goodyear: the aquatred launch : harvard case analysis

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Page 1: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 2: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 3: Goodyear: The Aquatred Launch : Harvard Case Analysis

• Five major companies based out of Akron, Ohio Dominated the

market from 1900s to 1970s

• Bias & Bias-belted tires were phased out by radial tires

• They lasted under 20,000 miles, by the early 1980s radials lasted

over 40,000 miles leading to decrease in frequency of tire change.

• Foreign competition reduced market share per company

• Rising oil prices led to increase in production-cost

• A number of mergers/acquisitions modified the industry

Page 4: Goodyear: The Aquatred Launch : Harvard Case Analysis

• Average life of a new tire rose from 28,600 miles in 1980 to

37,300 miles in 1991

• Annual miles travelled per passenger rising slowly 9,100 miles in

1980 to 10,600 miles in 1990

• The median retail price dropped by1991,the average retail price

was $75.00

• Tire-producing capacity outstripped demand U.S. tire-making

capacity rose 12% between 1987 and 1990; capacity utilization fell

from 87% to 76% during the same period.

• Led to a number of mergers/acquisitions modified the industry

Page 5: Goodyear: The Aquatred Launch : Harvard Case Analysis

• Important attributes ( tread life ,traction)

• Infrequent purchase (every 2.5 years)

• Significant dollar purchase (around $ 75 per tire plus

installation costs)

• High perceived risk (safety and security on long journeys)

1. In 1992, 53% of consumers did not know what tire they planned to buy

next (against 36% in 1982)

2. 75% of all Goodyear tires are sold on promotion at an average discount

of 25%, and 40% of replacement tires are private labels.

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Page 6: Goodyear: The Aquatred Launch : Harvard Case Analysis

Distribution Channels

Small independent

dealers (40%)

Garages / Service Stations

(6%)

Large Tire Chains (23%)

Mass Merchandisers

(12%)

Manufacturer owned stores

(9%)

Warehouse Clubs (6%)

Page 7: Goodyear: The Aquatred Launch : Harvard Case Analysis

Independent dealers dominated the market

Page 8: Goodyear: The Aquatred Launch : Harvard Case Analysis

• Value price and outlet

Trusting Patrons and

Bargain Hunters

• Loyal to outlet and brand

• Search for preferred brand at the best price

• Buy the best within the budget

• Little loyalty to brand

Page 9: Goodyear: The Aquatred Launch : Harvard Case Analysis

Performance vs

broad-line

Major brands,

Minor brands, Private label

Replacement &

OEM tire

Page 10: Goodyear: The Aquatred Launch : Harvard Case Analysis

Consumers in the Replacement Passenger Tire Market

Goodyear also regularly surveyed car owners concerning the criteria they used

to select a tire retailer.

1. Price

2. Offers fast service

3. Can trust personnel

4. Store is attractive

5. Offers mileage warranty

6. Brand selection

7. Maintains convenient hours

Page 11: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 12: Goodyear: The Aquatred Launch : Harvard Case Analysis

• 1 of the 5 to dominate the industry, only remaining US company

• Quick to convert to radial production

• Profits hurt by international competition & oil prices

• Strong track record of innovation

• Diversified in 1980’s but earnings were sluggish

• Goodyear ranked third in worldwide sales of new tires

• 1991 Stanley G Gault Sold indirect investments Prioritized on new

development.

Page 13: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 14: Goodyear: The Aquatred Launch : Harvard Case Analysis

Distribution Channels

4400 Small independent dealers (50%

sales revenue)

Franchised Dealers and

Govt. Agencies

(20%)

Just Tires

(under testing phase)

1047 Manufacturer owned stores

(30% sales)

Page 15: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 16: Goodyear: The Aquatred Launch : Harvard Case Analysis

• Reestablish Goodyear’s industry leadership and

reputation for product innovation, especially vis a vis

Michelin.

• less number of competitors in the high wet-traction,

broad-line tires segment, being the first to enter the

market with such products

• Refocus the dealers on product and away from the daily

tactical problems of manufacturer-dealer relations

• Motivate Goodyear’s sales staff and dealers

Page 17: Goodyear: The Aquatred Launch : Harvard Case Analysis

BARRY ROBBINS

(VICE PRESIDENT, MARKETING,

NORTH-AMERICA, GOODYEAR)

STANLEY GAULT

(CHAIRMAN, GOODYEAR)

Page 18: Goodyear: The Aquatred Launch : Harvard Case Analysis

Long buying cycles of auto manufacturers

Goodyear has major share in

US Replacement Tire Market (15%)

Aquatred would come through the replacement market not as

Original Equipment

Page 19: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 20: Goodyear: The Aquatred Launch : Harvard Case Analysis

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Page 26: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 27: Goodyear: The Aquatred Launch : Harvard Case Analysis

• The Aquatred was developed after comparing 10 different

designs on performance and consumer preference .

