Goodyear Tire and Rubber Company
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• Goodyear was founded in Akron, Ohio in 1898 by Frank and Charles Seiberling.
• In 1992 Goodyear Tire and Rubber Company were reconsidering a proposal from Sears, initially denied in 1989, to sell their Eagle brand tires.
• Two factors contributed to the reconsideration of the sears proposal
– decline in market share
– Goodyear brand tires were being replaced annually at Sears Auto Centers.
• Tire production of 850 world wide
• Ten tire manufacturers account for 75% of world wide production
• 3 largest account for 60%
• Two types of markets
– Original equipment tire market (20% -25%)
– Replacement tire market (70%-75%)
Should Goodyear accept the proposal from sears to sell their tires?
• Selling Goodyear tires through sears will represent a significant change in distribution policy and create conflict with franchise dealers
• If they accept the proposal, should they sell only the Goodyear Eagle brand or multiple Goodyear brand tires through Sears?
• Possible cannibalization of company owned Goodyear Auto Service Center and Franchised Goodyear Tire Dealers
• Broadest line of tire products of any tire manufacturer.
• They are the second largest producer of tires in the world.
• Market share leader in U.S. for original equipment tires and replacement tires.
• They are one of the leading national advertisers in the U.S.
• Goodyear has not sold through a mass merchandiser since the 1920’s.
• Sears customers will buy the eagle brand rather than the Goodyear brand due to being more price-sesative
• Tire dealers run frequent price promotion ads in the local newspapers.
• The growing want for full service stations by consumers.
• Growth of discount multi brand independent dealers increased from 7 percent in 1982 to 15 percent in 1992
• Independent tire dealers carry several different brands for replacement buyers.
• Department stores focus on marketing their own private label brands.
• Consumers have become more price conscious and less brand loyal
• Replacement tire sales do not rely on the original equipment tire market as much as it used to.
• Canalization of company owned Goodyear Auto Centers and franchised Goodyear tire dealers if they accept Sears’ offer.
Consumer and Competitor Analysis
– Groupe Michelin, Bridgestone Corp., Pirelli, Cooper Tire and Rubber, and Sumitomo, and Continental A.G.
• Competitor strategies
– sell tires through other distribution channels, such as retail tire outlets and service stations.
– Have broad product lines that appeals to most buyer segments for different types of vehicles.
– They are becoming more price conscious and less brand loyal. – When shopping for replacement tires, most consumers are confused due to the amount of choices. Majority buy on the basis of price, while knowledgeable buyers choose based on dealer recommendations.
1-How would you characterize the competitive environment in the tire industry in 1991?
• Very intense in both OE tire manufacturers and replacement tire manufacturers. The top 3 brands of tires, advertise heavily through T.V. and print media.
• Reliability of a strong brand name, and OE tire manufacturing to secure replacement tire sales is slipping due to customers becoming more price sensitive.
• Although Goodyear is a large powerful brand, they need to compete on the basis of what consumers want.
2-What is Goodyear’s relative competitive position within the tire industry?
• They compete on the basis of quality and are known as a premium brand of tires and therefore are more expensive.
3-Does it make strategic sense for Goodyear to broaden its distribution beyond company-owned and franchised Goodyear tire retailers as a matter of channel policy? Why?
• Goodyear brand is traditionally positioned as one of the best known brand names in the world of premium quality tires.
• Creating a new distribution channel to Sears will:
– Attract their loyal and new customers to lead them to buy the Goodyear brand.
– Attract already brand informed customers to Sears
4-What are the strategic implications of broadened distribution of Goodyear-brand passenger tires through Sears Auto Centers?
• With more locations of Goodyear tires being sold, It will increase revenues with cannibalizing their franchise stores
• Broader distribution channels gives customers easier access and closer locations to buy Goodyear tires
– Goodyear franchise stores= around 100
– Sears stores= 850
• Goodyear should accept Sears’ proposal
– Although Goodyear’s methods have worked in thepast channels of distribution are changing due to changing consumer preference.
• Goodyear should sell Eagle brand tires through Sears, in addition they should sell their lower priced options such as T-Metric
• To create awareness of Goodyear tires being sold at Sears
– Create Ads for Television, newspapers, billboards, radios, and racing events.
– promotions and coupons to lure price-sensitive customers to be less brand loyal and try the Goodyear brand.
– Corporate ads will benefit both companies and can save on ad expense
– Build strong relationships with the franchise dealers and do special promotions to eliminate conflict and increase there revenue