Scribd
Upload
287 views14 pages

Goodyear Case Sudy

Goodyear should launch its new Aquatred tire using a limited distribution strategy through its manufacturer-owned outlets and most loyal dealers. This exclusive distribution approach will allow Goodyear to maintain control over pricing and protect dealer margins and sales volumes for the premium tire. In the first two years, Goodyear should focus on establishing Aquatred in the quality-focused market and avoid mass merchandisers that prioritize volume and price wars. Once competition enters in two years, Goodyear could introduce a lighter version of Aquatred targeted at mass merchandisers to capture more of the market.

Uploaded by

Sakshi Sharda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
287 views14 pages

Goodyear Case Sudy

Goodyear should launch its new Aquatred tire using a limited distribution strategy through its manufacturer-owned outlets and most loyal dealers. This exclusive distribution approach will allow Goodyear to maintain control over pricing and protect dealer margins and sales volumes for the premium tire. In the first two years, Goodyear should focus on establishing Aquatred in the quality-focused market and avoid mass merchandisers that prioritize volume and price wars. Once competition enters in two years, Goodyear could introduce a lighter version of Aquatred targeted at mass merchandisers to capture more of the market.

Uploaded by

Sakshi Sharda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 14

Good Year : The Aquatred Launch

•
Use the concepts discussed in class regarding Distribution Strategy to
analyse the distribution strategy of Goodyear
• Questions
• 1-Map the distribution strategy of Goodyear and the reasons why the
company designed such a distribution strategy
• 2-What channel should the company use to launch the new Aquatred
Tire 
Background

• Company: Goodyear operated 41 plants in the US, 43 plants in 25 other countries, 6 rubber plantations
and more than 2000 distribution outlets worldwide. It ranked 3rd in worldwide sales of new tires. It also
had a strong track record in launching innovative products.
• Competitors: Michelin, Firestone, Uniroyal, BF Goodrich, Bridgestone, Uniroyal and General Tire.
Michelin is the major competitor for Goodyear among value-oriented and quality buyers.
• Context: In the 1970s and 1980s, the US tire industry experienced three important changes- the
emergence of the radial tire to replace the older “bias” and “bias-belted” tire constructions, increase
foreign competition and change in the nature of demand from consumers and car makers were observed.
In 1989, Goodyear started the NEWEX project, to develop a new and exciting replacement market tire.
The Aquatred was developed after comparing 10 different designs on performance and consumer
preference.
• Consumer: Goodyear segmented tire buyers into four categories – price-constrained buyers, value-
oriented buyers, quality buyers, commodity buyers. In 1992, 45% of tire buyers were price oriented, 22%
were brand oriented and 33% believed the outlet was not important.
In 1970s and 1980s, the U.S. tire industry experienced three important changes:-
• The first was the emergence of the radial tire to replace the older “bias” and “bias-
belted” tire constructions.
• The second major change was increased foreign competition.
• The third major change was in the nature of demand from consumers and car makers.
These changes had four major impacts.
• First, demand for passenger tires grew sluggishly during the 1980s
• Second, new tire prices in the U.S. market declined.
• Third, tire-producing capacity outstripped demand.
• Fourth, the industry’s difficult economic conditions, coupled with the tire
manufacturers’ slow response, resulted in a number of mergers and acquisitions.
Strategic role of Aquarted
• The tire market is almost at its saturation stage and at this stage
Goodyear requires Aquatred to develop its brand image as an
innovative leader in an industry where competition is at its peak. The
launch of this new and innovative tire range will improve the sales
and profits of the company which will automatically strengthen its
financial condition. Such improvements will allow Goodyear to access
those resources that will enable it to compete with its competitors. In
the current scenario, the company is experiencing decline in prices,
low growth and low profit, therefore, Goodyear needs to introduce a
powerful and superior quality product to become a market leader for
premium tires.
DISTRIBUTION CHANNELS AVAILABLE
AND THEIR SHARE
Channel share of retail share

4% 6%
Garage/Serice Stations
13% Warehouse clubs
24% mass merchandisers
small independen dealers
10% large independent dealers
other

