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.
How would you characterize the competitive environment in the tire industry in1991?
The tire industry is divided into two end-use markets:
1.the original equipment tire market (OEM)
2.the replacement tire market
The Original Equipment Market
OEM tires are sold by tire manufacturers directly to automobile manufacturers, and they account for 25% - 30% of tire unit production volume each year. The Goodyear Tire & Rubber Company is a perennial OEM leader, in 1991 they captured 38% market share. Firestone and Michelin each held 16% OEM market share.
The Replacement Tire Market
The replacement tire market accounts for 70% - 75% of the total number of tires sold each year. Demand for this market is directly related to the average mileage driven per vehicle, and it should be noted that the better the tires are made (longer treadlife) the less they need to be replaced. Goodyear is the perennial market-share leader in the U.S. replacement tire market.
What is Goodyear's relative competitive position within the tire industry?
Ten tire manufactures account for 75% of the worldwide tire production. The largest is Groupe Michelin from France, who markets the Michelin, Uniroyal, and BF Goodrich brands. The second-largest producer is Goodyear. Their biggest brands are Goodyear, Kelly-Springfield, Lee, and...