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Goodyear : The Aquatred LaunchGaurav Sharma Pauline Busnel Naima Kassanaly Gaspard Padet Hardeep Pathak Gaurav Arora Paritosh Singh Ashish Varkey

Tire Industry in the US Industry was dominated by five companies in the early years ; Goodyear, Firestone, Uniroyal, BF Goodrich, and General Tire. In the 1970s & 1980s, the U.S. tire industry experienced three major changes : 1. Radial Tires 2. Increased foreign competition 3. Nature of demand These changes had four major impacts :1. 2. 3. 4. Demand for passenger tires New tire prices Tire-producing capacity outstripped demand Mergers & Acquisitions

Company Background The Goodyear Rubber & Tire company had been known as The Gorilla for its dominance In 1991, Goodyear operated 41 plants in U.S., 43 in 25 other countries and more than 2,000 distribution outlets worldwide In 1991, Goodyear had approximately 1.05 lac employees and a revenue of $10.91 billion Goodyear ranked third in worldwide sales of new tires after Michelin & Bridgestone In 1977, Goodyear introduced Tiempo , the first all-season radial In 1981, Goodyear launched the Eagle, the first radial tire offering high speed traction for sports cars. In 1991, Stanley G. Gault became the chairman of Goodyear and laid more emphasis on new product development

Brand Shares18 16 14 12 10 8 6 4 2 0 1975 1980 1985 1991 Goodyear Michelin Firestone Goodrich Bridgestone

Market Segmentation Performance & Broad-line : Performance tires were wider , expensive (approx. 3 times) & provided better traction compared to broad-line tires Replacement & OEM : Replacement tires were sold to individual customers while OEM were sold to car manufacturersReplacement (in mn. dollars) Industry $8,600 Goodyear $1,290 OEM N/A $695 Replacement (in mn. units) 152.0 22.8 OEM 43 16.3

Market SegmentationMajor, Minor & Private Labels : Major brands had the highest recognition among customers. Minor brands included tires made by small manufacturers as well as major manufacturers but sold under different name. Private labels had flexibility in pricing.Major brands Minor brands Private labels

40%

36%

24%

Consumer Behavior Price Offers fast service Can trust personnel Store is attractive Offers mileage warranty Brand selection Maintains convenient hours

Consumer SegmentationPrice-constrained buyers Quality buyers Value-oriented buyers Commodity buyers

22% 37%

18%

23%

Consumer Marketing Channels0-levelManufacturer

1-levelManufacturer

2-levelManufacturer

Wholesaler

Retailer

Retailer

Consumer

Consumer

Consumer

Wholesale Distribution Channels80 70 60 Oil Companies 50 40 30 20 10 0 1976 1981 1986 1991 Large retailers Manufacturer-owned outlets Independent dealers

Retail Distribution Channels

Garages / Service stations Warehouse clubs Mass Merchandisers Manufacturer-owned outlets Small Independent tire dealers Large Independent tire chains Other

Goodyears distribution structureIndependent dealers Franchised dealers Government Agencies Manufacturer-Owned Outlets

27% 50% 8% 15%

Goodyear Distribution ChannelSmall Independent Dealers : Accounted for 40% of retail sales Brand Loyalty is high Creates value through post sales service Manufacturer owned outlets High cost to maintain, awareness building among customers Decreases in market share to 9% Large Chains Resellers for independent dealers, secondary outlets Diversion problems from wholesalers to discount outlets created a problem with independent dealers Diversion was difficult to avoid due to legal restrictions. .

RetailGarage/ Service Stations Small Independent Dealers Manufacturer Outlet Warehouse

OBSSmall outlets Gasoline Auto Services Small outlets auto services One brand auto services Large stores Limited offer according to deals Minimum Service LOW PRICE Retail Chain Large Brand Selection Auto Services Multi brand discounters LOW PRICED, HIGH VOLUME

Share6%

% Private Label57%

Price110%

40%

36%

100%

9% 6%

16% 8%

107% 80%

Mass Merchandiser Large tire chains

12%

34%

97%

23%

54%

90%

Conflict Conflict between various channels due to differences in the independent goal of each channel Goal: ->Small independent dealers : Obtain higher margin & attract loyal customers ->Manufacturer owned : To make public aware & educate about Goodyears product line ->Large chains : To push the largest volume of product at smaller margins

Aquatred Tire Goodyear started the NEWEX project to develop a new & exciting product. The Aquatred was developed after comparing 10 different designs on performance and consumer preference The deep groove down the center of the tire was called the aquachannel It channeled water out from under the tire reducing hydroplaning & improving traction in wet conditions

(contd) In wet conditions , cars travelling at 55mph stopped in as much as 2 car lengths less distance than similar cars equipped with conventional tires. When 50% worn it maintained the same traction as a new all season tire Positioned at the top of the broad line segment with a 60,000 mile warranty

Concerns about launch Competitors launch: Michelin & Bridgestone planned to launch new tires with 80,000 mile warranty at relatively lesser prices Dilemma about good years Distribution channel Advantages: 1. Boosts sales 2. Prevents Goodyear OEM tires from being replaced by other brands Disadvantages: 1. Sales in lower service outlets could erode the brand value 2. Can lead to cannibalization of sales of existing outlets

Recommendations Loyalty Programs Compromise with independent dealers about competition in the areas Expand more distribution channels and find new retail formats like Just Tires Integrated marketing communication to create awareness Researches to observe trends and changes in consumer preferences Emphasize on strong brand image and outstanding customer services

RecommendationsConflict : Specialized sales force that conducts planning sessions with goal setting and communicate incentive programs Planning for each product in the PLC which type of distribution system to select from extensive to intensive Design internal structure with specialized programs

Thank You