Goodyear Case Study.

1. INTRODUCTION & COMPANY BACKGROUND

Goodyear is a tire company based in Akron,Ohio,USA that has been in operation since the 1970s. It has been enjoying a considerable portion of the market share (1 of the 5 dominating tire companies) from the tire industry all through the 70s to 90s. With the introduction of radial tires, Goodyear shifted from bias-belted tires to radial tire production. The products introduced by Goodyear have always been innovative but sales were proven to be "sluggish" during the 1980s. In 1991, Goodyear underwent a shift in management when Stanley G. Gault became the president of Goodyear and put an emphasis on new development.

In 1992, however, Goodyear decided to launch a new tire, Aquatred, that specifically provides improved control and traction under wet conditions. In this case study, we plan to determine whether the launch was a positive step forward for Goodyear, or if it was a big mistake to launch it in the first place. To determine the direction that Goodyear should undertake, or the areas in which they should focus on, Goodyear has to take in account the benefits or risks that may come if they launch Aquatred, and determine whether or not this new product is parallel to their positioning in conjunction with the market segmentation and their core value. Can Goodyear expand its market channel and own the market, without sacrificing existing channels and their marketing mix? Will Aquatred be distributed by the newer marketing channels? We need to analyse Goodyear's business and marketing strategy because the answer is always IT DEPENDS!

Before we go deeper, the first step is identifying the core business of Goodyear. While being a tire company that aims to provide tires or parts to it's target consumers (people who drive cars), Stanley G. Gault has stated:

"...[my goal in Goodyear is] to create a market driven organization... to serve the customer and the ultimate user… Customer's want safety… they want reliability…"

From this we can deduce that Goodyear's core value is to provide innovative tires to the market, while listening to the wants and needs of the market, which in the mind of Gault, is safety and reliability.

Next we have to determine whether the actions and decisions of the company, as well as the reaction from the market itself, mirrors what was stated by Gault..

2. STP ANALYSIS

i) Segmentation

Goodyear has segmented its market strategy into two major groups:

a) Original Equipment Tire Market (OEM) and Replacement Tire Market.

Tires that are sold directly to the automobile or truck manufacturers are called OEM. This is the least profitable option but it is considered strategically important to be a player in this segment. It is because car or truck owners who are satisfied with their original tires would seek out the same brand when they need to be replaced.The more profitable option for Goodyear is Replacement tires, which are sold to individual consumers. This makes it a B2C market, which is opposed to B2B, whereby original equipment manufacturer tires are sold to car manufacturers.

b) Performance and broad line tires

Performance tires are wider than broad-line tires, more expensive but provided better traction. Consumers who already used performance based tires rarely change to broad-line tires because of the resulting decrease in performance. People who have used broad-line tires are the consumers who we can label as price focused buyers.

c) Major brands, minor brands and private label.

Major brands have the highest recognition among consumers. Minor brands represented 24% of unit sales and included tires made by smaller manufacturers as well as tires made by major manufacturers but sold under a different name. Many small manufacturers specialize in private label tires while some larger manufacturers used excess capacity to service the private label market.

ii) Targeting

Goodyear is targeting in two segment market of consumers,

a) Commodity buyers:

-Bargain hunters: little brand preference, low retailer royalty and a tendency to shop around extensively

-Trusting patrons: View brand as unimportant and tended to buy lower-priced tires at a preferred retailer

b) Price constrained buyers: buyers buy the best brand they could afford within their budget

iii) Positioning

Between the 5 top competitors in the tire industry, Goodyear is known as the "Gorilla" of the industry and has enjoyed a worldwide top 3 ranking in tire sales.

Among consumers and competitors in the tire industry, Goodyear has always been known to introduce innovative tires that have relatively high functionality in the market.

Tiempo : First all season radial that could withstand all 4 seasons

Eagle : High performance radial that offers high speed traction for sports cars

Invicta GS: All season performance and smooth, quiet ride.

Others : Invicta GL, Arriva, Corsa GT all boasting all season performance

By purchasing Goodyear tires, consumers have a set expectation that they will get tires which are innovative and reliable for all seasons.

Goodyear has also claimed in a proposed advertisement for the Aquatred tire, that it is "the tire of the future". Based on statistics of the major consumer segments' intents, quality-seeking consumers are the highest percentage in buying Goodyear tires. But research has also shown that Goodyear is strong with the price constrained and commodity buyers of tires.

iv) Targeting Decision

Based on our STP analysis, instead of the two targets that Goodyear had, they should be targeting on the Replacement tires segment for major brands with an emphasis on performance. This means that they will be targeting consumers who are more concerned with quality.

They also should target the price-constrained buyers as they have products positioned affordable, reliable tires with high mileage

3) SWOT ANALYSIS

Strengths:-

Based on customer's survey,

- Goodyear provides good customer services and tends to be the pioneer of warranties in tire industry at that moment.

-Goodyear leads the advance technology after introducing the Aquatred type tire concept replaced the radial tires.

- Goodyear build wide distribution channel by strong price-constrained and keep the commodity buyers maintains buying their product.

- They have strong position with independent dealers through effective ways as well. Distribution strategy made by Goodyear attracts all the dealers. 50% of sales revenue on independent dealers, 30% on manufacturer owner outlets and the remaining goes to franchise dealers and government agencies.

Opportunities:-

- Goodyear keeps the good relationship with the dealers by offering discounts and incentives for the dealers. This automatically generates 90% of revenues for most independent dealers.

-Market share and the availability increase by time as well as the auto-services system.

-Market opening for tires with strong grip and traction in wet conditions

Weaknesses:-

-Problem on its distribution structure for example financing flow problem. "Most complaints from independent dealers involved relatively minor billing problems".

-Low availability in many outlets forced consumers to buy other brands.The distribution channels of Goodyear was not focused on garages or service station, warehouse clubs or mass merchandisers. Instead of focusing on the mentioned distribution channel, Goodyear focused on these three types of outlet, manufactured-owned outlets, independent dealers and franchised dealer.

Threats:-

Based on the study case, below we list up all the threats that being faced by Goodyear which took place in their market. The threats are:

- Possibility of competitors launching the products in the same segments

- Michelin has stronger value oriented, quality oriented buyers and customer royalty.

- Independent dealers are complaining