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Stephen M Smith
Goodyear, the largest selling brand name in car tires, has been approached for a second time by Sears to purchase their top of the line Eagle line of tires. Although they rejected Sears a number of years of, Goodyear is seriously considering this proposition due to recent changes in the market leading to a decline in market share. Goodyear is battling 5 major brand name competitors under 2 manufacturers, Groupe Michelin and Bridgestone, for the majority of the worldwide market share in tires.
Goodyear is at a strategic fork in the road with regarding its distribution strategy. On one hand, Goodyear is losing market share at a significant rate: 3.6%, which equates to almost five million tires. The top quality brand name that Goodyear has labored to build over the years may now be hindering their progress in a market controlled by price.
In the United States, where they does most of their business, Goodyear controls the majority of the market share as a brand name in all categories. Downward pressure on price due to recent changes in retail outlets and shift in consumer priorities has left Goodyear considering new retail avenues for passenger car replacement tire sales to make up the lost market share.
Goodyear benefits from a large influx of revenue from the OEM, as shown in the graph below, however the largest portion of sales still stems from the competitive replacement tire market, in which Goodyear is losing market share.
Goodyear Sales, 1991 (in billions)
The original equipment market (OEM) is key to Goodyear's success and overall strategy. The OEM provides very stable profits for little maintenance cost from Goodyear. The price inelasticity of demand for the OEM provides a stable, predictable...