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¢ 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
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¢ !luggish 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 !umimoto
Firestone sold to Bridgestone
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  %

Replacement OEM

3 5
50
3

@52 @ @3


@23

@ @ @  @ @ @ 
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¢ Founded by Frank !eiberling in @ 

¢ Manufactures tires for automobiles, commercial


trucks, light trucks, !UVs, race cars, airplanes.

¢ Operates @ plants in U!, 3 plants in 25 other countries, 


rubber plantations and more than 2000 outlets

¢ Revenue of $@0. @ billion and @05,000 employees


 # c $ "%
¢ Introduced the Tiempo in @ , the first all-
season radial

¢ Launched Eagle in @ @, the first radial tire


offering high speed traction for sports

¢ Large investment in pipelines for natural gas


and oil transmission during @ 0s
      
 $     %

!umimoto,
3.5
Pirelli, 3.

Michelin,@0
Continental, .
3.

Goodyear,. Bridgestone
5 , .
   
V 3 of unit sales
Major Brands V Made by large manufacturers
V ighest recognition

V 2 of unit sales


Minor Brands V Made by small manufacturers
V Includes high priced niche brands

V 0 of unit sales


V Mostly exclusive to particular retailer
Private label V One distributor per territory
V Less retail price
V Less average life
Percentage sales

50
5
0
35
30
25 @ 5
20 @ 2
@5
@0
5
0
Price Brand Outlet
Oriented Oriented Oriented
      #  

Tire manufacturer

Wholesalers

Retailers / Dealers

End consumers
       
¢ 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
(@0 of sales)
Dealers who sold tiers at retail and resold tires to other
dealers and secondary outlets(0 of sales)
Dealers who bought tires to resell in their own retail
outlets only (50 of sales)
Percentage Sales for 1976 Percentage Sales for 1981
5
 Oil Companies

20
2 Large Retailers

5 @0
Manufacturer 5
@@ owned outlets
Independent
dealers Percentage Sales for 1991
Percentage Sales for 1986
3 2

@ @ 

@3 @2
 
     

Garages/!ervice Mass
Warehouse clubs
stations merchandisers

!mall, neighbourhood
Large stores Retail chains
outlets

!old tires, auto


!ells gasoline, tires and !old various categories
services and different
auto services like food, clothing
merchandise

!old private label and Offered limited brand Consisted of many


branded tires selection, low prices outlets
      $ "%

Large
Manufacturer
independent tire Others
owned outlet
chains
Known as alf the sales account
Owned and operated
multibranded for by full service auto
by manufacturer
discounters supply stores

!old only one brand of Consisted of many


!old tires at low prices
tire outlets within a region

Competitor for
Offered range of auto Carried major brands
independent dealers
services and private label tires
due to price
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¢ 00 independent dealers accounting for 50 of
sales revenue

¢ @0 manufacture owned outlets generating 2


of sales revenue

¢ 00 franchised dealers accounting for  of sales

¢ Remaining @5 attributed to government


agencies
    $ "%
¢ Average selling price by independent dealers -
$5 per tire

¢ Retail margins :
2 for independent dealers
25 for dealers carrying other brands
20 for private label tires

¢ Wholesale margins :
@ for private label tires
@ for goodyear tires
Ô '
¢ New retail format by Goodyear

¢ Modeled after ͚quick lube͛ stores

¢ !old and installed tires only

¢ No other products or services

¢ Provides guarentees on speed and quality of


installation
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¢ 3/th tires sold in independent or company
owned outlets at discount of 25

¢ For independent and company owned


dealer, promotions by ͞core events͟

¢ Company offered dealers ͞spring dating͟ every


spring which provided extended financing
 #   () # 
 
R P   S COMP  OW 
OUS
Offered more choice for brands Offered single choice for brand

Required less capital Required more capital

Required less attention from Required more attention from


management management

Restricted brand availability and Expanded brand availability and


market share market share
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¢ Goodyear provided its independent dealers with services
like :
Expertise and training
Certified auto services
The Goodyear Business Management !ystem
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
    

Wholesale Merchandising Advertising


allowance allowance accruals
  (
¢ Constituted $50 billion market
¢ Included jobs like oil changes, tune-ups, parts
repairs, etc
¢ Typical price - $0
¢ Break up of auto service revenues :
service stations


new car dealers
0
@5 speciality outlets

tire dealers

2  mass
merchandisers
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¢ Major competition from Michelin which had
stronger image among value oriented and
quality buyers

¢ Bridgestone and Michelin were planning to


launch new tires with 0,000 mile warranties

¢ Uniroyal was introducing a new tire for light


trucks

   
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¢ Target market : Replacement tires in U.! passenger
cars

¢ Focus on tread design and appearance

¢ Reduced hydroplaning and improved traction in wet


conditions

¢ Planned to be sold with 0,000 mile warranty

¢ Positioned at top of broad line segment


  (  c   
¢ Alternative @ : At the time of winter olympics
2 R RSK

Due to winter and snow, people The accumulated inventory level


would want tires with better wet would not support tires for small
traction to ensure safety cars to be used in olympics

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


olympics
2 R RSK

The inventory levels would Initial sales may be low due to


support large size cars absence of winters.
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¢ Alternative @ seems better because :

igh initial sales expected due to winter and snow

Due to prior commitment the launch would keep the


brand image intact

Test market data shows  of buyers have


domestic make of cars
  (   
  

¢ Alternative @ : Use existing channel

¢ Alternative 2 : Add new channels


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Company should use the existing distribution system an


go 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


  ( # c

¢ Alternative @ : Keeping it low cost

¢ Alternative 2 : Fixing an average cost

¢ Alternative 3 : Costing at a premium price


  c # c
Alternative 3 seems the best option because :

In @ @, company earned net income of less than @


of total sales revenue

Company needs to enter into value and quality


oriented customer segments

igher dealer margins

Avoid cannibalization of Invicta G! tires sales


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¢ Aggressive promotion by the existing 0
space of company in media

¢ Increase in advertising accruals for dealers


from  to  ʹ   to get their support

¢ Resolving channel conflict by methods like :