In 1992, the Goodyear Tire and Rubber Company decided to reconsider the offer from Sears to sell Goodyear's Eagle brand tires. The reasons that Goodyear was contemplating this offer was that Sears was replacing worn out Goodyear tires at a large amount every year. The tires were not being replaced with Goodyear tires because the customers at Sears wanted to replace their tires with the best possible tires that Sears offered, and the Goodyear tires were not in the offering. The company's major options in this decision were whether to sell only the Eagle brand tires or all of the Goodyear tire brands.
Analysis and Evaluation
The tire industry is global in area and most competitors originate, market and sell their products worldwide. There are ten tire manufacturers that account for 75% of worldwide tire production. Of the ten tire manufacturers, Goodyear is the second largest. The industry divides into two markets: 1. The original equipment tire market and 2. The replacement tire market. The original equipment tires account for 25-30 percent of the company?s production each year and the replacement tire market accounts for 70-75 percent of the production each year.
Independent tire dealers usually carry the brands of several different major manufacturers and a discount priced private label brand so as to give the replacement buyers an assortment of prices, qualities and brands to chose from. The tire manufacturers decided that it would be profitable to produce a product line of tires to appeal to many buyers by making tires that can be driven under a variety of different road and weather conditions.
Goodyear?s principal business is the development, manufacture, distribution and sale of tires throughout the world. The distribution of tires represented 83% of the company?s corporate sales of $10.9 billion in 1991. Around 60% of Goodyear worldwide sales were in the tire replacement market and 40% were to the original equipment market. Because of the Goodyear name, which is one of the best known brand names in the world, the Goodyear tires have been positioned and priced as premium quality brands. It is one of the leading national advertisers in the U.S. The company also operates around 1,000 company owned Goodyear Auto Service Centers and sells through 2,500 franchised Goodyear Tires Dealers in the U.S. These outlets account for a good portion of the company?s annual tire sales.
Because of an industry analysis that expects Sears to benefit from carrying Goodyear tires, I think it would be a good idea for Goodyear to sell their tires at Sears? stores. The fact that Goodyear is losing...