1. Background / Situation Analysis: As we anticipate the launch of our new Aquatred tire,
we need to finalize the specifics with regards to our distribution channel strategy. This
analysis highlights the impact of our new product on channel management, taking into
account, our relationship with our independent dealers, customers’ wants and needs,
changes in marketplace, in conjunction with our marketing objectives. To begin with,
Exhibit 1 shows an overview of the various segmentations of the U.S. Passenger Tire
Market. To design the channel strategy, this analysis employs the 5 C’s framework
(Customer, Company, Competition, Collaborator, and Context). Analysis of the 1st C, i.e.
Context or the Situation analysis (see Exhibit 2: SWOT analysis) shows that we are the
Market leader in the U.S. replacement and OEM passenger tire markets with a strong
track record of launching innovative products. Aquatred is an innovative tire that
provides the best wet traction with shortest stopping distance under wet conditions that
also has tangible and perceptible difference over existing models. We have the
opportunity to capitalize on the high brand recognition and the First-mover advantage in
launching Aquatred before the competition, at a 10% price premium over the Invicta GS,
as the test market survey showed that Aquatred buyers are more likely to replace
competitors’ tires compared to Invicta GS. Having said that, however, we have some
weaknesses that we need to address, i.e., we have larger debt, generate lower profits, and
have limited distribution channels compared to competitors. In addition, we have some
external threats from the market, i.e. increasing competition, maturing replacement tire
market, new channels gaining share, which combined with low-growth, declining prices
and over-capacity in an environment of corporate consolidation of the U.S. tire industry
warrants for a well designed distribution channel strategy.
Distribution Structure Comparison Analysis: Further analysis on the comparison of our
distribution structure with that of our competitor Michelin (see Exhibit 3, that analyzes
next 3 C’s, Company, Competition, and Collaborators or independent dealers in this
case), reveals that, compared to our major competitor, in terms of brand positioning, we
have a weaker brand image among quality-focused and value-focused consumer
segments, we have less number of outlets, we have limited number of distribution
channels which means that in terms of distribution intensity, we have a lower coverage
level (selective distribution) than Michelin with higher coverage level (intensive
distribution) which works against us especially because tires are being viewed more and
more by consumers as a commodity. Also, Goodyear independent dealers are unhappy
about the sales cannibalization due to channel conflict coming from company owned
outlet, or from low-priced outlets.
Consumer behavior analysis: There are two types of tire-buying consumers, emergency
buyers and planned buyers. The comparison analysis in Exhibit 4 lays out their buying
decision process, the roles played by the branding and promotion in their decision
process, and the implications for Goodyear’s channels of distribution and the Aquatred
launch. Emergency buyers have to buy replacement tires immediately and they view tires
as a “grudge purchase” and they are more price-focused. The planned buyers plan their
tire purchase ahead of time and are more quality and value conscious. Price-focused
buyers treat tires as a commodity purchase, they generally tend to buy low-priced tires,
they are less brand loyal and look for promotions, whereas, quality and value conscious
buyers place greater weight on tire quality and performance attributes such as tread life,
wet traction, handling, snow traction, and dry traction, they are brand loyal and are less

2. sensitive to promotions.
Recommendation: Based on the analysis above, initially, Aquatred passenger tire should
be positioned as a major brand at the top of the broad-line segment in the replacement tire
market to target quality-conscious and value-conscious consumer segments through our
existing distribution channels, i.e. small independent dealers and our company-owned
outlets, since our existing channels best support the relatively high-end positioning of this
product. However, as market evolves, we should also consider expanding our distribution
channels to lower-priced outlets such as mass merchandisers and warehouse clubs to
target the price-focused buyer segment since our current channel strategy does not
effectively address the needs of consumers who are price sensitive. By introducing minor
brand or private label equivalents and placing them in lower-priced outlets, we can gain
more market share, without cannibalizing existing sales.
APPENDIX
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Exhibit 2: SWOT Analysis - Aquatred (product) and/or Goodyear (company)
|Strengths |Weaknesses
|
| | |
|Aquatred is an innovative tire that provides the best |Brand image is weaker among
quality-conscious and value-conscious buyer |
|traction with shortest stopping distance under
wet |segments. |
|conditions. It also has tangible and perceptible difference |Large debts incurred due to
emotional takeover battle in 1986 and low profits |
|over existing models |Limited channels of
distribution |
|Market leader in the U.S. Replacement and OEM passenger tire|Goodyear products
sporadically available at unauthorized dealers at low prices |
|markets |Low availability in other outlets forced
consumers to choose other brands |
|Strong track record of launching innovative products |Knowledge levels of
independent dealers. |
|Stronger brand image among price-focused consumer segment. |Independent dealers
sometimes had competition from manufacturer owned outlets. |
|Aquatred design patented. |Point of sale display did little to alter
consumer’s expectation of retail |
|Goodyear ranks 3rd in worldwide sales of new
tires. |price. |
|Strong brand
recognition | |
|Close relationship with small independent
dealers. | |
|Opportunities |Threats
|

3. | | |
|Capitalize on the high brand recognition and the First-mover|Low-growth, declining
prices and over-capacity in an environment of corporate |
|advantage in launching Aquatred before the competition |consolidation of the U.S.
tire industry. |
|Price Aquatred at a 10% premium over the Invicta GS. |Matured replacement tire
market and new channels gaining share. |
|Aquatred buyers are more likely to replace competitor’s |Michelin and Bridgestone are
planning to launch new tires with 80,000 miles |
|tires. |warranty in 1992 with huge advertisement
budgets. |
|Target high precipitation areas in the U.S. |Continental Tire is working to
launch Aqua Contact, its own anti-hydroplaning |
|Selling through lower service channels could increase the |tire in early
1993. |
|sales. |Michelin tires are available through 7000
dealers, mass-merchandisers, and |
|Average life of a private label tire is slightly lower than |warehouse
clubs |
|the life of a branded tire. |Michelin, Uniroyal, and Goodrich
combined their sales forces to allow their |
| |salespeople to sell all three
brands. |
| |Michelin’s brand image is stronger quality-
conscious and value-conscious |
| |consumer
segments. |
| |Michelin’s rapid market share growth in both
replacement and OEM passenger tire|
| |markets between 1975 and
1991. |
| |Significant proportions of consumers who owned
major brands replaced their |
| |tires with private label brands because of lower
price |
| |Selling through lower service channels could
erode the value of the brand. |
| |Average retail selling price of a private label tire
is 18% lower than the |
| |price of a comparable branded
tire. |
| |Consumers viewed tires as a “grudge
purchase”. |
| |NTDRA passed a bill of rights to support
independent dealers |