Goodyear is launching a new tire called the Aquatred, designed for driving in wet conditions. It will target the mature replacement tire market in the US. Goodyear relies on independent dealers for 50% of its sales, but faces challenges from competitors like Michelin and changing consumer preferences. The launch of the premium Aquatred tire could expand Goodyear's offerings, but may not appeal to price-sensitive consumers or be supported by all of Goodyear's existing sales channels.
Goodyear: The Aquatred Launch HARVARD BUSINESS SCHOOL CASE STUDY
2. What is Aquatred ? It is a new tire providing improved driving traction under wet conditions
3. Major Tire Industries in U.S
4. Three major changes in US Tire Industry
5. Emergence of RADIAL tires to replace older “bias” and “bias-belted” tires. Between 1971-91 radial’s share of unit sales increased from 32% to 95%.
6. Increased in foreign competition
7. Change in nature of demand from consumers and car makers.
8. FOUR major impacts of these changes
9. Demand for the passenger tires grew sluggishly
10. New tires in the U.S market declined
11. Tires producing capacity outstripped demand Tire making capacity rose 12% and capacity utilization fell from 87% to 76%
12. Industry difficult economic conditions, coupled with the tire manufacturer slow response resulted in a number of mergers and acquisitions
13. In, 1991 company operated 41 plants in U.S, 43 plants in other 25 countries and 6 rubber plantations Known as “THE GORILLA” in world tire industry
14. Goodyear ranked third in worldwide sales of new tires
15. In 1977, company introduced the TIEMPO, first all season radial their unit sales grew from 2% to 71%
16. In 1981, company successfully launched the EAGLE
17. Market for Passenger Tires could be segmented in three ways
18. Distinction between Performance and Broad-line tires Performance Tires Broad-line Tires
19. Market can be also segmented on Replacement and OEM tires Replacement tires sold directly to the individual consumers OEM tires were sold to the car manufacturers
20. In 1986, Sir James Goldsmith attempt to takeover Goodyear greatly increased their debt. Their earnings were sluggish despite spending $1 million per day on investments.
21. Third segmentation was along brand classification It includes major brands, minor brands and private labels
22. Most consumers viewed tires as a “grudge purchase” An expensive necessity to keep vehicle in driving condition
23. Five important tire attributes 1)Tread life 2)Wet traction 3)Handling 4)Snow traction 5)Dry traction
24. Criteria for selecting Tire Retailer 1)Price 2)Offers fast service 3)Can trust personnel 4)Store is attractive 5)Offers mileage warranty 6)Brand selection 7)Maintains convenient hours
25. CONSUMER SEGMENTS
26. Price constrained buyer
27. Value oriented buyer
28. Quality buyers
29. Commodity buyers
30. Wholesale distribution channels
31. Retail distribution channels
32. Goodyear Distribution Structure 4,400 independent dealers accounted for 50% of sales revenue, 1,047 manufactured owned outlets generated 27% and the 600 franchised dealers for 8% and remaining 15% were to government agencies
33. Just Tires was a new retail format under test by Goodyear
34. Goodyear supported core events with radio, television and print advertising, announcing special prices on specific tire lines.
35. Independent Dealers
36. Indepe
Goodyear: The Aquatred Launch HARVARD BUSINESS SCHOOL CASE STUDY
2. What is Aquatred ? It is a new tire providing improved driving traction under wet conditions
3. Major Tire Industries in U.S
4. Three major changes in US Tire Industry
5. Emergence of RADIAL tires to replace older “bias” and “bias-belted” tires. Between 1971-91 radial’s share of unit sales increased from 32% to 95%.
6. Increased in foreign competition
7. Change in nature of demand from consumers and car makers.
8. FOUR major impacts of these changes
9. Demand for the passenger tires grew sluggishly
10. New tires in the U.S market declined
11. Tires producing capacity outstripped demand Tire making capacity rose 12% and capacity utilization fell from 87% to 76%
12. Industry difficult economic conditions, coupled with the tire manufacturer slow response resulted in a number of mergers and acquisitions
13. In, 1991 company operated 41 plants in U.S, 43 plants in other 25 countries and 6 rubber plantations Known as “THE GORILLA” in world tire industry
14. Goodyear ranked third in worldwide sales of new tires
15. In 1977, company introduced the TIEMPO, first all season radial their unit sales grew from 2% to 71%
16. In 1981, company successfully launched the EAGLE
17. Market for Passenger Tires could be segmented in three ways
18. Distinction between Performance and Broad-line tires Performance Tires Broad-line Tires
19. Market can be also segmented on Replacement and OEM tires Replacement tires sold directly to the individual consumers OEM tires were sold to the car manufacturers
20. In 1986, Sir James Goldsmith attempt to takeover Goodyear greatly increased their debt. Their earnings were sluggish despite spending $1 million per day on investments.
