Goodyear Case


Length: 913 words (2.6 double-spaced pages)
Rating: Excellent
Open Document
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Text Preview

More ↓

Continue reading...

Open Document

After processing Goodyear’s options I feel it is best for Goodyear not to partner with Sears. When considering this partnership it is important to understand the tire industry, specifically the replacement tire market.
The tire industry is divided into two end-use markets: The original equipment tire market (OEM) and the replacement tire market. The replacement tire market is of most importance in this case because that is Sears target market. The two markets are broken down as follows:
The Original Equipment Market:
OEM tires are sold by tire manufacturers directly to automobile manufacturers, and they account for 25% - 30% of tire unit production volume each year. The Goodyear Tire & Rubber Company is a perennial OEM leader, in 1991 they captured 38% market share. Firestone and Michelin each held 16% OEM market share.
The Replacement Tire Market:
The replacement tire market accounts for 70% - 75% of the total number of tires sold each year. Demand for this market is directly related to the average mileage driven per vehicle, and it should be noted that the better the tires are made (longer treadlife) the less they need to be replaced. Goodyear is the perennial market-share leader in the U.S. replacement tire market.

How to Cite this Page

MLA Citation:
"Goodyear Case." 123HelpMe.com. 19 Nov 2017
    <http://www.123HelpMe.com/view.asp?id=165322>.
Title Length Color Rating  
Essay about Goodyear Case - Goodyear Case In 1992, the Goodyear Tire and Rubber Company decided to reconsider the offer from Sears to sell Goodyear's Eagle brand tires. The reasons that Goodyear was contemplating this offer was that Sears was replacing worn out Goodyear tires at a large amount every year. The tires were not being replaced with Goodyear tires because the customers at Sears wanted to replace their tires with the best possible tires that Sears offered, and the Goodyear tires were not in the offering. The company's major options in this decision were whether to sell only the Eagle brand tires or all of the Goodyear tire brands....   [tags: Case Study Tires Business Essays, solution] 846 words
(2.4 pages)
Better Essays [preview]
Essay on Goodyear Case - After processing Goodyear’s options I feel it is best for Goodyear not to partner with Sears. When considering this partnership it is important to understand the tire industry, specifically the replacement tire market. The tire industry is divided into two end-use markets: The original equipment tire market (OEM) and the replacement tire market. The replacement tire market is of most importance in this case because that is Sears target market. The two markets are broken down as follows: The Original Equipment Market: OEM tires are sold by tire manufacturers directly to automobile manufacturers, and they...   [tags: Business Analysis ] 913 words
(2.6 pages)
Strong Essays [preview]
Essay on Goodyear Tire and Rubber Company - Goodyear Tire and Rubber Company With the competitiveness of the US tire industry in 1992, Goodyear Tire and Rubber Company is reconsidering a proposal from the department store Sears to carry Goodyear Eagle brand tires. With a $38 million loss in 1990 and a change in top-level management in 1991, the Sears proposal from 1989 was being looked at again. These new top-level managers have two decisions to make: whether Sears should carry only the Goodyear Eagle brand or all of Goodyear’s tire line....   [tags: Goodyear Tires Case Study Analysis Marketing] 1866 words
(5.3 pages)
Powerful Essays [preview]
Summary of Case Analysis: Goodyear Tire and Rubber Company Essay - Summary of Case Analysis: Goodyear Tire and Rubber Company 1.     INTRODUCTION GOODYEAR TIRE AND RUBBER COMPANY      Goodyear Tire and Rubber Company, was founded in 1898 and was the world tire production leader until November 1990 when Groupe Michelin took over after merging with Uniroyal Goodrich Tire Company. Goodyear¡¦s principal business is the development, manufacture, distribution, and sale of tires throughout the world. Its tires and tube sales represent 83 % of 1991 corporate sales of $10.9 billion with corporate wide earnings of $96.9 million....   [tags: Marketing Business Management Essays] 1551 words
