Goodyear Tire and Rubber Company Case Study

SUMMARY OF CASE ANALYSIS: ÐŽVGOODYEAR TIRE AND RUBBER COMPANY

1. INTRODUCTION ÐŽVGOODYEAR TIRE AND RUBBER COMPANY

Goodyear Tire and Rubber Company, was founded in 1898 and was the world tire production leader until November 1990 when Groupe Michelin took over after merging with Uniroyal Goodrich Tire Company.

GoodyearÐŽ¦s principal business is the development, manufacture, distribution, and sale of tires throughout the world. Its tires and tube sales represent 83 % of 1991 corporate sales of $10.9 billion with corporate wide earnings of $96.9 million. It has its owned Goodyear Auto Service Centers and franchised Goodyear Tire Dealers in supporting its distribution and sale of tires in US.

Goodyear controls 20 percent of the worldÐŽ¦s tire manufacturing capacity and 37 percent of US tire-making capacity and sales outside US represent 42 % of company revenues.

Table 1 ÐŽV Worldwide Market Share, 1990

In early 1992, Sears, Roebuck and Company (Sears), owner of Auto Centers proposed to sell GoodyearÐŽ¦s popular brand tire, Eagle. This has raised GoodyearÐŽ¦s management consideration due to the following facts:

(i) Goodyear brand tires has declined 3.2 % in market share (4.9 million units) for passenger cars between 1987 to 1991;

(ii) 2 million worn-out Goodyear tires were replaced with other brands at 850 Sears Auto Centers.

2. THE ISSUE

The declining of Goodyear market share was believed due to the growth of warehouse membership club and the discount tire retail. See Table 2 and 3 below. In addition to that, about 2 million Goodyear tires were replaced by other brands at Sears Auto Centers in the Replacement Tire Market.

Table 2 ÐŽV US Market Share of Tire Replacement by Retail Outlet

Type of Retail Outlet 1982 (%) 1992 (%)

Traditional multibrand independent dealers 44 44

Discount multibrand independent dealers 7 15

Chain stores, department stores 20 14

Tire company stores 10 9

Service stations 11 8

Warehouse clubs 0 6

Others 8 4

Total 100 100

Table 3 ÐŽV Pie chart of US Market Share of Tire Replacement by Retail Outlet

The GoodyearÐŽ¦s management is considering Sears proposal to sell its GoodyearÐŽ¦s popular brand i.e. Eagle which basically affect it distribution policy.

In summary, the above factors lead to a question that need to be addressed by GoodyearÐŽ¦s management namely, ÐŽ§Should Goodyear review its distribution and retails policy in order to re-gain market share and increase its revenue?ЎЁ

3. SITUATION ANALYSIS

We need to consider a number of relevant information prior to making the decision. The information that needs to be considered is:

(a) What are GoodyearÐŽ¦s situation, its strength, weaknesses, opportunities and threat?

Table 4 ÐŽVSWOT Analysis on Goodyear

Strength Weaknesses

„X 94 years of experience

„X 37% of US tire-making capacity

„X 60% in the Tire Replacement market (Top Ten in US)

„X 40% in the Original Equipment Manufacturer market

„X Market leader in North America

„X Broadest line of product

„X Broad market brand names with 11 brand names

„X Premium quality brands

„X A leading national advertiser

„X 8000 retails point of sale

„X 1000 company owned Goodyear Auto Service Centers

„X 2500 franchised Tire Dealers „X exclusive distribution policy

„X lack of customer service

Opportunities Threat

„X Additional 850 retails channels „X 2 million Goodyear brands were replace annually at Sears

„X growth of warehouse membership club stores and discount tire retails

„X customers loyalty to Sears

(b) What is the position of Goodyear in the Tire Industry?

There are 2 types of market in the tire industry, namely;

(i) Original Equipment Tire market;

Original equipment tires are sold by manufacturers directly to automobile and truck manufacturer and this account for 25% to 30% of the tire unit production on yearly basis. GoodyearÐŽ¦s share in this market is 38% in 1991.

(ii) The Replacement Tire Market.

This market accounts for 70% to 75% of tires sold annually and Goodyear is top ten in Passenger cars, Light-truck and Highway-Truck tires with 14% in Passengers cars and 11% in Light-truck and Highway-Truck tire.

Table 5, 6 and 7 ÐŽV Top Ten in Passenger Car, Light-Truck and Highway-Truck Tires

(c) What is the trend of the manufacturer, distribution, retail and the customers?

Manufacturer found its advantages to have a broad product line for the customers. Thus, customers will be able to choose various types of tires in the distribution and retail stores.

Major brand-name tire manufacturers build strong wholesale and retail dealer relationships and uses ÐŽ§retail points of saleЎЁ to