Goodyear Tire and Rubber Company In this case Goodyear Tire and Rubber Company’s executives were reconsidering a proposal made by Sears, Roebuck and Company. Due to decline in the market share of passenger car replacement tires in the US and the customer’s failure to repurchase Goodyear brand tires forced the executives to reconsider the proposal. Goodyear is one of the leading brands in the US and globally. Goodyear’s distributions channel mainly contains individual service companies, franchise and dealers.
It is really important for Goodyear to have strong distribution channel. Question: Should Goodyear and Rubber Company accept the proposal from Sears? Alternative 1: Goodyear Tire and Rubber Company accepts the proposal – Advantages: ? There is more demand for the replacement tires and sale through Sears would encourage Sears’ customers to prefer Goodyear Tires. ? Goodyear will have promotion advantage, since Sears is one of the well-known hardware stores. Advantage of capturing the Sears customers and improving sales. Disadvantages: ? Goodyear will require a significant change in the distribution policy and could create conflict with the franchise dealers. ? Goodyear might be forced to follow Sears’ specification for tire manufacturing. ? Uncertainty of customer preference is a concern since some buyers would prefer the same product at the time of replacement. ? This would undermine the tire sales of company-owned Goodyear Auto Service centers. Since Sears carries many other brands, Goodyear will have more competition in regards to the price and preference. Alternative 2: Goodyear Tire Company rejects the proposal – Advantages: ? Company will not face any threats regarding losing individual franchise or dealer sales. ? The tire sales of company-owned Goodyear Auto Service Centers will not be affected and Company can have their own pricing policy. Disadvantages: ? Goodyear will have to generate more promotional strategies to increase the sales. The company will have to acquire more dealers and franchise to improve the sales. Alternative 3: Goodyear sells only one brand through Sears – Advantages: ? The company could increase the sale of the particular brand. ? If Company sells the Aquatred brand which is a new addition, Goodyear might have better sales through Sears since Sears counts for about 2 million Goodyear sales annually. Disadvantages: ? One brand sold through Sears might compete against the other brands sold through the franchises and other dealers.
From the above alternatives, I would recommend Goodyear to go with alternative one which is the Goodyear continues to sell the products through individual franchises and dealer and not Sears because Sears already sells about 2 million Goodyear tires. Also from the below numbers we can say that the market share of Discount Multibrand Independent Dealers has increased significantly compared to the other seller. Accepting Sears’ proposal might turn out to be the negative impact on company’s sales due to unhappy dealers and franchise holders.
Since company’s majority of market is of replacement tires, the company needs to make sure not to lose any of that market share to beat the competition. US Market share of replacement Tire Sales19821992Change Traditional Multibrand Independent Dealers 44%44%0% Discount Multibrand Independent Dealers 7%15%114% Chain Stores20%14%-30% Tire Company Stores 10%9%-10% Service Stations 11%8%-27% Warehouse Clubs -6%6% Other8%4%-50% Original Tires 25%Repurchase 75% 29% production in North America 7%22% Note: Good years controls 37% of US tire making Capacity