CASE STUDY GOODYEAR : The Aquatred Launch

EKTA KOTAK - 98 MIHEER MOGHE - 95 AMRUTA VADHAVKAR - 97 SURBHI GANDHI - 85 MANAS SHAH - 91 PARAS MEHTA - 80 SHRIKUNJ SONI - 83 RANJANA HOUSNUR - 89 ASIF MAHMOOD - 99 RAJA FERNANDO - 84

INTRODUCTION
HISTORY TAKE OVER INTEREST PAYMENTS 1991 Stanley G Gault INNOVATIVE

ASSESS GOODYEARS POSITION IN TIRE INDUSTRY?

POSITION IN WORLDWIDE SALES OPERATED 84 PLANTS- 41 PLANTS IN U.S,43 PLANTS IN 25 OTHER COUNTRIES, SIX RUBBER PLANTATION, AND MORE THAN 2OOO DISTRIBUTION OUTLETS. INVESTMENTS $1.5 BN 105000 EMPLOYEES NATURAL GAS & OIL TRANSMISSIONS STRONG IMAGE IN PRICE FOCUSED CUSTOMERS BRAND LOYAL CUSTOMERS

1975

1980

1985

1990

1991

Replacement Market( includes larger brands only) Good year Michelin Firestone Sears General Bridgestone Copper Kelly Uniroyal Dunlop Pirellis others 14% 2.5 10.5 10.0 2.0 0 1.0 3.0 3.5 2.5 0 42.5 14% 7.0 10.0 10.0 3.0 2.0 1.5 4.0 3.5 2.5 0 34.0 15.5% 8.0 9.5 9.0 2.5 2.0 2.5 3.0 3.0 2.5 1.0 35.0 15% 8.5 8.0 6.5 4.0 3.0 3.0 3.0 3.0 2.5 2.0 35.5 15% 8.5 7.5 5.5 4.5 3.5 3.0 2.5 2.5 2.0 2.0 37.5

Brands replaced

Bridgestone

firestone

Good year

Michelin

minor Brands

Private label

total

Bridgestone

29

4%

8%

8%

7%

43%

100

Firestone Goodyear Michelin Minor brands Private labels

2 2 3 2 2

27 5 3 4 5

11 39 7 10 8

6 5 44 7 5

7 9 6 32 7

45 38 36 42 70

100 100 100 100 100

HOW DO CONSUMERS BUY TIRES?

GRUDGE PURCHASE AVG. TIME BETWEEN PURCHASE IS 2.5 YRS. PURCHASE OF TIRES BY CONSUMERS GREATER IMPORTANCE TO PRICE

Sales
1 TIRE 2 TIRE 3 TIRE 4 TIRE

TYPES OF CONSUMER
QUALITY CONCIOUS-18 % Quality & Performance Attributes TREAD LIFE WET TRACTION HANDLING SNOW TRACTION DRY TRACTION Michelin image was stronger VALUE CONSCIOUS-23% Quality & Performance Attributes TREAD LIFE WET TRACTION HANDLING SNOW TRACTION DRY TRACTION Michelin image was stronger

PRICE FOCUSSED-59% Treated tire as a commodity purchase 3 /4 of goodyear tires are sold on promotion Goodyear image was stronger

Brand image of major tire manufacturer, 1991

All buyers Value conscious

Quality conscious

Price focused buyers

Good year Michelin Others Uncommitted

15% 15 19 51

17% 25 19 39

15% 26 24 35

14% 7 17 62

Market segmentation

Distinction between Performance and broad line ties

Replacement and OEM Replacement and OEM

Brand Classification

Performance Broad line Major Brands Replacement Minor Brands Wider

OEM Private label Brands

Lesser Wide Car Individual customers Small Manufacturers BetterMajor tire Traction Lesser Traction Very small manufacturers Account for manufacturer 65% of manufacturers Accounts More Expensive Inexpensive Accounts for for 40% of market revenue Accounts for Accounts for 35% of distributor /territory One  accounts for sales $8.6BN IN US SALES sales 36% of 24%of unit revenue 25%of sales 1991:80% of sales High brand High price niche loyalty among the segment brands Lower price and lower life customers Warranty given by retailers

