINGSNOW TRACTIONDRY TRACTION•Michelin image was stronger

PRICE FOCUSSED-59%• Treated tire as a commodity purchase •3 /4 of goodyear tires are sold on promotion•Goodyear image was stronger

Brand image of major tire manufacturer, 1991

All buyers Value conscious Quality conscious

Price focused buyers

Good year 15% 17% 15% 14%

Michelin 15 25 26 7

Others 19 19 24 17

Uncommitted 51 39 35 62

Individual customers

Account for 65% of revenue

$8.6BN IN US SALES

Distinction between Performance and broad

line ties

Market segmentation

Replacement and OEM Brand Classification Replacement and OEM Brand Classification

Performance Broad line

Wider

Better Traction

More Expensive

accounts for 25%of sales

Lesser Wide

Lesser Traction

Inexpensive

Distinction between Performance and broad

line ties

Car Manufacturers

Accounts for 35% of revenue

Replacement OEM Major Brands Minor BrandsPrivate label

Brands

Major tire manufacturers

Accounts for 36% of sales

High brand loyalty among the customers

Small manufacturer

Accounts for 24%of unit sales

High price niche segment brands

Very small manufacturers

Accounts for 40% of market

One distributor /territory

1991:80% of sales

Lower price and lower life

Warranty given by retailers

Share of retail sales of replacement tires by channel ( U.S market only)Channel share of retail sales

1976 1981 1986 1991

GARAGES/ SERVICE STATION

18% 11% 8% 6%

SMALL INDEPENDENT TIRE DEALERS

36 47 46 40

MANUFACTURER-OWNED OUTLETS

11 10 11 9

WAREHOUSE CLUBS 0 0 2 6

MASS MERCHANDISER

28 24 16 12

LARGE TIRE CHAINS 4 2 12 23

OTHERS 3 6 5 4

TOTAL 100% 100% 100% 100%

OEM Market 1975 1980 1985 1990 1991

Good year 35% 28% 32% 36% 38%

Michelin 2 5 11 16 16

Firestone 24 22 22 17 17

General 11 11 13 12 11

Uniroyal 20 24 22 17 13

Dunlop 0 10 0 1 3

Bridgestone 0 0 0 1 2

Growth strategy • In this case study Goodyear is using 2 growth strategies

• 1) market penetration strategy

• Goodyear is striving to increase the sale of the current products in the current markets through following ways

• Increase sales to the current customers

• Pull customers from the competitors’ products

• Convert non-users into users

2) Product development strategy: Goodyear is able to increase sales by product improvement and by

introducing New products. For example- Aquatred tires which has better wet traction and performance as compared to its competitors

ASSSES THE EVOLUTION OF GOOD YEAR’S DISTRIBUTION CHANNELS IN REPLACEMENT

MARKET

• 4,400 SMALL INDEPENDENT DEALERS (50% OF SALES

• REVENUE)

• 1047 MANUFACTURER OWNED OUTLETS (30% OF SALES)

• FRANCHISED DEALERS AND GOVT. AGENCIES

• JUST TIRES

• BY 1983, COMPANY OWNED 1300 OUTLETS

• EMPHASIS ON FRANCHISING NEW OUTLETS

• CONVERTING OWN OUTLETS INTO FRANCHISED AND INDEPENDENT DEALERSHIP

• RETAIL MARGINS-28% AND WHOLESALE MARGIN- 14%

• GOODYEAR’S SERVICE TO INDEPENDENT DEALERS

GOODYEAR’S DISTRIBUTION CHANNEL IN REPLACEMENT

MARKET SERVICES GIVE MORE REVENUE THAN SELLING TIRES. COMPLAINTS OF DEALER IN 1989, 70% OF GOODYEAR’S INDEPENDENT DEALERS CARRIED

ONLY GOOD YEAR TIRES. GENRATED 90% OF REVENUES FOR MOST INDEPENDENT DEALERS NTDRA TO PASS A BILL OF RIGHTS IN 1992 LOW PRICE OULETS WERE NOT ALLOWED TOSELL GOODYEAR

TIRES, BUT STILL THEY CONTINUED SELLING AT LOWER PRICESGOODYEAR SUED TWO AUTOMOTIVE CHAINS FOR ADVERTISING THEIR BRANDS.

Aquatred Launch

• Better wet traction, better tread life, good friction.• Managers concern at Goodyear• Expanding distribution channel• Launch related issues

SOLUTION

• Launch the new Aquatred tire, but keep distribution the same.

Pros : Less complex, support of independent dealers, No risk of eroding Goodyear brand name.

Cons : Miss opportunity to boost sales, No answer for OEM replacements by other brands.

• Push Aquatred tire aggressively in market, expand distribution, set uniform pricing structure, inform buyers,

Thank you