Goodyear: Aquatred Launch Harvard Case Solution & Analysis

1.0.    Introduction

Basically, this case study is all about the tire industry in the US. In this case study, the performance of Good Year Company is discussed.It was also called the “Gorilla” because of its good services and was one of the leading companies in the United States.The company has fulfilled the demands of its customers very efficiently throughout its time. From 1975 to1990, Good year achieved large share gains in both the replacement and OEM markets.

2.0.    Radial Tires

In1990s, US tire market started facing challenges problems due to introduction of Radial tires.These tires gave more mileage then the bias tires and bias-belted tires, and were cheap in cost.It required large investment in the modifying the manufacturing plants to produce these tires.

Goodyear responded to the change by investing heavily with investment of over $1.5 billion in 1970s, to convert its factories to produce radials.

 The company also introduced all-seasontires. The company’sperformance was improving day by day, and it was the major shareholder in the United States.By the time, the radial tires were introduced in the United States no foreign companies were operating in the industry, but with radial tire foreign companies started to grab the market share, which increased to 8% in short time of two years.

2.1.      Consequences of DiversifyingInvestment

The company’s performance started to decline when it started to diversify in other industries like pipelines for natural gas and oil transmission. In 1986, Sir James Goldsmith tried to take over Goodyear which resulted in management buy-out. This takeover battle had a very negative impact on the company’s performance, resulting in a 13% retrenchment of workforce to reduce fixed costs.

The company’s performance started to deteriorateand ultimately, this resulted in a loss in 1990. The company’s debt was increased to large extent, as it was paying almost $1 million as interest payment for the debt on daily basis. This had a huge impact on the performance of the company, the labor force was reduced and earnings were declining day by day.

Rubbermaid retired as chairman in 1991 and Stanley Gault took over as Chairman. Gault changed the entire management team and replaced it with own.

He tried restructuring the company and sold-off some assets and prioritized new product development. These steps were not able to bring about any massive change in company and it faced continuous problems,Soon, the distributors started facing issues in the market.

Unfair practices were conducted in the market which affected the performance of company. In order to counter the problem of distributors,the company came up with idea to open the outlets.

It started to open outlets on anaverage of 200 per year. In 1993, the company was already operating more than 1200 outlets. This was also the alarming situation for the company, as it was not able to operate such a large number of outlets.Customers were also not satisfied with the design of outlets, actually, they were not able to match the positioning that company has created in their minds with the outlets that were operating.

2.2.      Launch of Aquatred

Despite facing this entire problem,the company came up with the new idea of launching new product,Aquard. The idea was good and was also according to the need of the company but the timing was not suitable. The company’s conditions were not good enough to be able to make this idea viable, company was lacking in resources to run the operations on full capacity.It required$2 billion.

The company introduced Aquatred in the market at high premium price,whereas other manufacturers such as Bridge stone introduced the products with low cost and more millage then the Aquatred. This was also due to the fact that Goodyear was having financial problems...............

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