Identification of Strategic Issues and Problems
In 1992, the Goodyear Tire and Rubber Company decided to reconsider the offer from Sears to sell Goodyears 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 companys major options in this decision were whether to sell only the Eagle brand tires or all of the Goodyear tire brands.
Analysis and Evaluation
The tire industry is global in area and most competitors originate, market and sell their products worldwide. There are ten tire manufacturers that account for 75% of worldwide tire production. Of the ten tire manufacturers, Goodyear is the second largest. The industry divides into two markets: 1. The original equipment tire market and 2. The replacement tire market. The original equipment tires account for 25-30 percent of the companys production each year and the replacement tire market accounts for 70-75 percent of the production each year.
Independent tire dealers usually carry the brands of several different major manufacturers and a discount priced private label brand so as to give the replacement buyers an assortment of prices, qualities and brands to chose from. The tire manufacturers decided that it would be profitable to produce a product line of tires to appeal to many buyers by making tires that can be driven under a variety of different road and weather conditions.
Goodyears principal business is the development, manufacture, distribution and sale of tires throughout the world. The distribution of tires represented 83% of the companys corporate sales of $10.9 billion in 1991. Around 60% of Goodyear worldwide sales were in the tire replacement market and 40% were to the original equipment market. Because of the Goodyear name, which is one of the best known brand names in the world, the Goodyear tires have been positioned and priced as premium quality brands. It is one of the leading national advertisers in the U.S. The company also operates around 1,000 company owned Goodyear Auto Service Centers and sells through 2,500 franchised Goodyear Tires Dealers in the U.S. These outlets account for a good portion of the companys annual tire sales.
Recommendations
Because of an industry analysis that expects Sears to benefit from carrying Goodyear tires, I think it would be a good idea for Goodyear to sell their tires at Sears stores. The fact that Goodyear is losing many customers to Sears by Sears not offering replacement tires to their customers is becoming a large loss of business for Goodyear. The customers at Sears are returning customers, and feel that the integrity of the company is well represented by the products they offer. For Goodyear to sell their products at the Sears stores, it would show that the Goodyear name stands for quality and that the product can be trusted and is reliable.
Chesterton Carpet Mills, Inc.
Identification of Strategic Issues and Problems
In 1999 Suzanne Goldman, Special Assistant to the President of Chesterton Carpet Mills, Inc., was faced with the decision to establish the companys own distribution centers or wholesale operation based on the position of the industry and competitive position of the company. She was instructed to focus only on residential business and consider sales of 1999. She was to address the strategic and economic aspects of a change in distribution practices.
Analysis and Evaluation
Approximately $50 billion is spent annually for floorcoverings. The largest category of floor coverings is carpet and rugs, followed by resilient coverings such as vinyl, hardwood, ceramic tile and laminates. Industry sales are divided between commercial sales and residential sales. Lack of marketing is often a problem with the decline of U.S companies providing carpet to residential and business customers. The market for U.S. made carpet and rugs is extremely competitive and U.S. manufacturers are experiencing rapid declines in sales.
As changes in the carpet and floor covering industry were made one of the biggest changes that had an effect on the entire industry, was when manufacturers started to operate its own retail stores. Many of the chain retail stores dropped these manufacturers and began selling other manufacturers products.
Many wholesalers began feeling pressure to shave their profit margins to accommodate retailer-pricing demands. Many of their retail accounts had joined regional retail buying groups and were seeking price breaks comparable to those made possible through their group purchases. This made Chesterton Carpet Mills agree to consider a reduction in its price to wholesalers that could be passes on to retailers.
Recommendations
Considering that wholesalers were threatening to pull their business from Chesterton, and because of the sales figures that would be needed to operate the direct distribution centers it would not be wise at this time to begin operations in this manner. I think that it would be smart for the company to reconsider when the industry becomes less competitive, and a little more stable.
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