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Page 1: Goodyear Presentation
Page 2: Goodyear Presentation

Goodyear : The Aquatred Launch

BY

ANANT AGGARWAL 10ib-009 AKANKSHA RANJAN 10fn-007

ALI AKBAR SAZID 10it-003 ANKIT BARIAR 10dm-015

AmRITA MISHRA 10fn-012 ANKUR SINHA 10hr-007

ANURAG WATE 10hr-008 ANKIT BATRA 10hr-006

Page 3: Goodyear Presentation

TiRE INDUSTRY IN U.S till 1970s

• 5 Major players : Goodyear, Firestone, Uniroyal, BF Goodrich and General Tire

• Consistent growth in profits • Absence of foreign competition• Changes during the period– Emergence of radial tires superior to existing bias

and bias belted tires– Increased competition e.g Michelin of France– Change in nature of demand of tires

Page 4: Goodyear Presentation

IMPACT OF CHANGES• Sluggish growth in demand for passenger tires• Decline in price of tires• Tire producing capacity outstripped demand• Number of mergers and acquisitions– Uniroyal-Goodyear sold to Michelin– General Tire sold to Continental– Armstrong Tire sold to Pirelli– Dunlop sold to Sumimoto – Firestone sold to Bridgestone

Page 5: Goodyear Presentation

TREND OF SALES OF PASSENGER TIRES(in millions)

1991 1986 1981 1976

152 144123 137

43 54

37

50

Replacement OEM

Page 6: Goodyear Presentation

“the gorilla” : COMPANY BACKGROUND

• Founded by Frank Seiberling in 1898

• Manufactures tires for automobiles, commercial trucks, light trucks, SUVs, race cars, airplanes.

• Operates 41 plants in US, 43 plants in 25 other countries, 6 rubber plantations and more than 2000 outlets

• Revenue of $10.91 billion and 105,000 employees

Page 7: Goodyear Presentation

Company background(cont.)

• Introduced the Tiempo in 1977, the first all-season radial

• Launched Eagle in 1981, the first radial tire offering high speed traction for sports

• Large investment in pipelines for natural gas and oil transmission during 1980s

Page 8: Goodyear Presentation

World leaders in tire industrysales(in billion us dollars)

Michelin,10.4

Bridgestone; 9.8

Goodyear,8.5

Continental; 3.9

Pirelli; 3.7

Sumimoto; 3.5

Page 9: Goodyear Presentation

Classification of tires

Brand classification

• Major Brands• Minor Brands• Private label tires

Manufacturing purpose

• Replacement • OEM

Quality based

• Performance• Broaline

Page 10: Goodyear Presentation

•36% of unit sales•Made by large manufacturers•Highest recognition

Major Brands

•24% of unit sales•Made by small manufacturers•Includes high priced niche brands

Minor Brands

•40% of unit sales•Mostly exclusive to particular retailer•One distributor per territory•Less retail price •Less average life

Private label

Page 11: Goodyear Presentation

Price constrained buyers

Value oriented buyers

Quality buyers

Commodity buyers

Consumers

Page 12: Goodyear Presentation

Price Oriented

Brand Oriented

Outlet Oriented

0

5

10

15

20

25

30

35

40

45

50

Percentage sales

19851992

Page 13: Goodyear Presentation

Distribution channel for replacement tires

Tire manufacturer

Wholesalers

Retailers / Dealers

End consumers

Page 14: Goodyear Presentation

Wholesale distribution channels• Major distribution channels are :– Oil companies– Large retailers– Manufacture owned outlets– Independent dealers

• 3 kinds of independent dealers :– Dealers strictly wholesalers, without any retail operations

(10% of sales)– Dealers who sold tiers at retail and resold tires to other

dealers and secondary outlets(40% of sales)– Dealers who bought tires to resell in their own retail

outlets only (50% of sales)

Page 15: Goodyear Presentation

9%

24%

11%

56%

Percentage Sales for 1976

Oil Companies

Large Retailers

Manufacturer owned outlets

Independent dealers

5%

20%

10%65%

Percentage Sales for 1981

3%

16%

13%

68%

Percentage Sales for 19862%

19%

12%

67%

Percentage Sales for 1991

Page 16: Goodyear Presentation

Retail Distribution Channel

Garages/Service stations

Small, neighbourhood

outlets

Sells gasoline, tires and auto services

Sold private label and branded tires

Warehouse clubs

Large stores

Sold various categories like food,

clothing

Offered limited brand selection, low

prices

Mass merchandisers

Retail chains

Sold tires, auto services and

different merchandise

Consisted of many outlets

Page 17: Goodyear Presentation

Retail Distribution Channel(Cont.)

