Research Proposal on "Goodyear Tire and Rubber Company"

Research Proposal 5 pages (1344 words) Sources: 0

[EXCERPT] . . . .

Goodyear Case Analysis

In the beginning of 1992, Goodyear Tire and Rubber Company executives decided to reconsider a proposal from Sears, Roebuck & Company which had previously been ignored. The proposal was first made few years back in 1989 and involved sale of Eagle brand tires through Sears Auto centers in the United States. Goodyear had its reasons for rejecting the proposal. It felt that taking such an action could weaken the sales at Goodyear's own service centers and many franchised centers. For one, the company had found that a large majority of its tires were being replaced at Sears Auto centers and people couldn't purchase Goodyear again "because the remarkable loyalty of Sears customers led them to buy the best tire available from those offered by Sears," and the auto center did not have Goodyear tires.

Problem Definition:

Goodyear is encountering serious problems in sales because repurchase is not possible at Sears Auto Centers and wants to know the strategic implications of accepting this proposal and selling one or some of its tire brands through Sears.

Analysis:

To find out how this decision would affect the company strategically, we first need to study the competitive environment in tire industry in 1991. In the U.S., the tire industry is composed of two main segments, original equipment (OE) and replacement tires. While OE accounts for some 20 to 25% of tire sales annually, it is the replacement segment which is the main player as it account for 70 to 75% of sales. There are around 10 main competitors in this market that control 75% of market share. But among these, the top three control 60% of the market and these are Group Michelin, Goodyear, and Bridgestone. While Goodyear lags behind Michelin in worldwide sales, it is a significant market leader in both segments in the U.S. Though OE segment is much smaller compared to replacement tires, it had always been considered an important unit as leaders believed that satisfied customers would want the same replacement tires. However they were proved wrong. It was realized that customers of replacement tires would prefer any good brand if it was more economical to them and suggested by someone they trusted like people at Sears.

Point of sales is also an important consideration. Tire dealers play a critical role in suggesting the right brand. It is important that they mention Goodyear as a possible alternative or allow customers to opt for Goodyear brand as replacement tires instead of making their own suggestions.

From various Exhibits in the case, we can make some important observations about various players in the market.

1. Sears enjoys an important place in the replacement market. While it doesn't produce its own tires, it still accounts for 5.5% of car replacement tire segment by selling private labels.

2. Fierce competition exists in both segments of tire industry. But the nature of competition is not the same in both segments. While competition in OE is driven by vehicle manufacturers, competition in replacement tires is a more general and wide-ranged in scope. Vehicle manufacturers are both quality and price sensitive and choose the most reliable yet economical brand for their newly manufactured cars. But replacement tire segment competes on all components of the marketing mix. Price, promotion, place and product all plays critical roles in customer's final decision of purchase.

Exhibits also reveal Goodyear's position in the Tire industry.

1. It is clear that Goodyear is the second leading tire manufacturer in the world.

2. Goodyear's OE segment sales and market share reveal an important point. While Michelin has to use both Michelin and Uniroyal/Goodrich brands to capture 30% of OE segment, Goodyear manages to capture 38% with only one large brand.

3. In the replacement market, Goodyear tires enjoy a comfortable leading position as it has 15% of passenger car tires market, 11% of light truck ties market and 23% of highway truck tires market.

The strategic implication of broadening the distribution network and selling through Sears is an important consideration. Should Goodyear go… READ MORE

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