21. Third segmentation was along brand classification It includes major brands, minor brands and private labels
22. Most consumers viewed tires as a “grudge purchase” An expensive necessity to keep vehicle in driving condition
23. Five important tire attributes 1)Tread life 2)Wet traction 3)Handling 4)Snow traction 5)Dry traction
24. Criteria for selecting Tire Retailer 1)Price 2)Offers fast service 3)Can trust personnel 4)Store is attractive 5)Offers mileage warranty 6)Brand selection 7)Maintains convenient hours
25. CONSUMER SEGMENTS
26. Price constrained buyer
27. Value oriented buyer
28. Quality buyers
29. Commodity buyers
30. Wholesale distribution channels
31. Retail distribution channels
32. Goodyear Distribution Structure 4,400 independent dealers accounted for 50% of sales revenue, 1,047 manufactured owned outlets generated 27% and the 600 franchised dealers for 8% and remaining 15% were to government agencies
33. Just Tires was a new retail format under test by Goodyear
34. Goodyear supported core events with radio, television and print advertising, announcing special prices on specific tire lines.
35. Independent Dealers
36. Indepe
Unraveling Trends and Charting Growth in the Automotive Tires Market.pptxGeeta Adhikari
Chart a course for success in the tire industry. Explore the rise of new players, harness strategic insights from our competitive analysis, and stay ahead with comprehensive industry reports.
ECO 5625Factors.docFACTORS AFFECTING RIVALRY AMONG EXISTING C.docxSALU18
ECO 562/5Factors.doc
FACTORS AFFECTING RIVALRY AMONG EXISTING COMPETITORS
To what extent does pricing rivalry or nonprice competition (e.g., advertising) erode the profitability of a typical firm in this industry?
Characterization (Current)
Future trend
Degree of seller concentration?
Rate of industry growth?
Significant cost differences among firms?
Excess capacity?
Cost structure of firms: sensitivity of costs to capacity utilization?
Degree of product differentiation among sellers? Brand loyalty to existing sellers? Cross-price elasticities of demand among competitors in industry?
Buyers' costs of switching from one competitor to another?
Are prices and terms of sales transactions observable?
Can firms adjust prices quickly?
Large and/or infrequent sales orders?
Use of "facilitation practices" (price leadership, advance announcement of price changes)?
History of "cooperative" pricing?
Strength of exit barriers?
FACTORS AFFECTING THE THREAT OF ENTRY
To what extent does the threat or incidence of entry work to erode the profitability of a typical firm in this industry?
Characterization (Current)
Future trend
Significant economies of scale?
Importance of reputation or established brand loyalties in purchase decision?
Entrants' access to distribution channels?
Entrants' access to raw materials?
Entrants' access to technology/know-how?
Entrants' access to favorable locations?
Experience-based advantages of incumbents?
"Network externalities": demand-side advantages to incumbents from large installed base?
Government protection of incumbents?
Perceptions of entrants about expected retaliation of incumbents/reputations of incumbents for "toughness"?
FACTORS AFFECTING OR REFLECTING PRESSURE FROM SUBSTITUTE PRODUCTS AND SUPPORT FROM COMPLEMENTS
To what extent does competition from substitute products outside the industry erode the profitability of a typical firm in the industry?
Characterization (Current)
Future trend
Availability of close substitutes?
Price-value characteristics of substitutes?
Price elasticity of industry demand?
Availability of close complements
Price-value characteristics of complements?
FACTORS AFFECTING OR REFLECTING POWER OF INPUT SUPPLIERS
To what extent do individual suppliers have the ability to negotiate high input prices with typical firms in this industry? To what extent do input prices deviate from those that would prevail in a perfectly competitive input market in which input suppliers act as price takers?
Characterization (Current)
Future trend
Is supplier industry more concentrated than industry it sells to?
Do firms in industry purchase relatively small volumes relative to other customers of supplier? Is typical firm's purchase volume small relative to sales of typical supplier?
Few substitutes for suppliers' input?
Do firms in industry make relationship-specific investments to support transactions with specific suppliers?