• Aquatreds traveling at 55 miles per hour stopped in two-car

lengths-less distance

• Aquatred came with a 60,000-mile warranty and positioned tire

at the top of the broad-line segment.

• Compared with buyers of the Invicta GS, Aquatred buyers were

more likely to replace competitors’ tires.

• Consumers searched more extensively for information prior to

purchase of Aquatreds.

Page 28: Goodyear: The Aquatred Launch : Harvard Case Analysis

Majority of drivers believed Aquatred has a good wet traction.

Page 29: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 30: Goodyear: The Aquatred Launch : Harvard Case Analysis

• Quality Radials &

durability

• Precision Handling

• Large Dealership

• Network

• Safety (lowest stopping

distance)

• Durability (60,000

miles > Industry average)

• Best Wet Traction

• Appearance: New,

Innovative, &

Contemporary Design

Page 31: Goodyear: The Aquatred Launch : Harvard Case Analysis

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Page 32: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 33: Goodyear: The Aquatred Launch : Harvard Case Analysis

Distribution Channels

4400 Small independent dealers (50%

sales revenue)

Franchised Dealers and

Govt. Agencies

(20%)

Just Tires

(under testing phase)

1047 Manufacturer owned stores

(30% sales)

Page 34: Goodyear: The Aquatred Launch : Harvard Case Analysis

30%

50%

20%0%

Sales

MANUFACTUREROWNED

SMALL INDEPENDENTSTORES

FRANCHISEDEALERS/GOVT.

JUST TIRES

Page 35: Goodyear: The Aquatred Launch : Harvard Case Analysis

Small and Large Independent dealers have the majority share in retail sales

replacement passenger tires.

Page 36: Goodyear: The Aquatred Launch : Harvard Case Analysis

Independent dealers have always had the majority share in wholesale

replacement tire market

Page 37: Goodyear: The Aquatred Launch : Harvard Case Analysis

• 50% of Goodyear’s independent dealers sold only Goodyear tires,

while the other 50% stocked at least one other brand.

• Among the latter, some merchandised other brands but Goodyear

tires still generated 90% of the revenues

• Three-fourths of all Goodyear tires sold in independent or company-

owned outlets were sold on promotion, at an average discount of

25%.

Page 38: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 39: Goodyear: The Aquatred Launch : Harvard Case Analysis

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Page 40: Goodyear: The Aquatred Launch : Harvard Case Analysis

Aquatred Invicta GS

Page 41: Goodyear: The Aquatred Launch : Harvard Case Analysis

Price, then brand Extensive Moderate

( s/to price)

Very low

Brand, then price Extensive High Very low

Brand, outlet

Outlet, brand

Brief

Brief

Very high

Mod. to low

Mod. to high

Very high

Price

Outlet

Extensive

Brief

Low

Low

Low

Very high

Page 42: Goodyear: The Aquatred Launch : Harvard Case Analysis

18+23=41% of total customers (value-oriented +quality customers) prefer major brands over

Minor or private labels

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Page 44: Goodyear: The Aquatred Launch : Harvard Case Analysis

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Page 47: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 48: Goodyear: The Aquatred Launch : Harvard Case Analysis

Proposed Aquatred Advertisement

TV AD focuses on advanced design and emphasizes on wet traction to appeal to the

quality ,safety and value-oriented customers

Page 49: Goodyear: The Aquatred Launch : Harvard Case Analysis
Page 50: Goodyear: The Aquatred Launch : Harvard Case Analysis

Consumers showed more interest in Aquatred

Invicta GSAquatred

Page 51: Goodyear: The Aquatred Launch : Harvard Case Analysis

Suggested retail price in Aquatred test market $90

Goodyear’s suggested retail prices for the Aquatred were $89.95 with a black sidewall,

and $93.95 with a white sidewall.

Page 52: Goodyear: The Aquatred Launch : Harvard Case Analysis

Suggested retail price in Aquatred test market $90

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