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CASE: GOODYEAR, THE AQUATRED LAUNCHGROUP 6

BACKGROUND (sharmista) 1900s U.S. tyre industry dominated by 5 companies. It was characterized by consistent growth in revenues & profits and absence of foreign competition.

1970 -1980s: three important changes Bias tyres replaced by radial ones. Foreign competition Change in demand from consumers and car manufacturers.

BACKGROUND Major impacts of these changes: Sluggish demand due to increased average life of tyres with less usage of cars.

Declined tyre prices by 25% 12% increased tyre making capacity but capacity utilization reduced to 76%. Mergers and acquisition due to economic slow down.

BACKGROUND Goodyear known as Gorilla for its dominance in the tyre industry. Highest market share -15% (replacement) & 38% (OEM market) in 1991 Made investment over $1.5bn to convert its factories to

produce radials. Had strong track record in launching innovative products. Stanley Gault, Chairman , increased priority on new product development.

BACKGROUND GY Earned net income of less than 1% on total revenues. GY testing a new retail format just tyres

Price conscious consumers, making purchases only onsale. Increasing dependence of industry on independent dealers to increase availability & market share.

BACKGROUND 50% of GYs independent dealers sold only GY tyres and other 50% stocked at least one other brand. These dealers aggressively merchandised other brands but still GY generated 90% of its revenue. 1991 Dealers were not pleased with their reliance on auto service which earned 48% of their revenues.

BACKGROUND Michelin owners were most loyal followed by GY. GYs competitors planning a wide range of campaigns for 1992. Aquatred new tyre, with improved driving traction under wet condition. Robbins concerned over the Aquatred launch program. Aquatred product to revitalize GY.

QUESTIONS Aquatred, a the right product consumers? Whether distribution be expanded and if so which channels to be added?

Whether new channels would sell Aquatred? Launching Aquatred during Winter Olympics, was the right option. Finalizing on the pricing and promotional policies.

AQUATRED, A RIGHT PRODUCT FOR CONSUMERS? (latif) Yes. Provided improved wet driving traction and as per survey wet traction is the 2nd most important performance attribute considered while purchasing. Tread life was given 1st priority while purchasing tyre and Aquatred offered 60,000 miles warranty.

PRICING Price conscious consumers, making purchase only on sale. New tyre prices in U.S. passenger market had declined & averaged at $75.

Aquatred - priced at 10% premium over the Invicta GS. Current pricing was appropriate: Aquatred, only product in the market offering wet traction. Wet traction 1st priority while making purchase.

CONT Pricing also depends on the marketing channel to be used. Use of exclusive distribution for Aquatred to signify uniqueness and premium pricing.

PUSH STRATEGY FOR GY PRODUCTS GY induced its intermediaries to carry, promote & sell only its

tyre lines to consumers by: Offering 28% retail margin on GY tyres as compared to 25% on other major brands. Offering its mechanize at a discounts. Extending financing on tyre orders. Offering other such services, not popular with every dealer. GY tyres to be available only in few dealership provided they carry only GY brand.

PULL STRATEGY FOR AQUATRED (anuja) GY used pull strategy for Aquatred i.e. persuading the consumers to demand products from sellers. Strategy is useful incase of Brand loyalty: Aquatred test market data revealed 61% ofAquatred buyers were quality buyers (i.e. loyal to brand and outlet) Michelin had most loyal customers followed by GY.

CONT. Perceived difference: survey also revealed that buyers were more likely to replace competitors tire with Aquatred.

Choose brand before they go to store: accordingto the survey majority buyers considered brand as

the primary shopping orientation followed bystore.

ADVERTISING & PROMOTIONAL POLICIES GY usually spends 9-11% of sales on advertising and promotions. 60% spent on promotions.

2/3rd of all GY tyres were sold on promotion i.e. anaverage 25% discount. Michelin and Bridgestone to launch new tyres (80,000 miles warranty) backed by heavy advertising.

CONT Firms advertising decisions depend on how much motivation dealers need. Need to advertise more for Aquatred as: Miles warranty was just 60,000 when competitors werecoming up with 80,000 miles warranty Priced higher when consumers where getting price

conscious. Targeted at maturing replacement market.

CONT. Increase advertising to induce sales and thus increase capacity utilization which is currently lower.

GYS DISTRIBUTIONAL CHANNEL (anesh) For consumer marketing, channels used One and two level channel:

For industrial marketing, channels used One level channel.

One and two level consumer channelsGY (MANUFACTUERE)

Manufacturer owned outlets

Independent dealers (Wholesalers)

Independent dealers (Wholesalers)

Car dealers, service stn, independent dealers (Retailer)

Own retail outlets

Consumers

Consumers

Consumers

One level industrial distribution channelGY (MANUFACTUERE)

OEMConsumers

CONT. Retail channels: Independent dealers accounting for 50% of sales Manufacturer owned outlet 27% of sales Franchised dealers 8% of sales Government agencies 8% of sales

WHETHER TO EXPAND DISTRIBUTION AND IF SO WHICH CHANNELS TO BE ADDED? (ruju) To modify distribution channel when consumers buying pattern changes, new competition arises and as the product moves into later stages.

Should opt for selective distribution: relying on more thanfew but less than all intermediaries. Include large independent tire chains and mass merchandisers.

CONT Use only for selected tyre lines which have entered the maturity or decline stage. With this it can gain adequate market coverage. Would avoid brand dilution. Avoid channel conflicts by reserving selling rights of certain goods only to individual dealers.

WHETHER NEW CHANNEL SHOULD SELL AQUATRED? Use exclusive distribution: limiting number of intermediaries Selling Aquatred only through Independent dealers & manufacture owned outlets.

Introduced to revitalize GY brand. Premium pricing under depressed economic situation. Try & bring down its levels of channel to one to avoid adding much to price.

CONT Protect its image by avoiding over exposure and availability in discount stores, as its positioned in the top broadline segment.

Avoid price wars due to limited availability and thushigher margins. Early buyers are willing to pay for high value added channels, but later switch to lower cost channels.

LAUNCHING AQUATRED DURING WINTER OLYMPICS (salil) Yes. Greater exposure within budgeted advertising expense. Scarcity would signify unique and justify premium pricing.

Suggestion To periodically review channel design of Aquatred and modify it if not working as planned. Use of e-commerce marketing practices. Lowering price at later stages to drive competition out.