Goodyear the aquatred launch

1. Goodyear:
The Aquatred Launch
(Condensed)
Elaborated by:
AMIRA ATHIMNI
Dr. Mehdi ZAHAF
Mediterranean School of Business
MERIEM BEN YEDDER
17/10/2012
REEM NASSAR
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RYM BELHADJ

2. Outline
Executive Summary ......................................................................................... 2
1. Situation analysis .................................................................................... 3
a. The market ................................................................................................ 3
b. Micro-environment ................................................................................... 3
c. Macro-environment .................................................................................. 4
2. SWOT analysis ........................................................................................ 4
a. Strengths ................................................................................................... 4
b. Weaknesses ............................................................................................... 4
c. Opportunities ............................................................................................ 5
d. Threats ...................................................................................................... 5
3. Main decisions ......................................................................................... 5
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3. Executive Summary
“The Aquatred” is the new innovative tires which will be added to Goodyear products family.
It is a replacement tire for passenger cars, specially designed for driving in rainy weather.
Goodyear is satisfying different targeted segments in a matured market with a strong
distribution strategy, especially among small independent dealers. Even though, its
distribution structure had several problems which they should work on, they also have to
weigh the risks and benefits of launching the Aquatred as a premium product, which can be an
issue since we are in a price sensitive market. Barry Robbins, Goodyear’s VP needs to answer
an important question which is “Can they expand its channels, without harming the existing
ones, if so, would this channels sell the Aquatred?”
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4. 1. Situation analysis
a. The market
Although, Goodyear is the 3rd company worldwide in sales of new tires, behind Michelin and
Bridgestone, the U.S tire industry is facing a period of “low growth, declining prices and over
capacity in an environment of corporate consolidation”.
In 1991, the U.S replacement tires sales were about $8.6 billion, which equals to 137 million
units sold. Goodyear’s passenger tire division made out the major part of its revenues (65%)
from replacement tires passengers. We are going to focus on that segment, which has reached
a state of equilibrium and is described as a mature market.
Goodyear’s new product, Aquatred, would be positioned in the U.S market as a replacement
tire for passengers’ cars, which is one of the segments of the passenger tires market, along
with the distinction between performance and broad-line tires, and the brand classifications
segment, which include major brands, minor brands and private labels.
Replacement tires are sold to individual consumers; it is indeed a B2C market opposed to the
B2B original equipment manufacturer (OEM) tires that are sold to car manufacturers.
The industry seemed to be turning toward long-life warranties to certify product quality and
low cost private labels.
b. Micro-environment
 Who are the competitors?
There are a lot of tires producers in the U.S market: Bridgestone, Firestone, Michelin, private
labels…but the main competitor is Michelin. Even though, they don’t have the same image
among customers: Goodyear attracts more price-focused customers, while Michelin has a
stronger image among quality and value conscious customers. Besides, this latter has a more
intensive distribution and coverage, indeed, unlike Goodyear’s products; we can find
Michelin’s tires in warehouse clubs’ and mass merchandisers.
 Who are the consumers?
Consumers are people who own cars, it is part of the vehicle maintenance to replace tires, and
to most consumers it is considered as a “grudge purchase”, it is a necessity not a pleasant
thing. The day they know that they need to change tires is the day that they are going it to buy
it. Usually consumers buy tires in pairs, 42% of them purchases involved 2 tires and 40%
involved 4 tires.
More and more consumers don’t know what tires’ brand to buy; most of them are not loyal to
a brand in particular and have no problem switching from major brands to private labels, even
though we consider that Michelin and Goodyear owners are respectively the most loyal
clients.
There are 3 types of consumers, for whom tires don’t have the same value; some are quality-
conscious buyers (18%), value-conscious buyers (23%) and price-focused buyers (59%).
Despite their different views on the product, all of them accord a great importance on prices,
it is a price driven market, and customers are getting used to buy their tires on promotion, as a
dealer said “we have created a price-conscious monster”.
 Who are the partners, the channels?
-The manufacturer, Goodyear directly sold its tires to:
- Large chains and wholesalers, which represent 10% of Goodyear factory sales. They
don’t do retail operations and resold the tires to car dealers, service stations, small
independent dealers and other secondary outlets.
