Goodyear and Rubber Company

INDUSTRIAL BACKGROUND

Tire Industry

Tire industry is the big industry that is global in scope, produce and markets their product worldwide. In 1991, the tire production was approximately 850 million tires was produced, whereas 29 percent were produced in North America, 25 percent in Asia and 23 percent in Western Europe. There are three (3) largest tire manufacturers in worldwide which consist of Group Michelin with headquarters in France. Group Michelin is the world largest producer and markets the Michelin, Uniroyal and BF Goodrich Brand. Meanwhile, Goodyear is the second largest producer tire in USA firms and as being its most well-known branding such as Goodyear, Kelly-Springfield, Lee and Douglas. And the third largest firm of tire production is Bridgestone Corporation that fully owned by Japanese firm. It major brands are Bridgestone and Firestone. There are 60 percent of these three (3) firms' accounts of all tires sold worldwide.

The Tire Industry

In the tire industry market there are divided into two end-use market consist of the original equipment tire and replacement tire. Original equipment tires are sold by tire manufactures directly to automobile and truck manufacturers. This tire markets represent 25 to 35 percent of tire unit production volume each year. Goodyear tire group is the perennial market share leader and the demand of it is derived whereas the tire volume is directly related to automobile and truck production. Even though the demand of tire is highly price inelastic but the price elasticity of demand for individual tire manufactures was considered highly price elastics and it could easily switch to competitors brands. Other than that, tire price competition among tire manufacturer was fierce and less profitable. The automobile manufacturer relied on two sources of tires. In hence, General Motors split tires purchase among a few brands in the year 1990s. Meanwhile for the replacement tires market it sold annually for 70 to 75 percent of production volume. It was directly sold to wholesaler and distributors and chain retailer. For the passenger car tires account are 75 percent of annual sales and the primary demand for this market is affected by the average mileage. The production produces a large variety of grades and lines of tires and the market is under both manufacturer's brand names and private labels. The market is less profitable and fierce competition. The producers promoting their brand often used network TV campaign and sponsorship on auto racing events. As reason these promoting will help them by pull customers to their retail dealer outlet and also shown their performance capabilities of their tires.

Retailers

There have two types of retailer in the tire industry which are retailer distribution and retailer marketing. Retailer distributions is a franchise dealer and it sell franchisor brands and own private brand. For that it will offer more choices to the customers. Meanwhile, for the retailer marketing it is an independent dealer. Their sell multiple brands including the private brands. They also were offering more choices to the customer to make a best decision.

For both retailers, although the manufacturers provide broad product lines, the end buyer will choose tires based on prices. The profitability is competitive due to stagnant growth and decline in retail prices. To bolster profitability, tire dealers had expanded into auto repair services, retreading and