Goodyear_ The Aquatred Launch
Case Analysis
Goodyear: The Aquatred Launch
March 31, 2014Problem Statement:
In 1989 Goodyear started a project to develop a new and exciting replacement market tire that would provide improved driving traction under wet conditions. The company planning to launch the ‘Aquatred’ tire in early 1992 and management was upbeat and saw the Aquatred as a product to revitalize Goodyear.
Goodyear planned to sell the Aquatred with a 60,000-mile warranty with a 10% price premium. Management had two concerns:
Did Goodyear have the right product/timing for the dealers and consumers?
Two competitors planned to launch new tires with 80,000-mile warranties in 1992 backed by heavy advertising.
Should Goodyear expand its distribution channels?
This could boost sales
Selling tires in lower-service outlets could erode the value of the Goodyear brand
It could also cannibalize sales of existing outlets
It might cause independent dealers to take on additional lines of tires
Background:
The Tire Industry:
The U.S. tire industry was dominated by five companies from early 1900 – 1970s: Goodyear, Firestone, Uniroyal, BF Goodrich, and General Tire
All five companies were based in Akron, Ohio and were run by executives who socialized together at the same country club. The U.S. tire market saw consistent revenue growth and profit and a complete absence of foreign competition.
In the 1970s and 1980s, the U.S. tire industry experienced three important changes:
Emergence of the radial tire to replace the older ‘bias’ and ‘bias-belted’ tire constructions. The radial offered superior tread-wear, handling, and gas mileage. Between 1975-1991 the radials’ market share increased from 32% to 95%
Increased foreign competition – imported passenger tires sales jumped from 8% in 1972 to 22% in 1990
Decreased demand – the price increase for oil in 1970s cause consumers to drive less. Consumers preferred smaller, lighter cars plus the new radial tires have longer life.
Goodyear: The Aquatred Launch
March 31, 2014Problem Statement:
In 1989 Goodyear started a project to develop a new and exciting replacement market tire that would provide improved driving traction under wet conditions. The company planning to launch the ‘Aquatred’ tire in early 1992 and management was upbeat and saw the Aquatred as a product to revitalize Goodyear.
Goodyear planned to sell the Aquatred with a 60,000-mile warranty with a 10% price premium. Management had two concerns:
Did Goodyear have the right product/timing for the dealers and consumers?
Two competitors planned to launch new tires with 80,000-mile warranties in 1992 backed by heavy advertising.
Should Goodyear expand its distribution channels?
This could boost sales
Selling tires in lower-service outlets could erode the value of the Goodyear brand
It could also cannibalize sales of existing outlets
It might cause independent dealers to take on additional lines of tires
Background:
The Tire Industry:
The U.S. tire industry was dominated by five companies from early 1900 – 1970s: Goodyear, Firestone, Uniroyal, BF Goodrich, and General Tire
All five companies were based in Akron, Ohio and were run by executives who socialized together at the same country club. The U.S. tire market saw consistent revenue growth and profit and a complete absence of foreign competition.
In the 1970s and 1980s, the U.S. tire industry experienced three important changes:
Emergence of the radial tire to replace the older ‘bias’ and ‘bias-belted’ tire constructions. The radial offered superior tread-wear, handling, and gas mileage. Between 1975-1991 the radials’ market share increased from 32% to 95%
Increased foreign competition – imported passenger tires sales jumped from 8% in 1972 to 22% in 1990
Decreased demand – the price increase for oil in 1970s cause consumers to drive less. Consumers preferred smaller, lighter cars plus the new radial tires have longer life.