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Good year analysis report
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Goodyear: The Aquatred Launch
Analysis Report
Submitted by Group 8:
Mayank Kumar (1302-084)
Nikhil Garg (1302-090)
Nikhil James (1302-091)
Prashant Gupta (1302-105)
Rahul Gupta (1302-113)
Rahul Panthri (1302-114)
Rajeev Tibarewal (1302-116)
Ravi Kumar (1302-120)
Q1. Assess Goodyear’s position in the tire industry?
Answer: Goodyear was among the five key players who dominated U.S tire market in
1970s. The other brands, which had a considerable share in market, were Firestone,
Uniroyal, BF Goodrich and General Tire.
Goodyear had an exceptionally well operating capacity that included 41 Plants in US
and 43 Plants in 25 other Countries. Six rubber plantations, 2000 Distribution outlets
worldwide, 4400 Independent dealers, 1047 manufacturer owned outlets and 600
franchise dealers.
The company also had a strong track record in launching innovative new product.
Goodyear had made large investment (over $1.5 billion) during the late 1970s to
produce radials. Goodyear had several brands under its brand portfolio namely: Eagle,
Aquatred, Invicta, Arriva, Tempo and Corsa.
Goodyear ruled the market until 1991, when company experienced its first financial
loss in 58 years, and the company's million-a-day debt service charges had placed
Goodyear to the verge of bankruptcy. Newly appointed CEO Stanley Gault, charged
with the responsibility of turning the company around, recognized that Goodyear had
to increase its selling prices wherever possible.
Q2. How do consumers buy tires? How can the market be segmented?
Answer: To analyze consumer-buying process, it is important to examine the situation
in which a consumer makes the purchase. Consumer buys tires in cases of emergency
when the tire is torn on the road; and as a preventative measure before the crisis
(including tear in the tread; nail; at car registration inspection) occurred.
The behavior of consumers for tires in the replacement market are either habitual or
dissonance seeking. Habitual buyers rely on the same brand and channel of
purchasing; while dissonance seeking consumers explore product variety in terms of
performance, resilience and durability and make a purchase in their favorite
distribution channel.
Replacement tires market of 1991 shows that consumers across all segments are
becoming more ti brand aware and price conscious. In fact, the tire has become almost
a commodity and consumers do not see it as a premium product.
The market can be segmented by dividing consumer into three categories:
Quality Conscious: Factors driving purchasing decisions are performance attributes
including long life time of the product - thickness of the rubber, reliability, tread and
superior high touch service at the point of sale. These consumers look at variety in
durability, reliability, style and high touch service from sales representatives. Price
sensitivity is often low.
Value conscious: Factors driving purchasing decisions are getting extra value for
money paid as compared to a competitive product. Performance benefits are important
in terms of lifetime for tire and reliability connected to Psychological safety.
Price conscious: Perceive tires as a necessity. Do not hesitate to change brands if it
saves money. They could be drawn to low prices, wide variety in sizes, styles and
brands
Q3.Assess the evolution of Goodyear’s distribution channels in the U.S.
replacement tire market?
Answer: The company basically relied upon three types of outlet for its sales i.e.
Independent Dealers who were 4400 in number and accounted for 50% of the sales,
1047 Manufacturer-owned outlets accounting for 27% of the sales and 600 Franchised
Dealers who accounted for 8% of the sales. Rest 15% of the sales was done through
government agencies.
During 1970’s Goodyear opened 200 outlets per year and by 1983 the company
owned 1300 outlets in United States. They primarily emphasized on franchising new
outlets and also converted some company-owned outlets into franchised and
independent dealerships.
Good year was also planning to open a new Retail format Just Tires. Its model was
taken from Quick Lube stores that offered fast oil changes without an appointment.
Working on a similar model Just Tires would sell and install tire providing guarantees
on speed and quality of installation but would not provide any other product or
service.
Q4. Assess Aquatred’s strategic role in the marketing program?
Answer: Aquatred tire is unique because of providing dry traction in snow ice and has
improved safety component. The stopping of the cars became easier. Half of the tires
managed to get the same traction under wet conditions. The product was thus priced
at a premium of 10% above the rest due to its safety and appeal.
The question is whether to add a sub brand to the existing good year brand.
Good year has been going through a crisis because of no clear strategy. They have
neglected the innovation required to stay competitive in the market and hence has
started diversifying into other segments. The consumers have failed to identify
anything distinct with good year and hence there is no differentiating factor. This has
resulted in a degradation of brand loyalty. Financially their net income is 1% lower
than their net revenue.
Good year’s reputation of being an innovator is not totally lost. The focus
should be on increasing their brand equity through increased customer perception of
tires and by getting a higher margin. Michelin has started gaining due to a wide
distribution channel and a combined sales force for premium and private label brands.
They offer strongest competition for good year. There is large number of competition
in the private label segment leading to increased price competition. It is seen the price
of private label is 18% lower but with lower functional characteristics of lifetime.
Hence Good year need Aquatred to improve its financial position and also its
brand equity. In a stagnant tire replacement market this can help Goodyear to
establish them as leader in innovation. In order to achieve the same Goodyear should
break down price driven behavior and general perception of the customers. Hence
Aquatred should be introduced as soon as possible.
Q5.Should Goodyear broadens its distribution to mass merchandisers? Should
they be offered the Aquatred?
Answer: a) We need to discuss on distribution structure of Goodyear in which 4400
independent dealers accounted for 50% of sales revenue where 27% of sales
contributed to manufactured-owned outlets and 8% of sales for franchised dealers
along with that 15% of sales were generated from government agencies. If Goodyear
has to increase its market share then they have to sell it to garages/service stations,
warehouse clubs and mass merchandisers. For this they have to cut their prices but
selling it to low-service outlets could erode the value of Goodyear brand, it could also
cannibalize the sales of existing outlets and might cause dealers to take on additional
line of tires. While figuring out from the customer research it was mentioned that
consumers wanted a tire that should be for all-season, should have a good ride
characteristic, a low noise level and should provide good mileage. They also placed a
very high importance on wet stopping ability. But interestingly, Goodyear’s
marketing team also discovered that consumers were willing to pay more for a tire
that looked like it provided wet traction. As Goodyear plan to position their tire at the
top of the broad line segment that is entry into the niche segment and to earn higher
profit, their idea of expanding distribution network using mass merchandizers should
be dropped.
b) Launching the Aquatred tire is a great opportunity for Goodyear and it will allow
the company to sustain its innovation-oriented strategy. This new tires will offer
better traction under the wet conditions, will also provide more safety, reliability and
will give a convenient warranty which is up to 80000 miles. Goodyear should also
focus on selling its Aquatred in specific targeted area such as heavy rainfall cities in
U.S. However, Goodyear should still maintain the current distribution channel and
guarantee the interests of its 2500 independent dealers. Moreover the company could
offer more training program for independent dealer’s employees to strengthen their
relationships and increase their sales.