Do suppliers pose ...
ECO 5625Factors.docFACTORS AFFECTING RIVALRY AMONG EXISTING C.docx
Good year report
1. Goodyear:
The Aquatred Launch
(Condensed)
Elaborated by:
AMIRA ATHIMNI
Dr. Mehdi ZAHAF
Mediterranean School of Business
MERIEM BEN YEDDER
17/10/2012
REEM NASSAR
0
RYM BELHADJ
2. Outline
Executive Summary ......................................................................................... 2
1. Situation analysis .................................................................................... 3
a. The market ................................................................................................ 3
b. Micro-environment ................................................................................... 3
c. Macro-environment .................................................................................. 4
2. SWOT analysis ........................................................................................ 4
a. Strengths ................................................................................................... 4
b. Weaknesses ............................................................................................... 4
c. Opportunities ............................................................................................ 5
d. Threats ...................................................................................................... 5
3. Main decisions ......................................................................................... 5
1
3. Executive Summary
“The Aquatred” is the new innovative tires which will be added to Goodyear products family.
It is a replacement tire for passenger cars, specially designed for driving in rainy weather.
Goodyear is satisfying different targeted segments in a matured market with a strong
distribution strategy, especially among small independent dealers. Even though, its
distribution structure had several problems which they should work on, they also have to
weigh the risks and benefits of launching the Aquatred as a premium product, which can be an
issue since we are in a price sensitive market. Barry Robbins, Goodyear’s VP needs to answer
an important question which is “Can they expand its channels, without harming the existing
ones, if so, would this channels sell the Aquatred?”
2
4. 1. Situation analysis
a. The market
Although, Goodyear is the 3rd company worldwide in sales of new tires, behind Michelin and
Bridgestone, the U.S tire industry is facing a period of “low growth, declining prices and over
capacity in an environment of corporate consolidation”.
In 1991, the U.S replacement tires sales were about $8.6 billion, which equals to 137 million
units sold. Goodyear’s passenger tire division made out the major part of its revenues (65%)
from replacement tires passengers. We are going to focus on that segment, which has reached
a state of equilibrium and is described as a mature market.
Goodyear’s new product, Aquatred, would be positioned in the U.S market as a replacement
tire for passengers’ cars, which is one of the segments of the passenger tires market, along
with the distinction between performance and broad-line tires, and the brand classifications
segment, which include major brands, minor brands and private labels.
Replacement tires are sold to individual consumers; it is indeed a B2C market opposed to the
B2B original equipment manufacturer (OEM) tires that are sold to car manufacturers.
The industry seemed to be turning toward long-life warranties to certify product quality and
low cost private labels.
b. Micro-environment
Who are the competitors?
There are a lot of tires producers in the U.S market: Bridgestone, Firestone, Michelin, private
labels…but the main competitor is Michelin. Even though, they don’t have the same image
among customers: Goodyear attracts more price-focused customers, while Michelin has a
stronger image among quality and value conscious customers. Besides, this latter has a more
intensive distribution and coverage, indeed, unlike Goodyear’s products; we can find
Michelin’s tires in warehouse clubs’ and mass merchandisers.
Who are the consumers?
Consumers are people who own cars, it is part of the vehicle maintenance to replace tires, and
to most consumers it is considered as a “grudge purchase”, it is a necessity not a pleasant
thing. The day they know that they need to change tires is the day that they are going it to buy
it. Usually consumers buy tires in pairs, 42% of them purchases involved 2 tires and 40%
involved 4 tires.
More and more consumers don’t know what tires’ brand to buy; most of them are not loyal to
a brand in particular and have no problem switching from major brands to private labels, even
though we consider that Michelin and Goodyear owners are respectively the most loyal
clients.
There are 3 types of consumers, for whom tires don’t have the same value; some are quality-
conscious buyers (18%), value-conscious buyers (23%) and price-focused buyers (59%).
Despite their different views on the product, all of them accord a great importance on prices,
it is a price driven market, and customers are getting used to buy their tires on promotion, as a
dealer said “we have created a price-conscious monster”.
Who are the partners, the channels?
-The manufacturer, Goodyear directly sold its tires to:
- Large chains and wholesalers, which represent 10% of Goodyear factory sales. They
don’t do retail operations and resold the tires to car dealers, service stations, small
independent dealers and other secondary outlets.
3
5. - Large chains (40% of Goodyear factory sales) that both sold tires at retail and resold
tires to other dealers and secondary outlets.
