Goodyear Presentation
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Transcript of Goodyear Presentation
Goodyear : The Aquatred Launch
BY
ANANT AGGARWAL 10ib-009 AKANKSHA RANJAN 10fn-007
ALI AKBAR SAZID 10it-003 ANKIT BARIAR 10dm-015
AmRITA MISHRA 10fn-012 ANKUR SINHA 10hr-007
ANURAG WATE 10hr-008 ANKIT BATRA 10hr-006
TiRE INDUSTRY IN U.S till 1970s
• 5 Major players : Goodyear, Firestone, Uniroyal, BF Goodrich and General Tire
• Consistent growth in profits • Absence of foreign competition• Changes during the period– Emergence of radial tires superior to existing bias
and bias belted tires– Increased competition e.g Michelin of France– Change in nature of demand of tires
IMPACT OF CHANGES• Sluggish growth in demand for passenger tires• Decline in price of tires• Tire producing capacity outstripped demand• Number of mergers and acquisitions– Uniroyal-Goodyear sold to Michelin– General Tire sold to Continental– Armstrong Tire sold to Pirelli– Dunlop sold to Sumimoto – Firestone sold to Bridgestone
TREND OF SALES OF PASSENGER TIRES(in millions)
1991 1986 1981 1976
152 144123 137
43 54
37
50
Replacement OEM
“the gorilla” : COMPANY BACKGROUND
• Founded by Frank Seiberling in 1898
• Manufactures tires for automobiles, commercial trucks, light trucks, SUVs, race cars, airplanes.
• Operates 41 plants in US, 43 plants in 25 other countries, 6 rubber plantations and more than 2000 outlets
• Revenue of $10.91 billion and 105,000 employees
Company background(cont.)
• Introduced the Tiempo in 1977, the first all-season radial
• Launched Eagle in 1981, the first radial tire offering high speed traction for sports
• Large investment in pipelines for natural gas and oil transmission during 1980s
World leaders in tire industrysales(in billion us dollars)
Michelin,10.4
Bridgestone; 9.8
Goodyear,8.5
Continental; 3.9
Pirelli; 3.7
Sumimoto; 3.5
Classification of tires
Brand classification
• Major Brands• Minor Brands• Private label tires
Manufacturing purpose
• Replacement • OEM
Quality based
• Performance• Broaline
•36% of unit sales•Made by large manufacturers•Highest recognition
Major Brands
•24% of unit sales•Made by small manufacturers•Includes high priced niche brands
Minor Brands
•40% of unit sales•Mostly exclusive to particular retailer•One distributor per territory•Less retail price •Less average life
Private label
Price constrained buyers
Value oriented buyers
Quality buyers
Commodity buyers
Consumers
Price Oriented
Brand Oriented
Outlet Oriented
0
5
10
15
20
25
30
35
40
45
50
Percentage sales
19851992
Distribution channel for replacement tires
Tire manufacturer
Wholesalers
Retailers / Dealers
End consumers
Wholesale distribution channels• Major distribution channels are :– Oil companies– Large retailers– Manufacture owned outlets– Independent dealers
• 3 kinds of independent dealers :– Dealers strictly wholesalers, without any retail operations
(10% of sales)– Dealers who sold tiers at retail and resold tires to other
dealers and secondary outlets(40% of sales)– Dealers who bought tires to resell in their own retail
outlets only (50% of sales)
9%
24%
11%
56%
Percentage Sales for 1976
Oil Companies
Large Retailers
Manufacturer owned outlets
Independent dealers
5%
20%
10%65%
Percentage Sales for 1981
3%
16%
13%
68%
Percentage Sales for 19862%
19%
12%
67%
Percentage Sales for 1991
Retail Distribution Channel
Garages/Service stations
Small, neighbourhood
outlets
Sells gasoline, tires and auto services
Sold private label and branded tires
Warehouse clubs
Large stores
Sold various categories like food,
clothing
Offered limited brand selection, low
prices
Mass merchandisers
Retail chains
Sold tires, auto services and
different merchandise
Consisted of many outlets
Retail Distribution Channel(Cont.)