Share of retail sales of replacement tires by channel ( U.S market only)

Channel share of retail sales
GARAGES/ SERVICE STATION SMALL INDEPENDENT TIRE DEALERS MANUFACTUREROWNED OUTLETS WAREHOUSE CLUBS MASS MERCHANDISER LARGE TIRE CHAINS OTHERS TOTAL

1976

1981

1986

1991

18% 36

11% 47

8% 46

6% 40

11

10

11

0 28

0 24

2 16

6 12

4 3 100%

2 6 100%

12 5 100%

23 4 100%

OEM Market
1975 Good year Michelin Firestone General Uniroyal Dunlop Bridgestone 35% 2 24 11 20 0 0 1980 28% 5 22 11 24 10 0 1985 32% 11 22 13 22 0 0 1990 36% 16 17 12 17 1 1 1991 38% 16 17 11 13 3 2

Growth strategy
In this case study Goodyear is using 2 growth strategies 1) market penetration strategy Goodyear is striving to increase the sale of the current products in the current markets through following ways Increase sales to the current customers Pull customers from the competitors products Convert non-users into users 2) Product development strategy:  Goodyear is able to increase sales by product improvement and by introducing New products. For example- Aquatred tires which has better wet traction and performance as compared to its competitors

POTENTIAL ENTRANTS

SUPPLIERS FIVE COMPETITIVE FORCE

BUYERS

SUBSTITUTES

COMPETITOR S

DISTRIBUTION CHANNELS IN US

WHOLESALERS & LARGE CHAIN(50%)

RETAIL CHANNEL

LARGE TIRE CHAIN

GARAGE SERVICE STATION

SMALL INDEPENDENT TIRE DEALER

MASS MERCHANDISER

WAREHOUSE CLUBS

MANUFACTUREROWNED OUTLET

ASSSES THE EVOLUTION OF GOOD YEARS DISTRIBUTION CHANNELS IN REPLACEMENT MARKET

4,400 SMALL INDEPENDENT DEALERS (50% OF SALES REVENUE) 1047 MANUFACTURER OWNED OUTLETS (30% OF SALES) FRANCHISED DEALERS AND GOVT. AGENCIES JUST TIRES BY 1983, COMPANY OWNED 1300 OUTLETS EMPHASIS ON FRANCHISING NEW OUTLETS CONVERTING OWN OUTLETS INTO FRANCHISED AND INDEPENDENT DEALERSHIP RETAIL MARGINS-28% AND WHOLESALE MARGIN- 14% GOODYEARS SERVICE TO INDEPENDENT DEALERS

GOODYEARS DISTRIBUTION CHANNEL IN REPLACEMENT MARKET

 SERVICES GIVE MORE REVENUE THAN SELLING TIRES.  COMPLAINTS OF DEALER  IN 1989, 70% OF GOODYEARS INDEPENDENT DEALERS CARRIED ONLY GOOD YEAR TIRES.  GENRATED 90% OF REVENUES FOR MOST INDEPENDENT DEALERS  NTDRA TO PASS A BILL OF RIGHTS IN 1992  LOW PRICE OULETS WERE NOT ALLOWED TOSELL GOODYEAR TIRES, BUT STILL THEY CONTINUED SELLING AT LOWER PRICESGOODYEAR SUED TWO AUTOMOTIVE CHAINS FOR ADVERTISING THEIR BRANDS.

Aquatred Launch
Better wet traction, better tread life, good friction. Managers concern at Goodyear Expanding distribution channel Launch related issues

SOLUTION
Launch the new Aquatred tire, but keep distribution the same.  Pros : Less complex, support of independent dealers, No risk of eroding Goodyear brand name.  Cons : Miss opportunity to boost sales, No answer for OEM replacements by other brands. Push Aquatred tire aggressively in market, expand distribution, set uniform pricing structure, inform buyers,

Thank you