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5. - Large chains (40% of Goodyear factory sales) that both sold tires at retail and resold
tires to other dealers and secondary outlets.
- Small independent dealers (50% of Goodyear factory sales) that resell in their own retail
outlets.
In addition to these retailers, there are the Goodyear owned outlets and new retail formats like
Just tires, which only sell and install tires.
c. Macro-environment
There are legal restrictions that prohibited manufacturers to impose a specific retail-selling
price. On the other hand, independent dealers had the right to protect their own interests.
In 1992, The National Tire Dealers and Retreaders Associations (NTDRA) wrote the bill of
rights for independent dealers to protect their businesses against mass merchandisers and tire
outlet stores. Manufacturers may face a problem when they will try to maintain their
distribution system and guarantee everyone interests without causing conflicts between its
members.
Regarding the technological level, tire industry has developed a lot since 1950s. For instance,
one of the evolutions has occurred in the 1970s: “The Radial Tire” was in fact an innovation
in sports car, which allows offering a high-speed traction.
In the 1990s, the tire industry wanted to offer a good quality product that guaranteed safety
and performance with “The Aquatred’, which has been developed by Goodyear to offer more
safety on wet traction.
2. SWOT analysis
a. Strengths
 rd
3 worldwide in sales of new tires.
 Goodyear invested a lot to produce radials.
 Strong track in launching innovative new products.
 Present in all market segments with different products (B2B – B2C).
 Strong distribution strategy: The Company relied in 3 types of outlets. 1st the small
independent dealer (50% of sales revenues), 2nd the manufacturer owned outlets (30%
of sales) and 3rd the franchise dealers and government agencies; they are testing a new
retail format “Just Tires”.
 Differentiation SOD among competitors: “Goodyear serviced independent dealers
through the area sales manager” in order to stay close with its dealers. Their S.O
consist in providing information about market trends, offering advice on operations,
handling complaints and placing orders properly.
 Strong brand equity among price oriented customers.
b. Weaknesses
 Problems on its distribution structure for example financing flow problems. “Most
complaints from independent dealers involved relatively minor billing problems”
 Availability of its products at unauthorized dealers at low prices.
 Low availability in many outlets forced consumers to buy other brands.
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6. c. Opportunities
 In 1991, 50% of independent dealers sold only Goodyear tires. Therefore, it has to
take into consideration this opportunity and strengthen its relationship with them to
generate more flows.
 Goodyear tires generate 90% of the revenues for most independent dealers; this is a
great opportunity for Good year to deal more with them.
 New technological breakthrough. (Aquatred)
 Absence of wet condition tires and high durability/distance tires in the market.
(Opportunity to introduce Aquatred via product development).
d. Threats
 Possibility of competitors launching products in the same segment.
 Michelin has stronger value oriented, quality oriented buyers and customer loyalty.
 Independent dealers are complaining about the competition of company-owned outlets
and mass merchandisers.
 Non-selling in warehouse clubs and mass merchandisers while other competitors have
their products exposed there, is a threat.
 Michelin, Uniroyal and Goodrich had recently combined their sales forces to allow
their salespeople to sell all three brands.
 Keeping the Aquatred tire out of the discounting and promotion channels.
 Further Erosion of market share for competitors: selling tires in lower-service outlets
could erode the value of Goodyear Brand, cannibalize sales of existing outlets, and
might push dealers to take additional lines of tires.

3. Main decisions
Launching the Aquatred Tire is a great opportunity for Goodyear. It will allow the company
to sustain its innovation oriented strategy.
Goodyear should position Aquatred to attract quality sensitive and value-oriented consumers,
in order to avoid the risk of cannibalizing other Goodyear products. This new tires offer better
traction under wet conditions, more safety, reliability and give convenient warranty (up to
80,000 miles). This innovative technology represents a competitive advantage for Goodyear
against its direct competitors such as Michelin.
In terms of distribution, Goodyear should focus on selling its Aquatred in specific targeted
area, such as, heavy rainfall cities in the US. However, Goodyear should still maintain the
current distribution channel and guarantee the interests of its 2500 independent dealers. Any
change in the distribution channel will lead to conflicts which will erode the value of the
brand and cannibalize the sales of existing channel members.
Moreover, the company could offer more training program for independent dealers’
employees to strengthen their relationships and increase sales.
Finally, a premium price and an effective product introduction for the Aquatred are required
to attract the targeted segment, which will generate the expected profit for the company and
its retailers. So the more the company takes into consideration its distribution channels
member’s interests, the less conflict it will have and the more profit they will all make.
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