Good Year Tire Corporation

Good Year Tire Corporation

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COMPANY BACKGROUND By 1998, Goodyear had a debt of $3.7 billion dollars. From 1995-1998 Goodyear’s principal business was development, distribution, and sales of times for most applications. Goodyear was a multi-product, diversified conglomerate and its’ approach to becoming a global company was having only one single global strategy, instead of tailoring products and distribution to each national market.

OVERVIEW OF STRENGTHS Size still matters and Goodyear has size. Its 1999 sales were $12,881,000,000 representing a one-year sales growth of 2%. Its net income was $241,000,000, a lot of money but a decrease of 64.7% from one year earlier. Despite that drop in net income, Goodyear paid a $.30 dividend. Its net income also beat Wall Street’s expectations. It has become the world leader in tire sales as a result of its alliance with Japan’s Sumitomo Rubber Industries. Goodyear ranks No. 130 in Fortune Magazine’s 500 list of large companies. Its product diversity includes the manufacture and sale of tires, industrial and consumer products from rubber including belts, hoses, and tank tracks, and a wide range of synthetic rubber, resins, and organic chemicals. Goodyear supplies tires to European and North American auto manufacturers and construction and agricultural equipment manufacturers and operates more than 900 retail tire outlets that also provide auto repair services. Like many American manufacturers, though, it has extended its reach to include international markets in order to stay ahead of its competition. It has more than 90 facilities in 30 countries, and world-wide marketing operations.
Two attributes that any company desires are brand recognition and brand loyalty. Goodyear enjoys both. Its’ blimps are one of the world’s most recognized advertising symbols. In 1999, it ranked No. 1 in six of eight categories to lead its industry in Fortune’s “Most Admired List”. Leadership categories included quality, innovativeness, employee talent, social responsibility, financial soundness, and long-term investment. Of these, quality is probably the most important in creating and keeping brand loyalty. Its P/E ratio is 15.95, a very conservative number when compared to Internet stocks, which frequently have P/E ratios of 50 or more. The industry (rubber/plastics) P/E ratio is 13.65 while the broad market (8,000 stocks traded on the NYSE, AMEX, and NASDAQ, has a P/E of 39.46. Another strength is its intangibles, which include a 100,000-person workforce, patents and trademarks. Goodyear owns 2,903 patents and five trademarks (Goodyear, Hi-Miler, Viper, Vintner, and Allegra).

OVERVIEW OF WEAKNESSES In 1999, Goodyear’s sales were down from 1998 in Eastern Europe, Africa Middle East market, Latin America market, Engineered Products market, and Chemical Products market.

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Related Searches

Its EPS (earnings per share) growth dropped 64.7% over the last 12 months. The Internet can be a weakness to many companies, not only Goodyear. Is Goodyear preparing to compete with the on-line sale of tires? Customers will no longer be obligated to drive to the nearest tire outlet. A customer may go “on-line” and order a tire at the best competitive price, have it shipped to his home, and pay considerably less than he would at his neighborhood tire store. While Goodyear may see this weakness as an opportunity, it may be prohibited from using this tool because of its contracts with local dealers.

OPPORTUNITIES Four areas present themselves for opportunities: new territories, Internet sales, innovations, and acquisitions. New territories may include China, India, and Russia. As discussed previously, Goodyear’s lack of a presence on the Internet presents a weakness. It also presents an opportunity. Consumers are becoming comfortable with ordering an increasing number of items via the Internet. Goodyear is missing an opportunity by remaining “off-line”. Goodyear continues to invest more than $300,000,000 per year in an effort to improve its present product line and create new products. One of its more recent popular “inventions” was the “Aqua Tread” tire, a tire that purportedly reduces the dangers of hydroplaning.
Finally, Goodyear has grasped opportunities in foreign markets by either forming alliances with or acquiring its competition. Its most recent move in this area was the formation of a broad alliance with Tokyo-based Sumitomo Rubber Industries. The alliance created four geographical joint ventures (one in the U.S., one in Europe, and two in Japan), one joint venture for purchasing and one for sharing research.

THREATS Every human endeavor faces two threats: internal and external. As reported previously, Goodyear ranked No. 1 in six of eight categories in its industry as “Most Admired” according to Fortune Magazine, however, an internal re-organization may be coming. Externally, the company faces enormous competition: Internet sales Wholesale club stores (BJ’s, Wal-Mart, Sam’s Club) Bridgestone Cooper Continental Michelin Pep Boys (auto service stores) Midas (auto service stores) Auto Zone (auto service stores) Independents Goodyear must continue to be effective (doing the right things) and efficient (doing things right) to maintain its leadership role and to survive in this extremely competitive market. Based on its 1999 performance, it may have let its guard down, but its long-term prospects continue to appear to be good.

RECOMMENDATIONS Good Year is a company that has been through some really rough times. The industry that Goodyear is in is a competitive one in that they have to keep pumping money into R&D to stay on the cutting edge and keep providing a competitive product to the market. Gibara had been vice president of strategic planning and business development as well as CFO. The company is on the right track now and needs to keep the same focus to stay successful. However, Good Year will have to invest more in the global market in order to maintain its profit growth and to maintain its competitive edge. Furthermore, they need to continue to provide excellent customer service by providing quality products.
IMPLEMENTATION AND CONTROL · Continue to expand globally.
· Invest in technology Controls · Monitor costs · Redirect Profits into expansions and continue to keep up with technological changes.

Brief Overview:

Goodyear SWOT Analysis
Product diversity Total market coverage
An American company
International sales
Generally increasing sales revenue since 1991
Brand recognition Brand loyalty “The world’s No. 1 tire manufacturer”
Reduction in debt since 1991
Introduction of new tire lines
The Blimp P/E ratio
Patents: 2,903 Trademarks: 5

Declining stock price
Dealer contracts that my be inhibiting
Sales declines in Europe, Asia, Latin America

New international markets: China, India, Russia
Internet sales
R&D expendituresinnovations

Competition: Internet sales Wholesale club stores (tire sales) Bridgestone Cooper Continental Michelin Pep Boys (auto service stores) Midas (auto service stores) Auto Zone (auto service stores) Independents

Hoover’s On-line Business Network Goodyear press releases

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