Harvard Business Case Study

Gorilla

$10.91 billion

$0.1 million.

3rd

105,000

In June 1991, Stanley G

Gault took over as the

chairman with Barry Robbins

serving as Vice President of

marketing.

In the 1980s, radial tires were quickly replacing the conventional bias-belted tires.

Foreign competition increased. Michelin of France used its expertise in radial tires to gain market share.

Rising oil prices decreased

demand.

Overcapacity was expected to

last through the mid 1990s.

Difficult economic conditions led to many

mergers and acquisitions

Only major US tire

manufacturer that

had not been acquired

was Goodyear

The market for passenger tires can be segmented

along brand classifications.

Average price of private label tire was 18%

lower than that of a branded tire.

36%

24%

40%

% of unit sales

Major brands

Minor brands

Private Labels

50%

27%

8%

15%

% of sales revenue

independent dealers

maufacture ownedoutlets

franchised dealers

government agencies

Goodyear plans to launch its latest technological innovation,

60,000 miles warranty

Unique design channels

water out from under

the tire

Superior wet traction

Does not hydroplane

Premium price product

Key issues

Is

Aquatred the right product for

dealers and consumers ??

1.

For consumers:

A survey conducted by Goodyear among car owners revealed the top two performance attributes consumers consider for buying tires :

Aquatred :

Tread life – 60,000 miles (much above market average)

Wet traction – same as a new all-season tire after

being 50% worn !

A comprehensive survey comparing purchase behavior of Aquatred and Invicta GS buyers yielded the following numbers : The first segment did, on an average 50 % more product research than the second and ended up buying Aquatreds. Thus, Aquatred does indeed meet customer needs.

Checked newspaper ads 33% 23%

Telephoned outlets 21% 14%

Shopped other dealers 20% 12%

Total : 74% 49%

For dealers: The following table showcases the major consumer segments for Replacement Passenger Tires (Exhibit 4) :

Percentage sales of Major brands due to Price constrained and Commodity buyers = (22%)(30%) + (37%)(18%) = 13.26 % Percentage sales of Major brands due to Quality and Value oriented buyers = (18%)(54%) + (23%)(51%) = 21.45%

Price-constrained

buyers 22% 30%

Value-oriented

buyers 18% 54%

Quality buyers 23% 51%

Commodity buyers 37% 18%

The table below enlists the purchase decision segments of Aquatred buyers : As is clearly evident, bulk of Aquatred buyers are the Quality and Value oriented buyers, who form the greater 21.45 % segment (as calculated previously).

Price-constrained Buyers 6%

Value-oriented Buyers 23%

Quality Buyers 61%

Commodity Buyers 10%

“In 1991, Goodyear and Michelin were virtually even, but Michelin’s image was stronger among value-oriented and quality buyers, while Goodyear had a stronger image among price-constrained buyers and commodity buyers.”

Thus the introduction of Aquatreds, increases Goodyear’s market reach to include quality and value buyers and can greatly boost the selling potential of dealers.

Should

Distribution be expanded ??

2.

Considering present situation of overcapacity,

expansion of distribution is futile and would only

increase competition between dealers.

Instead, a structural modification aimed at

maximizing sales can prove useful.

Goodyear’s 4400 independent dealers, who

contribute 50% toward its sale are its biggest

assets and proper measures must be taken to avoid

further straining of relationship with them.

50%

27%

8%

15%

% of sales revenue

independent dealers

maufacture ownedoutlets

franchised dealers

government agencies

Business with wholesalers found supplying in low-priced outlets must be reduced and replaced by alternate distribution channels. This would provide following benefits:

• Retail dealers would be encouraged as Goodyear

products won’t find their way into low priced

outlets.

• Aquatred will be available only at its designated

value in market thereby maintaining its premium

image.

Independent dealers 50/4400 = 0.0114 %

Manufacture owned outlets 27/1047= 0.0258%

Franchised dealers 8/600= 0.0133%

As shown above, the manufacturer owned outlets

are the most profitable in terms of sales volume.

But they are accompanied by additional costs of

capital and management.

Thus, efforts can be concentrated on improving

numbers of franchised dealers for replacing select

wholesalers.

What should be the

Pricing and

Promotional policies

??

3.

The core target market for the Aquatred brand

are the quality and value oriented consumers.

Thus, its brand image should be that of a

premium brand and should be viewed as the

highest value offering.

Pricings of 6 dealers were found as follows by a mystery shopper: Calculating the average price, we get $85.32 for Aquatred with Black sidewall $85.82 for Aquatred with White sidewall

Studies reveal that customers expect broad-line tires from Goodyear brand to be priced within a $6 range

With Invictus GS priced at $80, dealer pricings averaging at $85.32 and customer expectations in mind, an appropriate pricing scheme would be :

$86.5 Aquatred with Black sidewall

$88.5 for Aquatred with White sidewall

Promotional policies

Facing difficult economic conditions, cutting back on the advertising budget can be detrimental to the brand. The need of the hour is aggressive marketing and advertising using radio, television and print media to secure loyal customer base.

The commercial time opportunity at the Olympics must be utilized to the fullest for introducing the Aquatreds to the world

Requests for Aquatreds for imported cars must be seen as an opportunity to market the comparable wet traction of the Invictus GS The comparable pricing and characteristics of Invictus GS can rebuild its popularity and boost its sales too

Conclusion

Aquatred must be launched as a premium product for catering to the quality and value conscious consumers.

Such positioning will not only reduce cannibalization but will also attract rival market share.

Current distribution channels must be utilized to the maximum and products must be aggressively marketed and advertised.

Dealers must be encouraged to maintain recommended price to earn future promotional offers.

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