Manufacturer owned outlet

Owned and operated by manufacturer

Sold only one brand of tire

Offered range of auto services

Large independent tire

chains

Known as multibranded discounters

Consisted of many outlets within a

region

Carried major brands and private label

tires

Others

Half the sales account for by full

service auto supply stores

Sold tires at low prices

Competitor for independent dealers

due to price

Page 18: Goodyear Presentation

Goodyear’s Distribution Structure

• 4400 independent dealers accounting for 50% of sales revenue

• 1047 manufacture owned outlets generating 27% of sales revenue

• 600 franchised dealers accounting for 8% of sales

• Remaining 15% attributed to government agencies

Page 19: Goodyear Presentation

Distribution structure(cont.)

• Average selling price by independent dealers - $75 per tire

• Retail margins :– 28% for independent dealers– 25% for dealers carrying other brands– 20% for private label tires

• Wholesale margins :– 18% for private label tires– 14% for goodyear tires

Page 20: Goodyear Presentation

‘Just Tires’• New retail format by Goodyear

• Modeled after ‘quick lube’ stores

• Sold and installed tires only

• No other products or services

• Provides guarentees on speed and quality of installation

Page 21: Goodyear Presentation

Promotions by Goodyear

• 3/4th tires sold in independent or company owned outlets at discount of 25%

• For independent and company owned dealer, promotions by “core events”

• Company offered dealers “spring dating” every spring which provided extended financing

Page 22: Goodyear Presentation

INDEPENDENT DEALERS V/S COMPANY OUTLETS

INDEPENDENT DEALERS COMPANY OWNED OUTLETS

Offered more choice for brands Offered single choice for brand

Required less capital Required more capital

Required less attention from management

Required more attention from management

Restricted brand availability and market share

Expanded brand availability and market share

Page 23: Goodyear Presentation

Goodyear’s Independent dealers

• Goodyear provided its independent dealers with services like :– Expertise and training– Certified auto services– The Goodyear Business Management System– National and regional advertising– Research on market trends

• It serviced its independent dealers through area sales manager

• Dealer issues consisted of minor billing problems and complaints about competition from other outlets

Page 24: Goodyear Presentation

Allowances to dealers

Wholesale allowance

Merchandising allowance

Advertising accruals

Page 25: Goodyear Presentation

Auto services

• Constituted $50 billion market• Included jobs like oil changes, tune-ups, parts repairs,

etc• Typical price - $60• Break up of auto service revenues :

40%

29%

15%

8%

8%

service stationsnew car dealersspeciality outletstire dealersmass merchan-disers

Page 26: Goodyear Presentation

COMPETITION FACED BY GOODYEAR

• Major competition from Michelin which had stronger image among value oriented and quality buyers

• Bridgestone and Michelin were planning to launch new tires with 80,000 mile warranties

• Uniroyal was introducing a new tire for light trucks

Page 27: Goodyear Presentation

Aquatred : The latest tire by Goodyear

• Target market : Replacement tires in U.S passenger cars

• Focus on tread design and appearance

• Reduced hydroplaning and improved traction in wet conditions

• Planned to be sold with 60,000 mile warranty

• Positioned at top of broad line segment

Page 28: Goodyear Presentation

ALTERNATIVES FOR TIMING OF LAUNCH

• Alternative 1 : At the time of winter olympics

• Alternative 2 : Any other time i.e before/after olympics

BENEFIT RISK

Due to winter and snow, people would want tires with better wet traction to ensure safety

The accumulated inventory level would not support tires for small cars to be used in olympics

BENEFIT RISK

The inventory levels would support large size cars

Initial sales may be low due to absence of winters.

Page 29: Goodyear Presentation

RECOMMENDED STRATEGY FOR LAUNCH TIMING

• Alternative 1 seems better because :

– High initial sales expected due to winter and snow

– Due to prior commitment the launch would keep the brand image intact

– Test market data shows 74% of buyers have domestic make of cars

Page 30: Goodyear Presentation

ALTERNATIVES FOR DISTRIBUTION CHANNEL

• Alternative 1 : Use existing channel

• Alternative 2 : Add new channels

Page 31: Goodyear Presentation

RECOMMENDED STRATEGY FOR DISTRIBUTION CHANNEL

Company should use the existing distribution system ango for sale by independent dealers because :

• Independent dealers account for 50% sales

• Likely to replace competitor brands due to design and performance

• Fear of brand value erosion otherwise

Page 32: Goodyear Presentation

ALTERNATIVES FOR PRICING

• Alternative 1 : Keeping it low cost

• Alternative 2 : Fixing an average cost

• Alternative 3 : Costing at a premium price

Page 33: Goodyear Presentation

Recommended strategy for pricing

Alternative 3 seems the best option because :

– In 1991, company earned net income of less than 1% of total sales revenue

– Company needs to enter into value and quality oriented customer segments

– Higher dealer margins

– Avoid cannibalization of Invicta GS tires sales

Page 34: Goodyear Presentation

Other strategies

• Aggressive promotion by the existing 60% space of company in media

• Increase in advertising accruals for dealers from 4 to 6 – 7 % to get their support

• Resolving channel conflict by methods like :

Page 35: Goodyear Presentation

THANK

YOU