- Small independent dealers (50% of Goodyear factory sales) that resell in their own retail
outlets.
In addition to these retailers, there are the Goodyear owned outlets and new retail formats like
Just tires, which only sell and install tires.
c. Macro-environment
There are legal restrictions that prohibited manufacturers to impose a specific retail-selling
price. On the other hand, independent dealers had the right to protect their own interests.
In 1992, The National Tire Dealers and Retreaders Associations (NTDRA) wrote the bill of
rights for independent dealers to protect their businesses against mass merchandisers and tire
outlet stores. Manufacturers may face a problem when they will try to maintain their
distribution system and guarantee everyone interests without causing conflicts between its
members.
Regarding the technological level, tire industry has developed a lot since 1950s. For instance,
one of the evolutions has occurred in the 1970s: “The Radial Tire” was in fact an innovation
in sports car, which allows offering a high-speed traction.
In the 1990s, the tire industry wanted to offer a good quality product that guaranteed safety
and performance with “The Aquatred’, which has been developed by Goodyear to offer more
safety on wet traction.
2. SWOT analysis
a. Strengths
rd
3 worldwide in sales of new tires.
Goodyear invested a lot to produce radials.
Strong track in launching innovative new products.
Present in all market segments with different products (B2B – B2C).
Strong distribution strategy: The Company relied in 3 types of outlets. 1st the small
independent dealer (50% of sales revenues), 2nd the manufacturer owned outlets (30%
of sales) and 3rd the franchise dealers and government agencies; they are testing a new
retail format “Just Tires”.
Differentiation SOD among competitors: “Goodyear serviced independent dealers
through the area sales manager” in order to stay close with its dealers. Their S.O
consist in providing information about market trends, offering advice on operations,
handling complaints and placing orders properly.
Strong brand equity among price oriented customers.
b. Weaknesses
Problems on its distribution structure for example financing flow problems. “Most
complaints from independent dealers involved relatively minor billing problems”
Availability of its products at unauthorized dealers at low prices.
Low availability in many outlets forced consumers to buy other brands.
4
6. c. Opportunities
In 1991, 50% of independent dealers sold only Goodyear tires. Therefore, it has to
take into consideration this opportunity and strengthen its relationship with them to
generate more flows.
Goodyear tires generate 90% of the revenues for most independent dealers; this is a
great opportunity for Good year to deal more with them.
New technological breakthrough. (Aquatred)
Absence of wet condition tires and high durability/distance tires in the market.
(Opportunity to introduce Aquatred via product development).
d. Threats
Possibility of competitors launching products in the same segment.
Michelin has stronger value oriented, quality oriented buyers and customer loyalty.
Independent dealers are complaining about the competition of company-owned outlets
and mass merchandisers.
Non-selling in warehouse clubs and mass merchandisers while other competitors have
their products exposed there, is a threat.
Michelin, Uniroyal and Goodrich had recently combined their sales forces to allow
their salespeople to sell all three brands.
Keeping the Aquatred tire out of the discounting and promotion channels.
Further Erosion of market share for competitors: selling tires in lower-service outlets
could erode the value of Goodyear Brand, cannibalize sales of existing outlets, and
might push dealers to take additional lines of tires.
3. Main decisions
Launching the Aquatred Tire is a great opportunity for Goodyear. It will allow the company
to sustain its innovation oriented strategy.
Goodyear should position Aquatred to attract quality sensitive and value-oriented consumers,
in order to avoid the risk of cannibalizing other Goodyear products. This new tires offer better
traction under wet conditions, more safety, reliability and give convenient warranty (up to
80,000 miles). This innovative technology represents a competitive advantage for Goodyear
against its direct competitors such as Michelin.
In terms of distribution, Goodyear should focus on selling its Aquatred in specific targeted
area, such as, heavy rainfall cities in the US. However, Goodyear should still maintain the
current distribution channel and guarantee the interests of its 2500 independent dealers. Any
change in the distribution channel will lead to conflicts which will erode the value of the
brand and cannibalize the sales of existing channel members.
Moreover, the company could offer more training program for independent dealers’
employees to strengthen their relationships and increase sales.
Finally, a premium price and an effective product introduction for the Aquatred are required
to attract the targeted segment, which will generate the expected profit for the company and
its retailers. So the more the company takes into consideration its distribution channels
member’s interests, the less conflict it will have and the more profit they will all make.
5