Goodyear Tire and Rubber Company – a Marketing Analysis
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GOODYEAR TIRE AND RUBBER COMPANY
In 1992 Goodyear Tire and Rubber Company executives were reconsidering a proposal of extending their line of tires to the Sears, Roebuck & Company Auto Centers. Sears management had approached the Goodyear management in 1989 with a request to include Sears in their merchandise distribution group. Goodyears management declined the request on the grounds that the action would undermine tire sales of their current company-owned Goodyear Auto Service Centers and franchised Goodyear Tire Centers. The company owned and sponsored distribution sales centers were the primary retail sources for Goodyear tires and were, rightfully, held in regard. The unfortunate truth was that sales loss of 38 million in 1990, coupled with new management in 1991, initiated the resurfacing of the Sears proposal.

Two major factors were the catalyst which sparked the renewed interest in Sears and deviation from the current exclusive distributorship of tires. First, the decline of Goodyear brand of passenger car replacement sales in the United States was an immediate concern. Second, management believed that nearly 2 million end of life Goodyear tires were being replaced annually at some 850 Sears Auto Centers in the United States. In a quote, a Goodyear executed stated that failure to repurchase Goodyear tires could be attributed to Sears, “because of remarkable loyalty of Sears customers led them to buy the best tire from those offered by Sears”, thus lending to the erosion of Goodyear passenger car tires sales.

The Sears proposal raised two strategic considerations for Goodyear management. First, the broadening distribution of Goodyear tire brand products to the Sear Auto Centers. Goodyear had not sold their branded tires through mass merchandisers since the 1920s, which ironically, was Sears. Second, the ending of a policy which had helped form the current retail landscape for the Goodyear tire brand. This implication would include the end of exclusivity which the Goodyear retail franchise had been built.

Tire Industry Market Segment
The tire industry is divided into two market segments. The OE, original equipment, segment provided branded tires directly to the automobile and truck manufacturers. The OE represented 25 to 30 percent of unit production per year. Then there was the replacement segment which was composed of retail stores proving Goodyear Tires to those consumers who tires were at the end of life. The replacement tire segment account for 70 to 75 percent of annual tire sales.

The OE market segment is considered important because of the philosophy that satisfied owners were more likely to buy original equipment, or the same brand, when looking for tire replacements. The tire manufacturers benefitted by volume sales of tires to the auto manufacturing world. The profit margin was much less than the replacement market but did represent an important part of tire sales success.

The tire manufacturing landscape is fiercely competitive. Goodyear holds 38% of the OE perennial sales in 1991, which make them the leading market share holder. Although OE has been considered to be a required recipe to success in brand replacement purchases, passenger tire replacement sales are becoming more price sensitive. This is apparent in the exhibit one which shows that the independent dealer sales from 1982 to 1992 are flat and Tire Company Stores took a 1% loss. The growth segments are found within the Discount retailers, which offer multiple brands, and the distribution introduction of Warehouse Club, which are a new source of distributorships and gaining market share.

Exhibit 1
Type of Retail Outlet
1982
Traditional multi-brand independent dealers
44%
Discount multi-brand independent dealers
7%
Chain stores, department stores
20%
Tire Company stores
10%
Service Stations
11%
Warehouse clubs
_
Other
8%
100%
Retail Distribution
The current landscape of retail competitors is made-up of three primary players. The largest tire manufacturer is Michelin (Groupe Michelin) which manufactures Michelin, Uniroyal, and Goodyear brands. The second is Goodyear Tire and Rubber, which manufactures Goodyear and Kelly-Springfield. The third is Bridgestone Corporation, which manufactures the Bridgestone and Firestone brands (case Exhibit 6 pg 594). Goodyear brand tires are still the largest portion of the replacement tire market in 1991. They captured 15% of passenger tire sales, 11% of the light-truck sales, and 23% of the highway-truck sales (case Exhibit 5 pg 594).

The tire industry uses “retail points of sale” to gauge the retail coverage of brand sales. While it should be noted that Goodyear Tire and Rubber has the largest coverage of company owned or franchised with almost 8000 “points of sale”, they still lag behind Group Michelin which is estimated to have almost 14,000 “points of sale” (case Exhibit 6 pg 594).

Since 70 to 75% of tire distribution is in the replacement tire segment, the number of “retail points of sale” are understandable crucial. The retail purchase behavior is noted to be changing. The changes are less about brand loyalty and more about price. Exhibit 1 showed the growth of discount multi-brand distributors and convergence of the warehouse clubs. Since retail promotions can stimulate buying behavior, the number of retail distributors is also important. Due to the many choices of brand, line grades, and performance features, consumers are often confused. Many purchases are made directly from the advice of retail salespeople. This lends to dealer-sponsored private-label tires accounting for 15 to 20 percent of the total tire replacement sales in the United States during 1991 (case statement pg 595). This is further indication of OE erosion in the replacement tire sales.

Strategic Considerations in Broadening Distribution
As indicated earlier, Goodyear management is reconsidering a proposal

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Goodyear Tire And Tire Sales Of Their Current Company. (June 9, 2021). Retrieved from https://www.freeessays.education/goodyear-tire-and-tire-sales-of-their-current-company-essay/