(4.4 pages)
Strong Essays [preview]
Challenges Facing Goodyear Essay - Challenges Facing Goodyear Problem Statement There are several challenges facing Goodyear in the current environment. Our sales have leveled off in the past few years and we need to increase our market share in order to improve these numbers. Our debt is high and our interest payments are eating away at our profiles so we need to get more income to pay down this debt. The more immediate question is if Goodyear should launch its new line of Aquatred tires. The trend has been toward higher mileage tires and the Aquatred tire is not in line with this trend, being more of a higher end tire....   [tags: Business Management Consumerism Tires Essays] 2784 words
(8 pages)
Powerful Essays [preview]
Abc Tyres Case Study Essays - 1.1 Project : SuperTread Tyre Brand ABC Tyres has recently developed a new tyre, The Supertread. Managers and Financial Directors (Mr George Lee) must determine whether it is beneficial for the company to make the investment necessary to produce and market it. A report has been prepared analysing the concerns Mr Lee has with the company’s proposed new project. 1.2 Financial Decisions within ABC Investment decisions have major consequences for the future development of a company, in this case ABC Tyres....   [tags: Business Analysis Finance Management] 1800 words
(5.1 pages)
Strong Essays [preview]
Essay on The Ford/Firestone Case - The Ford/Firestone Case This case involves Ford and the Japanese tire manufacturer, Bridgestone/Firestone. The Ford Explorers which were prone to rolling over, came equipped with Firestone defected tires. The tire seemed to have a defect that caused the tread to separate from the whole of the tire and cause the vehicle to flip. Although Firestone knew about such defects, they continued to produce despite knowing the deadly consequences that lay behind their actions. The Explorer also had a bad reputation of rolling over and Ford knew it....   [tags: essays research papers fc]
:: 1 Works Cited
1127 words
(3.2 pages)
Strong Essays [preview]
Essay about Goodyear Co - Throughout the years Goodyear has been distributing its tires only through the company-owned Goodyear Auto Service Centers and franchised Goodyear Tire dealers. The decision of Goodyear Company to broaden its distribution to Sears Auto Centers will have several advantages and disadvantages related to this action. Advantages: 1) Increase in sales in the short term, which will create an increase of market share in the long term. Goodyear’s sales are declined because of multi-branding among mass merchandisers by warehouse membership club stores and discount tire retailers....   [tags: essays research papers] 544 words
(1.6 pages)
Good Essays [preview]
Charles Goodyear Essay - Charles Goodyear was born in New Haven, Connecticut on December 29, 1800 to Amasa and Cynthia Goodyear. Charles’s father was a hardware manufacture and a merchant. Amasa Goodyear built mainly farming tools like hayforks and scythes, which he invented. When Charles was a teenager he wanted to go into the ministry and become a pastor, but his father convinced him that he was a good business man and placed him in the hardware store of the Rogers brothers in Philadelphia at the age of seventeen. He worked there until he was twenty-one years old....   [tags: essays research papers] 993 words
(2.8 pages)
Strong Essays [preview]
Essay on Goodyear Tire Analysis - Problem Statement: With the development of Aquatread (AT), a premium differentiated tire intended for the broadline, replacement market; Goodyear (GY) must reassess its competitive position and distribution systems in the North American tire market. The GY is currently a market leader in the replacement market with 15% market share (Sales of 22.8MM units). GY¡¯s marketing strategy, in particular, the launch of AT, must be examined in the context of evolving consumer buying patterns and distribution channels, as well as alignment with their business strategy of differentiating GY through their brand....   [tags: Business Management Analysis Tire] 1661 words
(4.7 pages)
Strong Essays [preview]