43%
1-Map the distribution strategy of Goodyear and the reasons
why the company designed such a distribution strategy
GOODYEAR DISTRIBUTION STRUCTURE

governent Agencies
15%

600 Franchised Dealers


8%
4,400 Independent
Dealer
50%

1047 Manufacturer-
owned Outlets “JUST TYRES”
27%
(Under Testing Phase)

• Goodyear didn’t sell tires in Garages/service stations, warehouse clubs, or mass merchandisers instead focused of 3 types of outlets.
• Most sales revenue was derived from Small Independent Dealers, Manufacturer Owned Outlets and Large Chains.
• 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%.
• Manufacturer Owned Outlets allow Goodyear a full control of the
distribution, but creates a competition with the other channels. Outlets set
the quality and value standard for performance seeking consumer as they
have better training and educated personnel to evaluate the problem and
provide solution
2-What channel should the company use to
launch the new Aquatred Tire 

As seen, Small and large Independent dealers have Majority


shares so Aquatred distribution can be done through it.
Aquatred should be distributed using exclusive distribution channel design. To design the channel network,
Goodyear should understand what the need of the Quality Conscious consumer segment is and where they
purchase their tires. Based on the analysis, this segment is interested in performance and quality, thus the
channel must understand technical characteristics of tires and be able to provide presales and post sales
support.
Small independent dealers and manufacturer outlets are most consistent with the high value premium image
that Aquatred is going to portray. Channels should contribute to the value chain of the product through the
following characteristics:
· Price
· Image
· Post sales - warranty, check up, tire rotations
· Presale- convincing target consumers of purchasing
· Financing – payments Manufacturer needs to provide: Promotion, Information, On time efficient
manufacturing , ERP or online system for ordering
If small independent dealers are not perceptive to the idea of a higher priced product, Goodyear needs to
educate them through seminars describing points of differentiation. Goodyear is about to revolutionize the
market, and their dealers should be able to convince and educate the customers on the perceived value of the
breakthrough.
• Aquatred should be only provided under a limited distribution contract to the
manufacturer owned outlets and dealers who are loyal to the brand and generate
the most revenue – this way it will protect dealers’ profit margins and sales volumes.
This way Goodyear has a full control over its distribution channel and can control
price. Goodyear should avoid selling Aquatred to other distribution channel and car
manufacturers – OEM to keep the product in the premium channel, at least until
competition enters the market in 1993.
• In the next two years, Goodyear should introduce an Aquatred light version under a
different sub-brand and enter mass merchandising market to capture the remainder
of the consumers
• Competitors are already selling at this channel without scarifying its image. Mass
merchandisers do not discount heavily – only 3% from small dealers, and keep high
brand loyalty. At the same time from the company standpoint, expanding channels
means adding intermediaries to create an inventory buffer. This is a hedge against
fluctuations of demand. Since existing dealers should have already collected high
profits on Aquatred, they would probably see entering additional channels as less
threatening.
Alternatives and their Evaluations

Goodyear to broaden its distribution to mass merchandiser and offer Aquatred


Mass merchandiser focuses more Intensive distribution which comes with its own advantages and
disadvantages
Advantages:
• Intensive distribution through mass merchandiser can be done through small and large
independent tire chains which would provide increased coverage and increased sales.
Disadvantages:
• This strategy would help in the short run but it can hurt long term performance by eroding brand
equity.
• Mass merchandiser focuses on volume which encouraging price wars which further erodes
profitability
• Mass merchandiser sales are driven by promotional discounts while Aquatred product is priced at
10% premium over the standard product.
Goodyear to broaden its Distribution Channels focusing on Exclusive Dealership with the
Aquatred
To focus more on Selective distribution and reducing on the Intensive distribution
Advantages
• Selective distribution will help in gaining adequate market coverage with more control and
less cost than intensive distribution.
• Aquatred pricing and selective distribution will ensure that the product is of high quality
and will attract the quality customers also.
• It will also ensure that the territory conflict is minimum among the distributors.
Disadvantages
• Most customers of Goodyear are price-sensitive and hence market share in that segment
may come down.
FINAL CONCLUSION
• Aquatred product is a patented technology and its launch will ensure that Goodyear is innovation
driven company. To move from the promotional discounts, company should focus on the
advertisement and try to attract the customers through the quality features of the product. The
launch of Aquatred during winter Olympics is a right decision as the product is in initial phase and
hence extensive marketing is needed. Price of the product should be kept slightly high (8-10%) so
that the price-oriented customers as well as quality oriented customers could be targeted. For
distribution purpose, selective distribution model should be adopted to gain the market coverage
with more control.
• So our outcome is that Goodyear should launch the Aquatred product keeping in mind the following
recommendations:
Premium pricing
Launch during winter Olympics
Selective distribution channels
Invest more in advertisement than promotions

You might also like