Manufacturer owned outlet
Owned and operated by manufacturer
Sold only one brand of tire
Offered range of auto services
Large independent tire
chains
Known as multibranded discounters
Consisted of many outlets within a
region
Carried major brands and private label
tires
Others
Half the sales account for by full
service auto supply stores
Sold tires at low prices
Competitor for independent dealers
due to price
Goodyear’s Distribution Structure
• 4400 independent dealers accounting for 50% of sales revenue
• 1047 manufacture owned outlets generating 27% of sales revenue
• 600 franchised dealers accounting for 8% of sales
• Remaining 15% attributed to government agencies
Distribution structure(cont.)
• Average selling price by independent dealers - $75 per tire
• Retail margins :– 28% for independent dealers– 25% for dealers carrying other brands– 20% for private label tires
• Wholesale margins :– 18% for private label tires– 14% for goodyear tires
‘Just Tires’• New retail format by Goodyear
• Modeled after ‘quick lube’ stores
• Sold and installed tires only
• No other products or services
• Provides guarentees on speed and quality of installation
Promotions by Goodyear
• 3/4th tires sold in independent or company owned outlets at discount of 25%
• For independent and company owned dealer, promotions by “core events”
• Company offered dealers “spring dating” every spring which provided extended financing
INDEPENDENT DEALERS V/S COMPANY OUTLETS
INDEPENDENT DEALERS COMPANY OWNED OUTLETS
Offered more choice for brands Offered single choice for brand
Required less capital Required more capital
Required less attention from management
Required more attention from management
Restricted brand availability and market share
Expanded brand availability and market share
Goodyear’s Independent dealers
• Goodyear provided its independent dealers with services like :– Expertise and training– Certified auto services– The Goodyear Business Management System– National and regional advertising– Research on market trends
• It serviced its independent dealers through area sales manager
• Dealer issues consisted of minor billing problems and complaints about competition from other outlets
Allowances to dealers
Wholesale allowance
Merchandising allowance
Advertising accruals
Auto services
• Constituted $50 billion market• Included jobs like oil changes, tune-ups, parts repairs,
etc• Typical price - $60• Break up of auto service revenues :
40%
29%
15%
8%
8%
service stationsnew car dealersspeciality outletstire dealersmass merchan-disers
COMPETITION FACED BY GOODYEAR
• Major competition from Michelin which had stronger image among value oriented and quality buyers
• Bridgestone and Michelin were planning to launch new tires with 80,000 mile warranties
• Uniroyal was introducing a new tire for light trucks
Aquatred : The latest tire by Goodyear
• Target market : Replacement tires in U.S passenger cars
• Focus on tread design and appearance
• Reduced hydroplaning and improved traction in wet conditions
• Planned to be sold with 60,000 mile warranty
• Positioned at top of broad line segment
ALTERNATIVES FOR TIMING OF LAUNCH
• Alternative 1 : At the time of winter olympics
• Alternative 2 : Any other time i.e before/after olympics
BENEFIT RISK
Due to winter and snow, people would want tires with better wet traction to ensure safety
The accumulated inventory level would not support tires for small cars to be used in olympics
BENEFIT RISK
The inventory levels would support large size cars
Initial sales may be low due to absence of winters.
RECOMMENDED STRATEGY FOR LAUNCH TIMING
• Alternative 1 seems better because :
– High initial sales expected due to winter and snow
– Due to prior commitment the launch would keep the brand image intact
– Test market data shows 74% of buyers have domestic make of cars
ALTERNATIVES FOR DISTRIBUTION CHANNEL
• Alternative 1 : Use existing channel
• Alternative 2 : Add new channels
RECOMMENDED STRATEGY FOR DISTRIBUTION CHANNEL
Company should use the existing distribution system ango for sale by independent dealers because :
• Independent dealers account for 50% sales
• Likely to replace competitor brands due to design and performance
• Fear of brand value erosion otherwise
ALTERNATIVES FOR PRICING
• Alternative 1 : Keeping it low cost
• Alternative 2 : Fixing an average cost
• Alternative 3 : Costing at a premium price
Recommended strategy for pricing
Alternative 3 seems the best option because :
– In 1991, company earned net income of less than 1% of total sales revenue
– Company needs to enter into value and quality oriented customer segments
– Higher dealer margins
– Avoid cannibalization of Invicta GS tires sales
Other strategies
• Aggressive promotion by the existing 60% space of company in media
• Increase in advertising accruals for dealers from 4 to 6 – 7 % to get their support
• Resolving channel conflict by methods like :
THANK
YOU