MK 101: CASE SUBMISSION

GOODYEAR: THE AQUARATED LAUNCH

Done by:
Group 8
Prathmesh Gothankar (0154/52)
Meghana Katta (0187/52)
Kiranmaye Veldi (0198/52)
Kushagr (0209/52)
Manoj Kumar (0220/52)
Himanshu Jain (0165/52)
Jnyandeep Malakar (0176/52)

Should Goodyear expand its distribution channels? Discuss the risks and benefits.
Irrespective of your answer to the above-mentioned question, do you think
Aquatred should be offered to the new channel if the company decides to launch it?
Distribution channel
Current Situation:
Goodyear sold tires in 3 of the 6 channels of distribution. Most important channels
were the Independent dealers which accounted for the 50% sales followed by
Manufacturer-owned outlets having 27% sales. The franchised dealers account for
8% of sales. All the above 3 channels are positioned as high value added and sold
all major brands of tires. This positioning of the retail channels that Goodyear uses
is in good correlation with the image of the brand.
The large independent tire chains have grown significantly in their share
over the years from 4% in 1976 to 23% in 1991. Similarly, small tire dealers have
grown from 36% in 1976 to 40% in 1991. Other channels have largely either
declined or remained constant as shown in the Exhibit 5.
However, some mass-merchandisers and auto supply stores get hold of Goodyear
tires, mainly through large independent dealers acting as wholesalers, and then
sells the tires at discount prices. Goodyear is afraid of the negative effect this will
have on their image, as these low profile retailers contradict the high quality image
of the Goodyear brand. Furthermore the small independent dealers feel
threatened, because they cannot compete with these low prices.
RISKS

The independent dealers have shown concerns about the expansion might
lead to lowering of the prices.

Expansion of the distribution channel might create problem of

cannibalization.

Selling tires in lower-service outlets would erode the brand value of

Goodyear and dilute the image.

Independent dealers which account for 50% sales complain of channel

competition. They also have relatively high loyalty to Goodyear as given in
Exhibit 8.

BENEFITS

Expanding the distribution network we to boost sales and prevent Goodyear

OEM tires from being replaced by other brands in the replacement market.

Benefits for Launch

Continental tires was planning to launch anti-hydroplaning tires in 1993.

Launching Aquatred would help capture the market in the consumers who
arent brand loyal (36-53%])

As given in the case Aquatred meets most of performance attributes

The approach for distribution channel expansion for goodyear should be,
maximizing the number of active independent dealers. Currently the number of
independent dealers for goodyear is 4400, however only 2500 of them are active,
contributing to 50% of the sales revenue . Which is a lot more compared to other
channels where 1047 manufacture owned generated 27% of sales and 600
franchisee dealers had 8% respectively.
If we calculate percentage sales/ store:

Independent dealers : 0.02%

Manufacture owned : 0.025%

Franchisee owned : 0.013%

The other most important criterion, which is in Independent dealers are that they
are very loyal to the brand. By 1991, 50% of Goodyear dealers only sold goodyear
brand, while other 50% stocked one more brand. But even for them 90% of the
revenues were generated by Goodyear. Hence new competition doesnt cannibalize
our products in these stores.
Hence if we are able to expand the number of active independent dealers and have
correct distribution strategy, we can expand the sales revenue by another 38%.
And the total Sales revenue being contributed by independent dealers could rise
up to 63.7%. A very significant contribution, which will not just increase our sales
but cannibalize sales of other tires who are currently benefitting from these

inactive dealers.Thus we could see a significant rise in market share,if we follow

this approach.
Furthermore Goodyear should launch the Aquatred only in the original channels,
as these channels target the value-oriented and the quality-oriented buyers, which
is in line with the high quality and innovative image of Aquatred. The launch of the
Aquatredwill, be-cause of Goodyears first mover advantage, give these specific
channels a differentiated product from those of the mass merchandisers and other
channels where only Goodyears lower priced tires will be distributed. This
differentiation of products among the diverse types of channels will help insure a
spread of consumers, in terms of their buying behaviour, between the different
chan-nels. If Goodyear do not expand distribution channels to the mass
merchandisers this channel would most likely to some extent still sporadically
obtain Goodyear products. Thus, starting to distribute its low-priced products to
and thereby co-operate with the mass merchandisers Goodyear gain more control
of exactly which products the channel receives. However therewill still exist some
risk of Goodyears high price products like Aquatred or Invicta ending up at mass
merchandisers or other low profile outlets. Furthermore by expanding distribution
in this manner Goodyear will make a flank defence5 against its main competitors,
entering the low priced channels and highly increas-ing availability. As the appeal
of Aquatred is in the heart of Michelins core segments, value-oriented and quality
buyers, it is most likely that the launch will take away shares from Michelin and
not cannibalise Goodyears existing products. The cost of expanding the distribution
to include mass merchandisers will incorporate cost of point-of-sales displays, back
up advertising of the new channel and informing the sales assistants in the stores.
Nonetheless, this should be a rather inexpensive solution.
2. Discuss the brandability of tyres in the context of the timeline of the case.
3. Should Aquatred be launched? Why?