Related Searches




Consumer buying behavior is very important when considering whether or not to partner with Sears. When it comes to replacement tires, consumers have in recent years become more price sensitive and less brand loyal. It was previously believed that car and truck owners who were satisfied with their original equipment tires would buy the same brand when they replaced them. This is still true to an extent, but surveys have shown that dealers (salespeople) were able to influence a car owner's choice of replacement tires, in relation to both brand and type of tire. Most consumers don't have strong tire brand preferences, making it fairly easy for the salespeople to influence tire purchase. It is also note that it was difficult for car owners to comparison shop on the basis of tire quality and tread durability because of the lack of common terminology, which could explain why some have resorted to price comparison shopping.
It is easy to see that the channels of distribution for the replacement tire market are changing and evolving. Following are some advantages and disadvantages for Goodyear’s channel of distribution strategy:
Advantages
They have the most retail points of any major tire brand in the United States, with close to 8000
They produce tires for virtually every type of vehicle
They are diverse in their brands giving buyers options
Disadvantages
They don't typically sell Goodyear brand tires through discount multi-brand dealers, mass-merchandise chain stores, or warehouse clubs
This case presents us with a few different possibilities for Goodyear. They could sell only the Eagle brand through Sears, sell all Goodyear brands through Sears, make one or more brands exclusively through Sears, keep things as is, not selling any tires through Sears.
Finical analysis is of much importance in explaining why I chose to keep things as they are. Goodyear's principal business is the development, manufacturing, distribution, and sales of tires throughout the world. As stated in the case, in 1991 tires and tubes represented 83% of Goodyear's corporate sales of $10.9 billion, their corporate wide earnings in 1991 were $96.6 million, and their sales within the United States accounted for 58% of the company's revenues.
Goodyear's 1991 Corporate Sales
Goodyear Corporate Sales in 1991 $10,900,000,000
Tires & Tubes (83% of sales) $9,047,000,000

Goodyear's 1991 Corporate Wide Earning and U.S. Sales Revenues
Goodyear Corporate Wide Earnings $96,600,000
U.S. Sales Revenues (58% of Revenues) $56,028,000
Goodyear's average market share in the replacement car market of passenger car tires, light-truck tires, and highway-truck tires is 16%. In 1991 there were 155,400,000 replacement tires sold in the United States. Goodyear's 16% market share of the total number of tires sold equaled 24,864,000 million tires (155.4 *.16). If the tires sold at an average retail price of $150 (between the $125-$175 dollar price for Goodyear tires), then Goodyear in 1991 grossed retail sales of $3,729,600,000. Notice that there is no money paid to outside dealers because they are selling their products directly through their own franchises and Goodyear Service Centers.
It seems the biggest concern that Goodyear has with their current system is that in 1991 approximately 2 million Goodyear tires were replaced at Sears Auto Centers around the nation. So it would be a common goal for Goodyear to set to sell an additional 2 million tires annually in the replacement tire market if they decide to sell their tires through Sears. If they do decide to sell the tires through Sears, they will have to be prepared to pay a dealer margin of 35-40% on each sale. In the table you will see that if they sell just 2 million more tires in the replacement market than they did in 1991 at a price of $150 / tire, and paying a dealer margin of 40%, Goodyear will actually make in gross sales approximately $2 million less than they did in 1991.

Goodyear 1991 1992 Prediction if Goodyear sells through Sears
Number of Tires Sold 24,864,000 26,864,000
Average Retail Price / Tire $150 $150
Gross Retail Sales $3,729,600,000 $4,029,600,000
Dealer Margin N/A (no dealers used) 40%
Net Retail Sales $3,729,600,000 $1,611,840,000
Difference 1992 – 1991: -$2,117,760,000*
*this estimate does not include cannibalism of Goodyear franchisers in the surrounding areas

Just by the finical predictions alone, it would be wise to not go into business with Sears, but there are other reasons as well. For example, the case stated that many dealers featured and pushed their private-label “off-brand” tires because they could obtain higher margins. This indicated Sears’s sales people would be more apt to selling the Sears name brand rather than Goodyear’s.


Return to 123HelpMe.com