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SaleS & DiStribution ManageMent

An Analysis on:

Goodyear: The Aquatred Launch

GROUP 3
Anoop George [PGP/12/157]

Gokul Kannan [PGP/12/172] Gopakumar [PGP/12/173]

Prabaharan S K [PGP/12/120] Vijay S [PGP/12/128]

Vikram Mankal [PGP/12/148]

Situation Analysis
The Company: Goodyear US based tyre manufacturer Ranked 3rd worldwide in terms of sales Operates 41 plants in US, 43 plants in 25 other countries The Market Latest trends: Emergence of radial tyres; Increased foreign competition; Price sensitive buyers; Increased cost of production Market Segmentation Performance &broad-line tyres Replacement & OEM tyres Along brand classifications Major players: Michelin, Bridgestone, Continental, Goodyear Consumer Segments: Price Constrained buyers Brought the best affordable brand Value Oriented buyers Preferred brand at best price Quality buyers - Loyal to outlet & brand Commodity buyers Low brand preference ( Bargain hunters & Trusting patrons) Distribution Channels: 1. Wholesalers: Oil companies, Large retailers, Manufacturer owned outlets, independent dealers 2. Retail Distribution channels: Garages/Service stations, Warehouse clubs, Mass merchandisers, Manufacturer owned outlets, Small independent tyre dealers, Large independent tyre chains & Others like full service auto supply stores Goodyear: Distribution Structure Distributor Number Revenue share Independent Dealers 4400 50% Manufacturer owned outlets 1047 27% Franchised dealers 600 8% Others 15% Mass merchandisers are a big threat to existing distributors (problem of sales leakage) Plans of expansion through Just Tyres retail format that stores sold & installed tyres Goodyear supports dealers through a variety of services Dealer issues: Minor billing problems + competition from other channels The product: Aquatred Tire Latest product from Goodyear Directed at the replacement market Premium product, to be positioned at the top of the broad line segment Reduces hydroplaning and improve traction in wet conditions Patented product Indian Institute of Management Kozhikode Page 2

Problems Faced
Managers at Good Year were concerned if Aquatred is the right product for the dealers and consumers. Should Good Year expand the distribution channel to get increased sales from Aquatred launch? Launching in lower service outlets may lead to brand dilution and expanding distribution might cannibalize sales.

Alternatives
Good Year should go ahead with the launch of Aquatred because from the surveys conducted amongst car owners wet traction is one of the important considerations for buying a tyre. The product offered by Good Year will be filling the gap in the market (wet traction performance) and thus should be a successful product. Hence we are not looking at the question of whether to launch Aquatred or not. Considering we are launching Aquatred we will have the following alternatives 1. Launching the new product only through its traditional channels Independent dealers, manufacture owned outlets and franchisees 2. Expand the distribution channel Increase manufacturer owned outlets/new retail formats like Just Tires 3. Expanding distribution of Aquatred to low priced outlets such as warehouse clubs, mass merchandisers etc. 4. Integrating its dealership network Buying out independent dealers

Evaluation of Alternatives
Launching the new product only through its traditional channels Independent dealers, manufacture owned outlets and franchisees Surveys show that buyers in 1992 are tending to be more price oriented (45%) and outlet oriented (26%). Good Year does not have any price control when it sells through its independent dealers and almost 50% of its total sales are through this channel. Good Year needs to maximize its sales from this product in the shortest possible time because some of the competitors are also coming up with similar products, thus sticking to only existing channels might not be a good idea. Expand the distribution channel Increase manufacturer owned outlets/new retail formats like Just Tires Exhibit 9 (based on test marketing) shows that approximately 33% of Aquatred buyers want Good Year brand whereas 25% are specifically looking Aquatred, by launching a retail store they will able to serve this segment of customers at a lower price and also provide good service quality. Indian Institute of Management Kozhikode Page 3

By launching new retail formats which are manufacturer owned Good Year will be able to bring its other products to customer at a cheaper price and the outlets also will be well maintained (45% customers are price oriented and 26% are outlet oriented). Test marketing results also have suggested that 61% of buyers are quality oriented buyers who generally are loyal to the outlet and brand, and tend to be upscale. Thus opening new retail stores like Just Tires seems to be a good option. Expanding distribution of Aquatred to low priced outlets such as warehouse clubs, mass merchandisers etc. Expanding into low priced outlets may lead to brand dilution, cannibalization of sales from existing channels and this might result in the existing dealers taking on additional lines because of the decreased sales from Good Year. Integrating its dealership network Buying out independent dealers This option though will lead to lesser channel conflicts, greater control over the distribution channel. It will lead to lower costs for customers and better service quality because of the integrated n/w. This will lead to higher capital costs because of acquisitions and lost sales from customers. Customers will not be able to compare different brands (53% of customers are not sure of the brand they want) and thus may not prefer single brand outlets.

Action Plan
Expand the distribution channel Increase manufacturer owned outlets/new retail formats like Just Tires (Apart from its existing channels of Independent dealers, manufacturer owned outlets and franchisees) Channel Conflict issues Independent dealers might be unhappy with the expansion plans of Manufacturer Almost 53% of the customers dont know which brand/product they want, these customers would continue to go through the independent dealers who sell different brands. Only 25% of the customers who are sure of the brand they want to buy would go to Manufacturer owned stores. Independent dealers need to be taken into confidence so that they dont feel threatened by manufacturers expansion. Manufacturers expansion should not overlap with Independent dealers territories Manufacturers should try to get the help of the dealers association to prevent leakage of sales through unwarranted channels. (Like sales to mass merchandisers etc.)

Contingency Plan
Launching the new product only through its traditional channels Independent dealers manufacture owned outlets and franchisees. This will reduce the potential channel conflicts that may arise due to Just Tires. In such a scenario Good Year should expand its sales through Independent Dealers. An alliance can be reached with the dealer network through the State Association to increase the sales of Goodyear Aquatred through these outlets. Indian Institute of Management Kozhikode Page 4